Controversial Gold Advocate Judy Shelton Will Soon Be On the Fed

Mish

Trump's nominee, Judy Shelton appears headed to the Fed.

Judy Shelton Has the Votes

Senator Lisa Murkowski (R-Alaska) will now back Shelton giving the candidate 51 votes for the appointment.  

With that, Judy Shelton Heads for Confirmation to a Federal Reserve Seat.

“I’ve had an opportunity to talk to Judy Shelton and I’m going to be supporting her,” Murkowski told reporters Thursday afternoon, according to reports in various news outlets.

Shelton’s nomination had been stalled in the Senate even though the finance committee cleared her by a narrow party-line 13-12 vote in July. Several key Republicans had been wavering in their support, and it appeared for some time that the nomination would not clear before the current congressional session ended. 

At the contentious July hearing, senators grilled Shelton over her views on Fed independence, her support of the gold standard and her wavering over whether bank deposits should be insured.

Democratic senators accused Shelton of backpedaling from earlier statements she had made on those issues.

McConnell’s move drew an angry rebuke from Sen. Ron Wyden (D-Oregon), ranking member of the finance committee, who called it “an effort to sabotage what little economic recovery we have by installing an unqualified, political pick.”

“Her ideas are so wacky and outdated, giving her authority over the dollar would be like putting a medieval barber in charge of the” Centers for Disease Control, Wyden said in a statement. “Shelton’s views are so extreme, Senate Republicans have long refused to confirm her.”

Attack Dogs Blast Shelton

In a stunningly ignorant, yet hardly surprising op-ed, Steven Rattner says God Help Us if Judy Shelton Joins the Fed.

“Why do we need a central bank?” Ms. Shelton asked in a Wall Street Journal essay in 2009. She wants monetary policy set by the price of gold, a long-abandoned approach that would be akin to a Supreme Court justice embracing the Code of Hammurabi.

Anyone who questions the need for a Central Bank immediately has at least something on the ball.

The Fed has blown 3 consecutive economic bubbles of increasing amplitude. 

Diversity of Opinion

True diversity is not about race or sex, it's about opinions. 

Former fed Chair Janet Yellen was every bit a part of the good ol' boy network. 

Instead of another "good ol' boy" group-think candidate, we will actually have diversity of opinion.

Imagine 

  • Imagine having a dollar backed by something, rather than nothing. 
  • Imagine having a 100% gold-back dollar so that FDIC would not even be needed. 

Neither of those will happen because Shelton will be ignored by the rest of the Fed.

However, as Fed governor, he views will at least get public airing. That's a start assuming she did not abandon he views on gold, just to get the appointment. 

God Help Us

For further discussion, please see my July 24, 2020 post Controversial Gold Advocate Advances for a Fed Appointment in which I mock Steven Rattner for his view "God Help Us if Judy Shelton Joins the Fed"

Rattner has things ass backward. God help us if we stay on the path we are on. 

Addendum

I was asked why FDIC would not be needed under a 100% Gold-Backed Dollar.

  1. Gold stored for safekeeping could not legally be lent out. To do so would constitute fraud.  
  2. A 100% gold-backed dollar with audits takes care of the safekeeping requirement.
  3. Gold lent out pays interest. It is not risk-free. If people want interest they take a risk of default.
  4. Banks make money out of charging a small safekeeping fee and lening gold they are authorized to lend. 
  5. Past bank failures were because banks lent out more gold than they had or took excessive risks. No one can or should guarantee loans anymore than governments can guarantee stock market investments. 
  6. If people want to protect against theft or bank fraud despite #1, private insurance, possibly part of the safekeeping fee, would take care of it. There is no need for government to get involved.

Mish

Comments (64)
No. 1-28
Dodge Demon
Dodge Demon

Mish, regarding your Imagine bullets above, which I agree - isn’t that what Gaddafi was trying to do with a Libyan-African currency? That didn’t go over very well in the State Department here at the time.

PecuniaNonOlet
PecuniaNonOlet

People would be better off just bartering with each other, the best way to beat the game is to change the rules or avoid the game altogether. Someone will develop an app where we can just exchange goods and services between ourselves and not bother with funny fed debt instruments.

Mish
Mish

Editor

I do not believe Libya nor Iraq (euro-backed oil) had anything to do with US attacks on them

Stan877
Stan877

President Biden will be furious about this. A Gold advocate? She is nuts. We are not living in medieval times, this is 2020.

EGW
EGW

I'm fine with her being appointed. We need some fresh ideas at the fed.

Eddie_T
Eddie_T

Being appointed to the Fed seems to make gold advocates lose their memories. I give you Alan Greenspan as a prime example of that. But I have no problem with an Austrian economist on the Fed. It’s about time.....

Still not sure of confirmation though. I don’t give the Congress high marks for financial or economic acumen......they’re a bunch of pigs busy at the trough, who only looks up when a real crisis hits....and they always look to the Fed and the GS alums at the Treasury for their salvation.

Sechel
Sechel

The skeptic in me says Republicans didn't want her on the Fed while they controlled the Executive branch and now find Skelton useful to gunk up Biden's economy.

Sechel
Sechel

The skeptic in me says Republicans didn't want her on the Fed while they controlled the Executive branch and now find Shelton useful to gunk up Biden's economy.

Louis Winthorpe III
Louis Winthorpe III

I think I'm missing something.

How does a gold backed dollar make the FDIC unnecessary? I don't think it would eliminate the possibility of smaller banks defaulting on deposits.

Jojo
Jojo

I've read there isn't enough gold to back the amount of US $$. If true, what is the solution?

Farmer Ted
Farmer Ted

Way forward:
 
Use the so far dormant power of a state, where their resources in a legal issue are necessary.  
 
The Constitution requires states to tender gold or silver coin in payment of debts.  The US mints those coins, but then the US charges a capital gains tax on those coins.   Obviously, such a tax means those coins will never circulate as money.  

How upside down is that? Consider this: a dollar is defined in the US Code as an ounce of silver (ref: 31 USC § 5112). Federal reserve notes are neither a dollar nor are they redeemable in dollars or anything else (perhaps they would be effectively redeemable in gold and silver coins without a capital gains tax levied upon those coins). However, there is no capital gains tax levied on federal reserve notes, but there is a tax levied on what is defined by statute as a dollar.
 
How to rectify this bizarre state of monetary affairs?

A state brings a claim in proper venue advantageous to it based on the holding from McCullough v. Maryland, where the court held that the power to tax is the power to destroy such that a state couldn’t lay a tax on US bank notes.   As applied to this issue of whether the US can tax what the states must use to pay their debts, based on the holding from McCullough, no the US may not.
 
Get rid of the capital gains tax on monetary coins, and let the market decide the price and whether they circulate. Waiting for the US Congress to pass laws eliminating the capital gains tax on monetary coins shows a lack of understanding of human nature. It simply is not in the interest of any member of Congress to make their duties substantially more difficult because it would significantly reduce their ability to create infinite amounts of credit and currency. It is in the interest of a state to establish a means to eliminate debts without having to first acquire federal reserve notes.

Casual_Observer
Casual_Observer

Why should it be backed by something as limited in supply as gold ? Why not something like sand.

Brexitguy
Brexitguy

EU gold crisis re NO-deal BROVID goldfare
Hard-Brexit + the un-available EU Gold + Covid-19

Decades ago, current EU member states deposited their gold in custody at the Bank of England (BoE) in London.

Now, with hard-Brexit + Covid-19

  • The City would only return the EU gold under London-favorable terms.
  • Or, such EU gold cannot be returned because it has been sold off or loaned out or compromised in different ways as explained below.

Many supposedly ´knowledgeable´ experts both sides of the English Channel need to do some past due homework, fast. Should the Davos crowd be forced to re-establish anything similar or equivalent to a gold or SDR standard (quite probable) the matter will aggravate a 100-fold, even more.

Because many or all EU members would now want to simultaneously repatriate their BoE-vaulted gold partially or totally for many good reasons, Covid-19 included.
Beware: recently Germany had to wait 5 years to forcefully repatriate only 50% of its gold and never received back any single one of the gold bars it had originally deposited, which clearly explains the delay.

The problem is NO independent audit has ever been carried out (see sources below) in order to answer the following key questions:
(a) does the BoE still have everybody´s gold bullion... or has it been sold off or loaned out already (partially or totally) as many true experts insist is the case ? (see links below)
(b) is the BoE willing and able to return EU gold it may still have to legitimate owners ? Who are the legitimate owners ? Would the ECJ decide gold ownership ?
(c) has the BoE lent out, swapped, re-hypothecated or encumbered such bullion now lien with other alleged legitimate claimees also standing in line with ´fractional un-allocated synthetic´ bullion custodies unfit-for-purpose per Digital Derivative Pricing Schemes “(sic, I kid you not) thru which no one can know who owns what where (if anything) ?

Of course, the ECB would also claim it actually is "their" EU gold while the IMF and the BIS would also meddle, of course. But however it unfolds, the "continental gold" now vaulted across the English Channel will most probably be weaponized by The City of London during hard-Brexit negotiations with Old-Etonian types in charge.

Paraphrasing James Carville, “ It´s the gold, stupid ”

…“…There is nothing transparent about the London gold and silver markets. Unlike the equity and bond markets, there is no reporting of transactions and trades in the OTC London gold and silver markets. There is no data whatsoever about positions and transactions in the London gold lending market, no data on which commercial banks hold gold accounts at the Bank of England, no data on the identities of central bank gold custody customers of the Bank of England, no data on the size of the enormous unallocated gold and silver liabilities of the bullion banks, no published data on the location of the London commercial vaults, and no published audits of the claimed gold and silver inventories in the LBMA and Bank of England vaults. And that’s just a flavour…”…

Realist
Realist

Sorry Mish. God is not going to help the US. And Shelton is not going to change anything at the Fed. You are stuck on this path for the foreseeable future. A similar path to Japan.

As individuals, it is important that we face reality, even if it is unpleasant. We have to make our future plans, based on reality, not some fantasy that we hope will happen.

You can see the very negative consequences of people who cling to fantasy, rather than reality. Trump and his supporters don't want to face reality about the election. And it is causing all kinds of problems for them, and the country.

Gold can certainly be a part of any investment plan. But that plan should not depend on gold alone. It needs to be well diversified.

Dodge Demon
Dodge Demon

Jim Sinclair and Bill Holter (interviewed by Greg Hunter on 10/31/2020) said based upon Fed balance sheet - debt of $27,000,000,000,000 and divide that into 260,000,000 ounces of gold that the U.S. Treasury supposedly has, then price of gold should be more than $100,000/ounce based upon simple arithmetic.

Brexitguy
Brexitguy

It isn’t just a “Fed” problem, it’s a “global” problem
Debt ultra-high + effective GDP dropping fast + velocity of money close to 1...

Jojo
Jojo

Sure you can increase the price of gold but is that realistic? Of course, people holding gold will be all for this. But what about the businesses that use gold in industrial manufacturing?

And would people buy gold jewelry that cost 10X, 20X or more due to a sudden change in gold pricing? Think India, for example, where gold ownership is used in place of using regular banks. I don't think so.

So HIGHLY unlikely that such a change will ever occur regardless and despite all the many articles touting gold backing of the money supply.

But at least all these articles provide space for gold ads, so some people can still make money.

Brexitguy
Brexitguy

Exactly, and very clearly explained. The PROBLEMO @Jojo comes when people both in the US and outside the US see that as well as yourself and then proceed to DUMP US debt which suddenly becomes a worthless piece of of paper

nzyank
nzyank

Moving to a gold standard is economically unfeasable and will never happen. However it is used as a political tool to lend "theoretical" support for smaller government, lower taxes, etc. to generate populist support.

MikeUK
MikeUK

Imagine, no growth, queues for mortgages, business unable to borrow, because there is no money, welcome to the Gold Standard......

Brexitguy
Brexitguy

@MikeUK imagine long queues for EVERYTHING, empty shelves EVERYWHERE, hyperinflation all around you, no debts effectively payed back, Weimar, ex-Soviet Union... because currency is worthless (or almost). Money you say ? Real, genuine MONEY with all 3 required functions (unit of account, means of payment, and store of value) has not existed since August 15, 1971, 06:00 pm.
$ 15.000 gold would pull the trick, with corresponding periodical devaluations as required by parallel currency printing. Capitalism thrived with such monetary system

Rbm
Rbm

Seems like unless the whole world is on the gold standard all that is gonna happen is th egg us will lose all its gold. Isnt that why nixon took us off the the gold standard anyway. Paying for oil

Freytag
Freytag

Thanks for this.

Sechel
Sechel

Lamar Alexander is now added to the Nay column putting Shelton in doubt

Brexitguy
Brexitguy

Why is a gold standard needed people ask ?

Because...


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