The New York Times reports Shelton Clears Senate Committee, Moving Closer to Fed Board.
Judy Shelton, an unorthodox economist with close ties to the Trump administration, moved a step closer to a seat on the Federal Reserve Board after the Senate Banking Committee voted along party lines on Tuesday to advance her nomination to the full Senate.
Ms. Shelton moved forward along with Christopher Waller, who is research director at the Federal Reserve Bank of St. Louis and a more conventional pick. If they are confirmed by simple majority votes in the Senate, Ms. Shelton and Mr. Waller will fill the two empty seats on the Fed’s seven-member board in Washington.
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.
By keeping interest rates too low too long, the Fed helped brew the dotcom bubble, then when it burst blew the housing bubble, then before Covid hit blew another enormous stock market bubbles.
Letting the market set rates would have been a dramatic improvement.
The Federal Reserve is an indispensable player in managing our economy. Period.
Wrong. Period.
Her past opposition to the Fed buying bonds to help stimulate the economy — as it did successfully during the 2008 financial crisis — would have prevented the central bank from standing up many of the rescue programs that are now helping to keep the economy afloat.
Were it not for the Fed blowing bubbles, we would not need the Fed to stimulate the economy. The Fed overstimulated the economy in a major way three times in the last 20 year.
Rattner wants more of the same.
Between 1880 and 1933, the United States experienced at least five full-fledged banking crises; in the past 87 years, we’ve had two. Though promoted as smoothing price movements, a gold standard in fact magnifies them, as a comparison of the pre-Depression period to the post-World War II era makes clear.
Rattner is ignorant of history.
We had banking crises not because of gold, but because banks lent out more gold than they had on deposit, a fraudulent practice.
A few other weird ideas from Ms. Shelton: She has questioned the accuracy of government statistics. She wants a single currency for North America. (Does she not know how badly the euro has worked?)
Government stats, especially GDP and the CPI are indeed fatally flawed.
But Rattner is correct that wanting a single currency for North America is ridiculous.
However, that is nothing Shelton could do on her own even as Fed Chair. The US, Canada, and Mexico would all have to agree.
Until her confirmation hearing, she backed getting rid of federal deposit insurance, a key protection for individual savers.
Bingo, that is another plus for Shelton. FDIC is an enabler of Fractional Reserve Lending (that is lending more money or for longer period than there are deposits)
The system is so screwed up now that lending creates its own deposit reserves to the benefit of those with first access to money (namely the banks and the wealthy).
Thus Ratter openly advocates more income and wealth inequality.
God help us if the next chair is Ms. Shelton or anyone else with her views. Senate Republicans must recognize this danger and show some backbone.
That was written before the committee vote. Shelton passed the committee 13-12 and now advances to the full senate.
Diversity Desperately Needed
What the Fed desperately needs is diversity in new ideas not token people of color or gender that all think the same way,
Regardless of what one thinks of gold, it is clear the Fed needs new ideas instead of the same old bubble-blowing mindset of a bunch of clowns who have proven they do not know what inflation even is.
Question for Rattner
Hello Steve what do you think if I proposed the Fed set the price of steel or oranges?
Hopefully you would think that would be crazy. But setting the correct price of interest rates and money supply is much harder.
We know that based on 3 consecutive bubbles.
Mish
Senate lacks the votes. Looks like she is not getting in.
Link to NYT fixed
link to voimagold.com
Wanting a weaker dollar is really stupid especially since the US isn’t really an export oriented country. The ones benefiting from a weaker dollar are our debt ridden companies, which should go to hell anyways. The rest of us will benefit from deflation.
Federal Reserve worried about global dollar shortage … since a lot (close to $10 trillion) of emerging market debt priced in $US. You know the drill —- problems THERE will spread like contagion to our shores.
There should not be a dual mandate nor a single mandate because there should not be a Fed at all.
The idea that a group of central planners can fix anything is ridiculous in and of itself
Saying we could have a free market in money, a gold standard, etc. is like saying we could solve the obesity epidemic by having everyone eat less. That fact that the statement is technically true doesn’t change the fact that it’s impossible to do in practice.
It was done for thousands of years and now it’s supposedly impossible.
Ridiculous
To what 1000 years are you referring? The constantly debased Roman coin era?
The larger point of course is that in a pre-industrial revolution era, when the vast majority of people were farmers, a financial crisis was relatively easy to bear for the common man. You can still eat and even if crop prices fall they don’t fall to zero.
A world where the vast majority of people work for wages is very different. The common man is very sensitive to financial crises as the results for him is often joblessness and an income that falls to zero (without government intervention). With an income of zero you starve. It’s a totally different world.
There is a long history of competition in money; not just in theory but in practice. One could even argue that the various bitcoins are competing currencies in place today.
The gold solidus (1/72 Roman pound) basically lasted from the third to the eleventh century (hence the word soldier and saldo ‘balance’ or similar in many languages). The silver £ libra pound lasted from the time of Charlemagne’s father Pepin (751) to Tudor England (1500) before succumbing to debasement. Various coins denominating weights of metal were in circulation for thousands of years before being replaced by paper notes (originally hand written). At first, the value of paper notes was said to be backed by the metal ‘stored’ in the French King’s mines. During much of this time people used competing coinage that continually shifted in value and currency. Even the word dollar harks back to the German thaler, derived from St Joachimstal (‘valley’) in Bohemia, the only dependable source of silver mining in Medieval Europe.
“The common man is not “very sensitive to financial” crises” at all, if he sets aside even a fraction of what he earns above that of a subsistence farmer in year 1000b.c., in a currency which cannot be debased.
Instead, he is very “insensitive” to it. Which is another way of saying, he is very independent. Independent enough to not pay the world of attention to what Dear Leader and his sycophant army of useless FIRE sector trash is up to. As he can simply route around and disregard the lowbrows altogether.
Which is, of course, why totalitarians, as well as those plain stupid enough to believe even a word of their childish propaganda, can be counted on to mindlessly regurgitate nonsense about how things are always diiiiferent nooow! And how “we need” to have an institution whose only task is to rob productive people by debasement, so that the unearned loot can be handed to idle rank idiots living off of “asset appreciation.”
“ if he sets aside even a fraction of what he earns above that of a subsistence farmer in year 1000b.c., in a currency which cannot be debased.”
If people saved money? By that logic we could cure the obesity epidemic by getting people to eat less. Your understanding of human nature is deeply flawed.
Soo, what you are saying is that because some appear to have a hard time savin, we should therefore make it harder on them by stealing (by debasement or other means) whatever little they do manage to save?
Plenty of people, throughout all of history, have saved something. Farmers have done so after harvest every year, exactly to avoid “crises.” And, then as now, when they do have a crises, it has as often as not, been on account of some taxing/theft “authority” stealing enough of their stuff to render saving almost impossible. Left alone to prosper or perish, the mere fact that seasonal harvest farming was ever even possible, is testament to people being perfectly capable of saving, if only left alone.
I want a free market in money. When given a choice people have invariably chosen gold when available.
Except, there’s no choice but to accept Uncle Sam’s IOU.
“When given a choice people have invariably chosen gold when available.”
And then voted to abandon that choice when times got tough. It’s simply not sustainable.
People did not vote to do this – Governments forced it
Gold has been money for thousands of years.
There where others long before, but they where not realy suitable until gold and silver took their place for very good reasons.
It’s the perfect money.
Why do CB’s have a gold reserve?
We have been conditioned to call bills or notes (debt) as money.
Money and currency are not the same, there are important fundamental differences.
“And then voted to abandon that choice when times got tough. It’s simply not sustainable.
So, uh, times just were never “tough” for the first 99+% of the existence of humanoids on the planet, before the invention of central bank rackets? So much for the nasty, brutal and short guys, I suppose…..
But yes, when given a chance, quite a few people do indeed “vote” to have Dear Leader steal more from others. Which is why civilized governments are strictly limited, regardless of whether anyone “votes” for that or not.
The Fed’s allegiance is to their owners the banks!
Actually if the currency were a gold coin, it would not be that crazy to share it between Canada and Mexico.
That is how gold or bi-metal standards worked in the past, from ancient times right up to the latin monetary union where the coinage between nations in Europe were compatible and international accounting in gold.
There lies the problem, fixed exchange rates, they never work.
Nations invariably get involved in political economy and often fraud, the border those offer is subjective and open to argument, where national pride or ability is soon challenged.
I think you have to go back to the time metals were traded as a monetary commodity to see that working without problem. The moment the metals were co-opted as official currency it introduced facets that were corrupting to their meaning.
A recent circumstance was a small reminder to me of this. After receiving a delivery I liked to tip the errand, and it is always something private and personal to me, that takes place in the act. Afterwards I’m thinking “What would I do if there was no cash ?”… the idea of using an app to credit or tip would make little sense in real terms, as in of immediate kindness, so I figure in circumstance like that probably silver coin would become method ? I don’t know, but it just seemed something tangible would have to be used. The moral of this is that currency can only be taken so far from direct understanding before it starts to add some unthought of distortions to how everything works, even if it is just how people communicate as in this example.
“There lies the problem, fixed exchange rates, they never work.”
Just for the first 99.999% of human existence, until the invention of the theft racket known as central banks……
Tah-Dah! We have a winner!
When WWI started they looked at their plans and executed Day 1 Item 1 – suspend convertibility to gold. Even when we were to a gold standard, it rarely survived a crisis? Why do you think that would change?
No deposit insurance? If the direct deposits don’t come through on payday and people can’t get their money they are going to be lynching congressmen on the steps of the capitol.
It’s all so patently ridiculous to think this is even possible by any stretch of the imagination.
Crisis is always a good reason/excuse to take control of the resources of a nation. Now you have to figure out which crisis were manufactured to get a true picture of what is going on.
The idea of eternal compensation of accounting, economic and social failure looks good on paper, maybe only.
Deposit insurance has no effect on direct deposit payments.
It’s a psychological tool used to comfort you that your money is “safe” while your accounts are swept clean and lent out every single night of the year.
So it is really there for the banks, not for you.
Greece’s experience during the GFC and Sovereign Crisis proves that deposit insurance has no effect on your access to your deposits, and little effect on the balance of those deposits during an actual crisis.
“Greece’s experience during the GFC and Sovereign Crisis proves that deposit insurance has no effect on your access to your deposits, and little effect on the balance of those deposits during an actual crisis.”
Because the banks were bailed out by the EU. If you’re saying you don’t need deposit insurance if you can rely on bailouts, you’d have a point. But I don’t think that’s the point you’re trying to make.
“When WWI started they looked at their plans and executed Day 1 Item 1 – suspend convertibility to gold.”
Which only demonstrates that the Gold standard was too weakly entrenched. Instead of notes saying 1 Dollar, with some implicit understanding that 1 Dollar was 1/20 oz of Gold; attempt two at creating a proper currency therefore needs to instead say 1/20 oz of Gold.
Such that bread, wages, taxes, rents, guns etc, are priced directly in terms of Gold. That will make the fraudulent robbery which is all that suddenly reneging on a standing promise to redeem really is, harder to pull of, as it would require the Newspeakers to arbitrarily redefine entrenched weights and measures, not just the word “dollar.”
” …and people can’t get their money they are going to be lynching congressmen on the steps of the capitol.”
Yes. And that’s a feature. Not a bug.
Any society where thieves can get away with open, systematic theft without facing repercussions, will always end up a society of nothing but thieves. Always. Without fail.
After all, why would anyone bother with the the hard effort of working, when simple theft is more lucrative?
In a civilized society, if someone steals your horse, or your money, regardless of whether they do so by way of rustling or debasement, you hang them. Just like that. Systematic failure to do so, is why what was once The Land of The Free, is now nothing more than an everything-stolen-from-its-inhabitants shithole.
“
The Federal Reserve is an indispensable player in managing our economy. Period.
Wong. Period.
“
It’s not wrong at all. Problem is, a “managed” economy, is the exact opposite of a free economy.
Antebellum lynching posses were no doubt indisputable players in managing “our” Niggas as well….. As are current day Minnesota cops/hobby-stranglers…..
“the rescue programs that are now helping to keep the economy afloat.”
And how did these “rescue programs” do that? By putting Washington’s head on paper pieces? Did doing so create any real value to rescue someone with? I’m sure this idiot can’t add and stuff, but for those who fancies themselves numerate: How do you go about rescuing someone, as in making them wealthier than they would be if not “rescued”, without 1) creating some value to hand them as part of their rescue, or 2) stealing the wealth required from someone else, who first had to create it?
“Between 1880 and 1933, the United States experienced at least five full-fledged banking crises; in the past 87 years, we’ve had two”
And again, where does Sir NotSoBright suppose the wealth required to hand a bunch of useless banksters enough funds to prevent them from having a “crises”, come from? Does printing faces on paper magically create it? Or, did someone else have to create it, only to then have it taken from them in order to prevent Mr and Mrs. Idle McBanksterTrash from having themselves (horrors-of-horrors) a little “crises” during bonus season? And what will the latter, one “crises rescue” at a time, inevitably do to the amount of economic resources under control by those with a proven competence to create some value with them, who now had to have it taken from them to “rescue” makeworking nobodies producing nothing at all?
“A few other weird ideas from Ms. Shelton: She has questioned the accuracy of government statistics.”
Like Stalin getting 102% of the vote?
“Until her confirmation hearing, she backed getting rid of federal deposit insurance, a key protection for individual savers. “
Pray tell where the payouts for that insurance would come from, if not specifically from “individual savers.” More magic wealth creation by printing faces on paper again? Or, are we just back to the same old rob-the-value-creators game, one more time?
“God help us if the next chair is Ms. Shelton or anyone else with her views. Senate Republicans must recognize this danger and show some backbone.”
As long as you limit “Us” to mean the gaggle of completely useless for any purpose garbage, which the Fed was founded specifically to slaughter everyone else in order to “protect”; no doubt. For the 90+, and rapidly rising, percent of people who are being robbed to “rescue the banks”, “ provide “liquidity” to idiot “billionaires” “ and protecting completely useless, zero economic purpose banksters and other FIRE nobodies from “having a crises” OTOH: Anything which is a danger to the current “system” is, a priori and without exception, an undifferentiated good thing. Doesn’t even matter what that danger is anymore. Even America going full on Mogadishu-in-the-90s feral, literally and for real, is a step in the right direction, compared to the current “system.” And compared to that, a Shelton nomination doesn’t even register as far as possible side effects go. Much more concerning, is that it likely won’t register nearly as effectively as far as changes, hence benefits, go, neither.
“Does printing faces on paper magically create it? “
Yup.
No, it redistributes it and probably in a manner destructive to reward of effort.
“In a stunningly ignorant, yet hardly surprising op-ed, Steven Rattner”
…
Interesting that link no longer working.
Anyways, I assume this Rattner is the same dope who was O’s car czar … maestro of cash4clunkers.
I remember an interesting Godfatheresque story on Ratt.
Back in 2009 when GM on the ropes … and subsequent recipient of taxpayer bailout. There was immense pressure on GM bondholders to take a haircut … rather than union workers making big concessions. A hedge fund that held some GM bonds said no way. Well, good old Ratt met with the fund manager … and in an expletive laden tirade threatened the manager with having the IRS crawl into his every orifice. Nice Guy.
Mish, I listened to the Schiff podcasts this week and apparently she’s already been brainwashed, “got her mind right”, as Cool Hand Luke said, and had retracted years’ worth of her opinions in central banks and gold.
Got Gold?
Also a good hedge may be a 30 year fixed rate mortgage at 3% on property to be held long term, as anybody holding that paper would be a complete idiot (The Fed), even if only 1970s type inflation occurs. Property should not be in high property tax financial basket case state or political subdivision, however.
“and apparently she’s already been brainwashed, “
…
Possibly.
She knew she had to change her tune to get nominated … let alone confirmed.
But once she is in. She’s in. Serves a 14 year term and can only be removed by POTUS “for cause”. Not quite as bullet proof as SCOTUS member, but pretty durn good.
I expect long-dated bonds to do extraordinarily well over the short to medium term. Should be some serious capital gains there.
Yes!
Finally, someone who understands.
My core position – for years – long duration treasury strips. I’m cashing in when 30 yr yield hits .50%.
Why the MSM hates Judy Shelton:
Agree with most of the post but could someone please explain why a self-professed libertarian would want a gold standard again, of all things.
The gold standard was a government decree,was it not? They even made it illegal to own? So, it took coercion to get us to bring our gold in and exchange it for the paper. Then by another decree, they go off it by refusing to redeem. So, who ended up with the gold? And you want to do it all over again? Why?
A gold standard simply means that a government ensures the currency it prints is backed by assets, rather than hot air. Governments hate the idea of NOT being able to print and spend vast sums of money they don’t have, so resist backing their currency.
Making it illegal for Americans to own gold is something FDR did, because he wanted more gold in the treasury, and confiscating it for nominal payment was the easiest way to accomplish that objective.
Let’s see if I have this straight. We want the government to get more “gold in the treasury” so that “the currency it prints is backed by assets”. We do this by “confiscating” it through a gold standard.
And so…. a libertarian would want it because….?
“We want the government to get more “gold in the treasury” so that “the currency it prints is backed by assets”.”
No libertarian would want government to have more gold in the treasury.
Instead, they should have less gold. But also no way to print money not backed by gold.
With a gold standard, prices are quoted in terms of weight of pure Gold. Whether you pay in the metal itself, or in paper the government maintains a standing promise to redeem for the same amount of Gold, is irrelevant. A “Dollar”, is simply defined as being 1/20 oz of Gold. No more, no less. With that definition unalterable, as it should be printed right on the note.
No libertarian would want a government to confiscate gold from individuals. FDR made it clear that he did not care what the constitution (or the Supreme Court) said, he was going to do what he wanted.
It should be obvious to anyone who understands what a gold standard is why a libertarian would support it. If you really want to know the answer to your question, just do a little research on what a gold standard actually is (and what a libertarian actually is), and I promise it will become clear to you why a libertarian would want a gold standard.
I don’t think so Stuki. 1/20 would be a gold price of $20/ounce and yet today’s market price is approaching $1900. If its a true gold standard then I would be able redeem 1 dollar for an ounce and sell it in the market for $1900. Don’t sound tenable to me. And if they have less gold, how can it back all the dollars?
Quatloo, been a libertarian since 1981 and the days of Milton Friedman’s Free to Choose. He’s arguable the most famous liberation and if anyone knows the gold standard it’s him. He is anti-gold standard. I have studied many others, I’m a Cato donor and read many of the old economics books. We each have a different understandings of the the gold standard and libertarianism, and your intellectual defense is that I need to study it?
20 dollars for an ounce not 1 dollar
OK, I will answer your question. Why would a libertarian want a gold standard? Because it restrains excessive government spending and preserves the value of the currency.
Your response to Stuki makes me wonder if you are just trolling here. The idea that you are simply unable to comprehend his basic explanation to you is hard to take seriously.
Your right about my comprehension. In fact, you gold fanatics make my head hurt. Any sort of gold price fixing scheme just adds a complexity to the system that we simpletons just aren’t going understand. And understanding equates to trust. And trust me you are among us simpletons (gold doesn’t go into the treasury). So don’t try put your understanding above mine by condescending and then these trolling accusations whatever that means.
A libertarian would view any sort of imposed standard as an encroachment on liberty. Indeed, the gold standard (along with legal tender, central banking, etc, etc.) was no more than just one of the many steps toward full control of the money supply which is how we ended up here today. Any government standard can be changed and manipulated and suspended as easily as enacted. No lets’s change the price of gold, no lets switch to silver, now back to gold, then suspend part, then suspend all, then full fiat.
That is how excess government happens. The reason for the economic expansion of old is not because of the gold standard, but because the various governments were so insignificantly small relative to the economy at 8% rather than half the economy today. That’s it.
Enough gold stuff. I’m moving on.
You believe it is much better to have a currency backed by hot air than a currency backed by assets—because a currency that has intrinsic value would encroach on liberty? I just don’t follow your argument at all. A gold standard would restrain what government can do, which is always a good thing. A gold/silver (or any other) standard puts limits on the ability of government to put you further into debt; without a standard of any kind, the handcuffs are simply taken off the government and they are freed to engage in whatever behavior they like. Those who think government is a noble, wonderful institution think that is essential and benefits the people. Libertarians (and those who wrote and approved the U.S. constitution) tend to believe that government is a necessary evil that should be tightly restrained from acting without clear approval of the people. The real question is this: Is it better to have SOME restraint on government’s ability to spend, or NO restraint?
I am not a “gold fanatic”, in fact I think this may be the first time I have ever posted on the topic. You asked a question and I tried to answer it. I just can’t understand why anyone who claims to be a libertarian would want to free government up to engage in the abuse it always does.
You have it exactly backwards—no standard on currency (i.e., removing a restraint on what government can do) means government is free to abuse the monetary system and rack up debt (without the consent of the governed), that you and other citizens will be forced to pay. Without some sort of limit placed on government’s ability to spend whatever they want of our money, the $20 trillion in national debt will continue to grow until the system collapses.
“Letting the market set interest rates” is a part of any improvement. You’d also have to end central banking, adjust reserve ratios, sharply reduce government spending (ending deficit spending) and very likely eliminate government borrowing via bond issuance. But yes, anyone who questions the need for a central bank is halfway there already.
Totally agree that this hyperventilating about someone who brings a differing viewpoint is absurd. She is one person on a board; the ‘sky is falling’ editorial shows how terrified the establishment is to have ANY differing voices at the Fed.
That said, this op-ed is standard drivel from the New York Times. Diversity of thought is just not permitted there, and they simply cannot understand why anyone would want to hear viewpoints that differ from the views they espouse.
Yay for the gold bugs. And the digital currency bugs. And the weaker dollar bugs. And the …
Hi Mish,
I think we all agree wholeheartedly that we need to fix the valuation of each unit of currency, however the challenge in doing this exclusively to gold means that we would limit the total quantity of currency in circulation (based on the quantity of gold). Clearly this would promote the hoarding of money (at the end of the day people are greedy), and in effect creating unnecessary monetary shortages (and potentially elevated interest rates – which would have serious unintended consequences).
Surely the solution is to delink money from debt and then to fix the valuation of each unit of currency to a “basket of commodities” (which could also include a unit hour of labour for example). In this way, we would solve the valuation issue and also solve the potential problem of hoarding where the quantity could be managed according to the needs of the economy.
And lastly many thanks for your blog Mish – keep up the great work!!
“Hoarding” of money is not a problem – that’s a Keynesian canard.
Thanks for your comment Pater, but can you explain why?
Controversial? As opposed to the non-controversial counterfeit currency advocates that have dominated the Federal Reserve for decades?
A good report Mish.
There’s an interesting take on her proposed appointment under the second headline on here.