In tapping Judy Shelton to become one of two Federal Reserve Board governors, President Donald Trump selected one of the minority of mainstream economists supportive of a return to the gold standard and critical of central bank activity.
Shelton, who serves as the U.S. executive director at the European Bank for Reconstruction and Development, wrote as recently as last year in support of pegging the dollar to gold prices.
Trump announced his intention to nominate both Shelton and St. Louis Fed economist Christopher Waller via Twitter:
....Judy is a Founding Member of the board of directors of Empower America and has served on the board of directors of Hilton Hotels.— Donald J. Trump (@realDonaldTrump) 2 juillet 2019
Both nominees would have to be approved by the Senate, a process that could take months.
On April 21, Judy Shelton had an op-ed in the Wall Street Journal, The Case for Monetary Regime Change:
"For all the talk of a “rules-based” system for international trade, there are no rules when it comes to ensuring a level monetary playing field. The classical gold standard established an international benchmark for currency values, consistent with free-trade principles. Today’s arrangements permit governments to manipulate their currencies to gain an export advantage.
Money is meant to serve as a reliable unit of account and store of value across borders and through time. It’s entirely reasonable to ask whether this might be better assured by linking the supply of money and credit to gold or some other reference point as opposed to relying on the judgment of a dozen or so monetary officials meeting eight times a year to set interest rates. A linked system could allow currency convertibility by individuals (as under a gold standard) or foreign central banks (as under Bretton Woods). Either way, it could redress inflationary pressures."
In a post published by the libertarian think tank Cato Institute in 2018, Shelton drew a comparison between cryptocurrencies and gold:
“If the appeal of cryptocurrencies is their capacity to provide a common currency, and to maintain a uniform value for every issued unit, we need only consult historical experience to ascertain that these same qualities were achieved through the classical international gold standard without sacrificing the sovereignty of individual nations. To the contrary: gold standard rules permit nations to participate voluntarily by operating in accordance with the discipline of gold convertibility of their own currencies."
"The United States is the world’s largest holder of official gold reserves. In proposing a new international monetary system linked in some way to gold, America has an opportunity to secure continued prominence in global monetary affairs while also promoting genuine free trade based on a solid monetary foundation. Gold has historically provided a common denominator for measuring value; widely accepted at all income levels of society, it is universally acknowledged as a monetary surrogate with intrinsic value,” she wrote.
The choice of Shelton may hint at Trump’s growing frustration with Fed leaders and the direction of the central bank’s monetary policy. Trump has argued that higher interest rates and so-called quantitative tightening have capped GDP growth and dampened the U.S. position in trade deliberations with Beijing.
Questioned in a recent interview with the Wall Street Journal opinion page whether the U.S. central bank should lower rates she said, “The answer is yes.”
“When you have an economy primed to grow because of reduced taxes, less regulation, dynamic energy and trade reforms, you want to ensure maximum access to capital,” she told the Journal. “The Fed’s practice of paying banks to keep money parked at the Fed in deposit accounts instead of going into the economy is unhealthy and distorting; the rate should come down quickly as the practice is phased out.”
Judy Shelton is author of the 1998 book Money Meltdown; and previously she had concluded that "Central bankers, and their defenders, have proven less than omniscient."
Following the news that Shelton is being nominated to the Fed board, gold spiked $10 from $1,425 to $1,435 in minutes.