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Controversial Gold Advocate Advances for a Fed Appointment
by Mish Shedlock, The Street:
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,
