White House economic adviser Judy Shelton made headlines last week after President Donald Trump nominated her to the Federal Reserve Board of Governors. The mainstream press and finance industry were surprised to learn Trump’s Fed pick is a “gold bug.”
She advocates returning the U.S. Dollar to the “gold standard.”
President Trump’s Fed Nominee Dr. Judy Shelton discusses her support of a return to the gold standard and her critical take on central bank activity
— Squawk on the Street (@SquawkStreet) July 5, 2019
That’s especially surprising given Donald Trump’s stridently pro-fiat dollar comments on Twitter Thursday. The president spoke out on cryptocurrency for the first time on Twitter. He said he’s “not a fan.” The three-tweet thread railed against crypto and sung the praises of central bank money. It read like it had been drafted by New York Times columnist and Keynesian economist Paul Krugman.
But the mainstream media missed something else interesting about Shelton. She’s a cryptocurrency advocate too! And the U.S. president actually nominated her to the Federal Reserve Board.
The U.S. Dollar Gold Standard
Under a gold-backed dollar, the Federal Reserve would stabilize the dollar price of gold.
The United States was on the gold standard until 1971. That was when President Richard Nixon suspended gold convertibility of the dollar by executive order.
The old monetary regime limited the Fed’s wiggle room to enforce its twin congressional mandates. These are to keep unemployment low and stabilize prices in general.
Therefore, mainstream economists consider Shelton’s gold standard advocacy a fringe view.