No President can ever go it alone. President Trump is no exception. To fulfill the promise he made to the American people to “drain the swamp” and strengthen the US economy, among a host of other things, he surrounds himself with staff and a team of advisors capable of executing his vision.
Among his team is economic advisor Judy Shelton (or rather, Dr. Judy Shelton). Shelton is unique among the long line of economic advisors we’ve seen in past administrations, many of whom the public remain largely unaware.
To us free-market and gold advocates, Shelton sticks out mainly because of her views on gold and her position to influence the administration’s position toward reassessing and disrupting the current monetary landscape in favor of sound money.
A Sound Money Advocate
Judy Shelton made her name within the circles of economics and finance when in 1987 she predicted the Soviet Union’s economic collapse (to take place two years later).
Since then she has served as an economic advisor to many Republican politicians going as far back as Jack Kemp to current politicians like Marco Rubio, Ted Cruz, Ben Carson, and now President Donald Trump.
Judy Shelton is also a co-director of the Atlas Sound Money Project, an organization dedicated to promoting sound money principles and raising awareness of the problematic conditions of our current monetary system.
Seeing Similarities Between the Old Soviet Regime and World Economies
In 2015, Shelton published an article on the WSJ titled “The Soviet Banking System--and Ours.” She discussed how central banks across the globe, particularly the Bank of Japan and ECB, were loading up on corporate assets.
The concern was whether the US Federal Reserve would do the same, placing private corporations under partial state ownership.
After all, mandatory Fed membership is something that banks seemed to have accepted all too complicitly.
Sure, the Fed isn’t a branch of government. But its existence is predicated on an act of Congress, its functions not inseparable from the mechanisms of government.
Seeing these developments along parallel lines with Soviet-style state-owned enterprises and institutions, we can see not only the potential problems arising from such a partnership but the general weakening of the free market principles that have helped give rise to the nation’s economic dominance.
“We Need a Fundamental Reassessment of the Global Monetary Order”
What Shelton sees is a need for the economy to prosper goes far beyond the hawkishness of, say, normalizing interest rates much faster than Bernanke and Yellen did after the 2008 crisis.
Going far beyond the hawkish stance of normalizing interest rates, Shelton believes that government needs to reassess on a fundamental level our very stance toward domestic and global monetary policy--namely, the role of central banks, and the role that gold can play in the economy.
When asked in a Forbes interview whether a new gold standard can be achieved unilaterally or if nations must convene to the standard, Shelton says “I’m not opposed to a new Bretton Woods conference, and if it takes place at Mar-a-Lago, I’m fine with that.”
But given the fact that the US prints the world’s reserve currency, any unilateral action of the sort would immediately require other nations to adhere to the standard that the US has set forth.
Will Gold Have Its Day of Reckoning?
The American public largely sees gold as a relic and the gold standard as an ineffective throwback.
In contrast, Shelton sees it “as a sophisticated, forward-looking approach,” one that is neutral and universal, transcending borders and time.
Besides, most central banks says Shelton, keep their reserves in gold: “I don’t want to read too much into it, but it proves that gold is not some barbarous relic.”
But how to implement this switch? Shelton proposes starting off with a gold-backed bond:
“I think the U.S. should issue them as an experimental pilot program, similar to the TIPS bond, that compensates people who are concerned about the future value of the dollar. For those who are concerned about a big financial meltdown, these bonds would give them some insurance, as gold tends to rise in price during periods of financial stress.”
As a sound money advocate, Shelton is well aware of China’s efforts toward establishing a gold-backed yuan, and that adopting a gold standard in the US would be seen as a welcome development, as it would protect China’s (as well as every other country’s) dollar holdings:
“If this practice starts to spread to even more countries, you would start to see the semblance of a future stable exchange rate system with those exchange rates being determined by what market forces believe about the future value of those currencies.”
Trump has stated on several occasions that he supports the idea of free trade and that his contentious stance toward certain trade relationships are aimed at disrupting arrangements that undermine free trade, placing the US in a disadvantaged position.
Although labor costs and standards cannot be “homogenized” across the board, what can be dealt with are the problems we’re facing on a global monetary level.
And establishing stable exchange rates is key to a proper monetary foundation, one that can bring about, says Shelton, “optimum financial flows and investment, and optimum decisions about where to produce goods and where to buy and sell goods and services.”
In this kind of stable monetary environment, countries cannot manipulate currency to gain a competitive advantage in trade.
Will Shelton be able to make an impact in the Trump Administration’s view toward reinventing the monetary order, perhaps to the extent of reintroducing a new version of the gold standard?
As advocates of sound money, we certainly hope so. And Shelton seems confident about this prospect.
If anything, it reaffirms the significance that gold still plays as sound money, even when it isn’t officially recognized across all states as legal tender. In other words, it’s just a matter of time.
And when that time comes, you may be wishing you had bought gold just a little sooner.