Wednesday, July 24, 2019

This Is Interesting

This week, a week when Democrats and Republicans united to ignore that pesky ol' budget ceiling and continue to spend us into oblivion, I read a distinctly different story.

Do you recall the name of Dr. Judy Shelton?  Back during the earliest days of the transition team, and even months before his election, Dr. Shelton was one of Trump's team of economic advisors.  As far as I know (from public records and articles) she was the sole advocate of sound money.  Dr. Shelton advocated we provide something like the Treasury Inflation Protected Security (TIPS) bonds which would be redeemable in either dollars or gold, effectively tying the two together without a formal gold standard.  A video of her describing this is here.  Note the date on that video is 2012. 

Last week Trump nominated Dr. Shelton to the Federal Reserve Board.  Of course, the liberal media is aghast.
That triggered a flurry of superficial and derisive references in the controlled media to Shelton’s past support of a gold standard.

For example, CBS News described her as “a believer in the return to the gold standard, a money policy abandoned by the U.S. in 1971.” According to the story, “mainstream economists believe it's a fringe view.”

As the “mainstream” media portrays sound money advocates, we apparently are nostalgic for the monetary system that existed all the way up until 1971.
CBS spreads the fear, uncertainty and doubt:
As President Donald Trump named his picks to fill two influential seats on the Federal Reserve's Board of Governors, the price of gold surged. That may be because one of the them, Judy Shelton, is a believer in the return to the gold standard, a money policy abandoned by the U.S. in 1971.

Shelton is raising eyebrows among mainstream economists for her views, which include slashing the Fed's benchmark rate to zero and pegging the value of the dollar to gold prices. She's not the first Trump pick for the Fed to advocate a return to the gold standard, with his two previous failed Fed choices -- Stephen Moore and Herman Cain -- also advocating for a revival of the policy.
They repeat the phrase that "mainstream economists" disagree several times, but never give any numbers or figures to back their argument.  Just the old saw that "the US Economy is too complex to tie it to a gold standard".  (I think what they're really saying is the US Economy is too fucked up to link to a standard.)  Those mainstream economists didn't see the 2008 collapse coming, but they'll see the next one, by golly!  Half a dozen (or more) sound money economists I was reading predicted 2008 a couple of years in advance. 

Article 1 section 10 of the US Constitution says:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.  [Bold added: SiG]
and, of course, the Federal Government violates that by the bushel every second.   Sound money can be, as the document says, gold or silver or a mix of the two, and although the constitution doesn't say it, other commodities that can't be printed in practically infinite amounts could do.
The Coinage Act of 1792 defined a dollar in terms of silver. Specifically, a dollar was to be 371.25 grains (equivalent to about three-fourths of an ounce) of silver, in harmony with the Spanish milled dollar.

Even before the creation of the Federal Reserve in 1913, certain banking and political interests had worked to de-monetize silver.

In 1873, Congress moved to sideline the silver dollar. That sparked the so-called Free Silver Movement, which stood for allowing the supply of silver coins to be increased in accord with demand.
At the end of the 19th century, there was a bit of a gold vs. silver argument, with some advocates saying gold was the money of the elites; while silver was the money of the masses. 

But, hey, that's old-fashioned stuff.  Now we have Modern Monetary Theory, which says the government can no more run out of money than a football game can run out of points.  Want more than all the money in the world?  We just have to run the computers a little longer to add all those zeroes.  

Good luck, Dr. Shelton.  I sure hope your nomination goes through.  More importantly, I hope your ideas get listened to. 


  1. Article 1 section 10 of the Constitution is defining powers reserved to the federal government, and prohibited to the states. So the federal government can't be "violating" it. That's not to say what they're doing is right, or smart.

    1. IIRC that's what the supreme court ruled. It has been so long since I read that I don't give it much chance of being right, though.

      It's a long twisted road from the states issuing currency to where we are now, and absolutely too long to include in this piece.

  2. I think TIPS are a brilliant idea. I would love to be able to invest in gold without the hassle of actually coping with gold dealers.

  3. Black robed pirates can prestidigitate into law ANYTHING they desire if it serves the agenda. There are over 20,000 laws in America that are direct blatant violations of the Second Amendment...and THOUSANDS of people have served LONG prison terms because of these laws....all of them illegitimate laws. As is often stated we only have the rights we will fight for, die for and kill for.

  4. Going back on gold and silver would help a bit. But Congress would still just print money out of nothing. Oh, and does anybody still believe there is any gold left in Ft. Knox?

    I still say we need to go onto the egg standard. Ten cents to the farmer per dozen grade-A large eggs.

    1. Like I said above, anything "that can't be printed in practically infinite amounts could do". That even worked for those giant stone rings on Yap island.

      If I've written one article on what's wrong with fiat money, I've written a hundred.

      BTW - The Deadpool as Bob Ross painting is a cool profile pic.

  5. Excellent post. Bookmarked for future re-reading.

    Would like any recommendations on the topic: book, sources, etc.

    1. I think the best thing I've read is The Scandal of Money by George Gilder, subtitled "Why Wall Street Recovers but the Economy Never Does". It's an introduction to the information theory of money and also talks about sound money.

      Amazon Kindle version link