Nomination for the Board of Governors of the Federal Reserve

We read the news today that Judy Shelton has been approved by the Senate Banking Committee. This means that the full Senate can vote whether or not to approve her.

She is not liked in many quarters in Washington. Unlike President Trump’s pick for the other vacant seat (Christopher Waller), the vote on Dr. Shelton fell along strict party lines.

The reason for the antipathy is that she has promoted heretical ideas, dangerous ideas. Ideas about gold, and about a gold-backed Treasury bond. She has said that the US should return to a gold standard (though, alas, she has more recently called for the Fed to cut interest rates).

Given the entire theory developed by Keith Weiner, and our very raison d’etre, we feel we should comment on the prospect of Shelton joining the Fed. We should also disclose that Keith knows Judy, and has discussed gold bonds with her.

The Friedmanites and Keynesians who populate the Fed have the same stale, old ideas. We have remarked many times that their only debate is whether to centrally plan our economy based on discretion or whether to centrally plan our economy based on rules. And within the latter camp, the choice of rules is limited to targeting one or more of: inflation, unemployment, GDP, and the quantity of dollars.

Our opinion is that Dr. Shelton has some new and better ideas.

We make no prediction as to the politics she may encounter at the Fed. But there is a more fundamental problem. The Fed is a central planning agency. Its nature cannot be changed. And there is no good way to do central planning. There is no such thing as a good central plan.

We will not join the chorus cheering for her appointment. This is not because we don’t like her. If a person with a reputation for good ideas joins an organization with a reputation for central planning, it is the latter reputation that will survive.

Some might criticize us, and demand if we don’t care to minimize the harm inflicted by the Fed. Isn’t it better to have good people at the Fed, than bad?

To which we reply: we trust the Fed well enough to keep working towards its true purpose. Forget GDP and inflation and unemployment. The job of the central bank is to enable the government and its cronies to borrow more, more cheaply. And this includes keeping them solvent. We trust the Fed will do what it needs to do to the quantity of dollars and the interest rate. And to buy whatever securities it needs to buy, to stave off the insolvency of any financial intermediary it cares about.

In other words, it will keep the capital-consuming machine going as long as it can, heedless of the consumption of capital. This will hold true with or without Dr. Shelton.

We wish her the best, but this does not alter our view of the Fed one iota. Or our mission to revive the gold standard, by paying interest on gold and silver to everyone.