That’s the title of an article in Bloomberg:
Shelton, who’s served as an informal adviser to Trump, holds a Ph.D. in business administration with an emphasis on finance and international economics from the University of Utah.
Here is a recent writing advocating return to “sound money” in Cato Journal:
The United States is the world’s largest holder of official gold reserves. Comprising 8,311.5 tonnes or 261 million troy ounces, those reserves are carried at a book value of roughly $11 billion. Notably, the market value is significantly higher at $345 billion (based on the London Gold Fixing for September 30, 2016) as cited in the Treasury’s report filed June 30, 2017 (U.S. Department of the Treasury 2017).
In proposing a new international monetary system linked in some way to gold, America has an opportunity to secure continued prominence in global monetary affairs while also promoting genuine free trade based on a solid monetary foundation. Gold has historically provided a common denominator for measuring value; widely accepted at all income levels of society, it is universally acknowledged as a monetary surrogate with intrinsic value.
Speaking in February 2017, former Federal Reserve Chairman Alan Greenspan defined gold as the “primary global currency” and further added, “We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line” (Oyedele 2017). To confront U.S. indebtedness, we need to restore fiscal discipline and sound money through gold convertibility.
We make America great again by making America’s money great again.
For the sake of the institution, I hope she isn’t appointed and confirmed. Her craziness is not confined to the advocacy for gold convertibility. From my February 2017 post entitled “This Makes No Sense“:
Judy Shelton on currency manipulation.
In response to my post on a possible new approach to tackling currency manipulation, reader “Judy” comments by sending me a link:
This is a WSJ op-ed, which is behind a paywall. Here is an ungated version:
Certainly the rules regarding international exchange-rate arrangements are not working. Monetary integrity was the key to making Bretton Woods institutions work when they were created after World War II to prevent future breakdowns in world order due to trade. The international monetary system, devised in 1944, was based on fixed exchange rates linked to a gold-convertible dollar.
No such system exists today. And no real leader can aspire to champion both the logic and the morality of free trade without confronting the practice that undermines both: currency manipulation.
When governments manipulate exchange rates to affect currency markets, they undermine the honest efforts of countries that wish to compete fairly in the global marketplace. Supply and demand are distorted by artificial prices conveyed through contrived exchange rates. Businesses fail as legitimately earned profits become currency losses.
…central banks provide useful cover for currency manipulation. Japan’s answer to the charge that it manipulates its currency for trade purposes is that movements in the exchange rate are driven by monetary policy aimed at domestic inflation and employment objectives. But there’s no denying that one of the primary “arrows” of Japan’s economic strategy under Prime Minister Shinzo Abe , starting in late 2012, was to use radical quantitative easing to boost the “competitiveness” of Japan’s exports. Over the next three years, the yen fell against the U.S. dollar by some 40%.
Whether China is propping up exchange rates or holding them down, manipulation is manipulation and should not be overlooked.
So…let me get this straight. If you lower interest rates and that depreciates a currency, that’s manipulation. If you embark on quantitative easing by purchasing domestic assets and the currency depreciates, well that’s currency manipulation. And if you intervene in the foreign exchange market to keep a currency weak by purchasing foreign currency, that is manipulation, as well as if you intervene to keep it strong by selling off foreign currency.
This expansive definition of “manipulation” means that pretty much every central bank in the world is manipulating their exchange rates — except for those that have their exchange rates at the “correct” levels, as determined by somebody.
That article made me wonder what criterion would result in exchange rates being at correct levels. According to this article, Dr. Shelton believes a fix to gold would do the trick.
“We’re talking about monetary integrity. And if we really do have a some kind of a global economy, it doesn’t make sense that people are using different units of account to measure value.”
Implicitly, this means she views the world as an optimal currency area (e.g., symmetric shocks, and/or free factor mobility and fiscal union). Hmmm.
I’ll further observe that if you fix your exchange rate to gold at the “wrong” levels, you might have the real exchange rates less volatile, but still misaligned. Those who know economic history, know the consequences, summarized in this graph:
See also Jim’s post on the subject.
I have read that Dr. Shelton is an economic adviser to President Trump; if so, I think I will miss the days when Donald Trump called Lt. General Flynn for advice on the dollar.
For an econometric evaluation of Dr. Shelton’s proposition of fast adjustment to PPP under gold standard, see here, where I cite Alan Taylor’s “A century of PPP”. (If regressions, and half-lives, befuddle you, then don’t read).
On the other hand, as a social scientist, I am interested in how the combination of (1) a gold standard and (2) a permanent state of trade war would affect the world economy.