Friday, August 12, 2016

Did Donald Trump Just Name A Hardcore Gold Advocate to His Economic Advisory Board?

By Robert Wenzel

I have received several emails pointing to a recent op-ed by Judy Shelton, who was named by Donald Trump to his economic advisory team.

The comments by the emailers suggest that Shelton may be a gold advocate.

What is notable about the op-ed piece which appeared in the Wall Street Journal is that she barely mentions gold. She only has a passing comment about a gold-convertible dollar after World War II. Though, she does mention it in a favorable light.

In the piece, she does come out of the gate warning about the problems with the current floating exchange system:
The surest way to become alienated from Donald Trump supporters is to invoke the word “global” with regard to trade or economic interests. Even if you embrace the Trump economic agenda for enhancing U.S. competitiveness by lowering taxes and easing regulation, even if you support an “America First” approach for tackling domestic shortcomings from education to infrastructure—there is still a negative stigma attached to proposing any kind of global economic initiative.

Yet by insisting that the U.S. Treasury label China a “currency manipulator” and by promoting trade that is both free and “fair,” Mr. Trump may be laying the groundwork for a significant breakthrough in international monetary relations—one that could ultimately validate the rationale for an open global marketplace and restore genuine free trade as a vital component of economic growth.
Shelton is making a bold jump here by stating that "Trump may be laying the groundwork for a significant breakthrough in international monetary  relations—one that could ultimately validate the rationale for an open global marketplace and restore genuine free trade as a vital component of economic growth." If he is doing so, he is doing so without self-awareness,

With Trump's talk of tariffs and his raising the phony problem of trade deficits, there is no indication that Trump has the intellectual heft to be slyly laying the groundwork for anything other than the confused yet often championed simple-minded concept of mercantilism.

Though it is a fun thing to see Shelton take Trump confusion and hint that he really has in his mind a great worked-out map of fixed-exchange rate theory and free trade thinking .in his head.

One wonders how many times Shelton has seen the great Peter Sellers film, Being There.

As for Shelton's own theory, in 2015 she did write in an op-ed in The Hill:
The integrity of the world's monetary system rested on a U.S. dollar that was convertible into gold at the rate of $35 per ounce of gold.
But her gold advocacy in this op-ed appears to be within the framework of  global state planning. In it, she seems fond of the failed Bretton Woods agreement:
Ever since the Bretton Woods agreement from 1944 was ended in the early 1970s, we have had no rule-based system for aligning exchange rates among the world’s different currencies. The Bretton Woods system required every participating nation to maintain a fixed exchange rate between its own currency and the U.S. dollar. The objective for safeguarding international monetary stability was to ensure that sliding exchange rates did not tilt the scales of price competition. Free trade was based on genuine value rather than monetary illusion. Capital flowed to productive investment opportunities rather than speculative financial instruments.
But, I repeat, the Bretton Woods system was a failed system.

Bretton Woods did include a loose gold anchor that made massive money printing by any one state very difficult, but in the end, significant money printing did occur (by the United States!), enough that President Nixon cut the cord with gold entirely.

No doubt, a Bretton Woods system would be a better option than what we have now, but it is a weak option compared to a gold coin standard.

Although Shelton doesn't mention it in The Hill op-ed. she is aware of this,

If we dig further, we see that in a 1994 book, Money Meltdown, that she does talk about gold convertibility at the level of the private citizen, something  that was not part of the Bretton Woods system. She wrote:
Had private citizens enjoyed the same convertibility rights as foreign central banks under the Bretton Woods agreement, their individual actions would have brought about a more diffused adjustment to changes in the U.S. money supply and alerted officials to dangerous developments long before the integrity of the entire system came under threat.
I mean, she really gets the problem with free-wheeling government control of money. From her book:
 [G]overnments cannot resist the temptation to intervene and . . . government intervention causes perverse financial effects. ...Turning to an outside anchor permits trading partners to safely transcend politics in their monetary relations. Unlike a pegged rate system, an outside anchor offers an objective monetary point of reference instead of requiring countries to coordinate policies or subjugate their own economic agenda to the domestic priorities of the dominant regional power...given the disadvantages of other systems—the corruptness of floating rates, the superficiality of pegged exchange rates, the confusion of competitive private currencies—an international gold standard emerges as the most attractive option.
Bottom line, Shelton, is, or was, an advocate of a gold standard that still sees a role for central banks, albeit, a very limited role. She does not go as far as advocating a gold coin standard, which eliminates the need for central banks altogether, but she is the closest thing to a hardcore gold adviser that I have ever seen, in my lifetime, next to a major party presidential nominee.

(ht Felix Bronstein, Pat Johnson, Tony)


The Inside Scoop on Judy Shelton

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