Today the Senate Banking Committee held a hearing for President Trump’s two most recent Federal Reserve nominees. In one chair sat Christopher Waller, vice president and director of research at the Federal Reserve Bank of St. Louis, whose dreadfully dull answers could have been the product of a bot forced to watch one thousand hours of central bank testimony. Luckily for those watching, most of the questions were directed towards the far more intriguing—and controversial—Judy Shelton.
Although by no means an Austrian, Judy Shelton’s record includes public support for a modern gold standard, criticism of the Fed’s response to the financial crisis, and even a comparison of America’s central bank to Soviet central planners. On the topic of competing currencies, Ms. Shelton once referred to Bernard von NotHaus, a man arrested by the US government for the production of silver “Liberty Dollars,” as the “Rosa Parks of monetary policy” for his willingness to challenge the Fed. Beyond monetary policy, she cited government deposit insurance as a program that risks creating moral hazard, suggested that the US could pay off its public debts by selling off assets such as the US Postal Service and federally held public lands, and even publicly questioned the accuracy of government inflation measures.
The recounting of the greatest hits of Judy Shelton offered a glimpse of what it would look like to actually drain the swamp of central bankers.
Of course, all of this was sharply—and at times uncivilly—criticized by duly elected economic midwits who sought to lecture to Shelton while desperately relying upon the prepared questions of legislative aides.
Senator Richard Shelby, at one point the chairman of the banking committee, was particularly appalled at the notion of nominating a Federal Reserve candidate so outside the mainstream. His grilling of Ms. Shelton included sagely pointing out that the amount of gold in the world is worth less than the American GDP and suggesting that the gold standard was a product of the days when the US was a “barter economy.”
Of course, it is a reflection of the dilapidated state of modern economics that Shelby’s ignorance would make him a safer choice for the Federal Reserve than either Shelton or her friend James Grant.
It is also sad to see Shelton, obviously a very intelligent woman, take the strategy of trying to sing from a more traditional script rather than take the opportunity of the hearing to defend the ideas she has long supported. Although there were times when she offered clever outs to her testimony, such as declaring that she would never want to “go back” to any previously existing monetary system (which is not the same thing as seeing a potential use for a newly priced gold backing in the future), for the most part Shelton attempted to try to present herself as a more status quo figure.
In one of the more entertaining exchanges, Senator John Kennedy of Louisiana pushed Ms. Shelton on what she would recommend if faced with an abrupt financial crisis. Her response, unfortunately, was more of the same—taking interest rates to 0, more QE. It was an answer so uninspired that it was basically repeated by Mr. Waller.
Shelton was also attacked for apparent changes in her policy prescriptions during the Trump regime.
Although she once (accurately) blasted the Obama administration for monetary and fiscal recklessness, she has advocated for more accommodative policy in recent years. One could perhaps forgive Shelton for the sin of identifying the Federal Reserve for what it really is—a political institution—but her nomination is likely to be killed by senators who prefer to maintain that the illusion it is anything but.
In fact, shortly after the hearing, Washington was already filled with whispers about her nomination already being dead.
If true, Congress will miss the opportunity to actually act on the goal that is so often given lip service on the Hill—increasing diversity on the Fed. Beyond the irrelevant point of her gender, Judy Shelton would have brought a heterodox economic perspective from well beyond the echo chamber of modern central banking. Having received her PhD in business administration from Utah State University, she is far removed from the elite institutions that are quite effective at wiping out common sense.
At least the Fed will have the addition of Mr. Waller, who can offer such pearls of wisdom as:
The fiat monetary system we have around the world works well as long as it is managed well by the central bank.
Where would America be without such invaluable insight!
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