There have been some interesting news events related to what we watch for here over the past days. Below are some links to articles that cover President Trump weighing in on Facebook, the ramping up of the debate over the merits of a gold standard related to the nomination of Judy Shelton to the Fed, and the recent exchange between Congresswoman Alexandria Ocasio Cortez (AOC) and Fed Chairman Jerome Powell regarding the Phillips Curve model. Below each link is an excerpt extracted from the article.
-------------------------------------------------------------------------------------------------------------------------President Trump Suddenly Weighs in on the Facebook Libra Project
"Facebook May Need a Banking Charter for Libra" (CNBC article)
"U.S. President Donald Trump on Thursday said he’s “not a fan” of cryptocurrencies, and suggested that Facebook may need a banking charter if the company wants to launch the digital token Libra."
Trump on Facebook Libra - CNET
"In June, Facebook announced its next attempt at expanding outside social media platforms: the Libra cryptocurrency. It'll be like Bitcoin, except its value will be pegged to a basket of assets, like government securities, to make it more stable. The world is unsure of how successful or disruptive Libra will be, and on Thursday the cryptocurrency got perhaps its biggest detractor yet: the president of the United States."
------------------------------------------------------------------------------------------------------------------------
Nomination of Dr. Judy Shelton Triggers Renewal of Debate Over the Gold Standard
Articles written in support of Dr. Shelton and those opposing her confirmation to the Fed have tended to focus somewhat on her views on the gold standard. That has prompted the authors of the articles to weigh in with their own views of a gold standard. Below are links to some articles that have popped up recently:
NY Sun - Debate Over the Fed Begins
"The thing to mark here is that the criticism being levied against Ms. Shelton for hewing to the principle of a gold standard today is from the newspaper that was saved from bankruptcy by a man who gave up the chairmanship of the Fed over not only a point of principle but over the principle of a gold standard."
Judy Shelton is a Dangerous Pick for the Fed Board (Salt Lake City Tribune - from Washington Post article)
"Her radical vision involves replacing the Fed's mandate of stable prices and maximum employment with a gold standard. The gold standard is roundly rejected by economists and was abandoned ages ago, worldwide, for good reason."
The Fed Could Use a Golden Rule - Wall Street Journal
"Though money can’t talk, people can’t stop talking about it. With the nomination of Judy Shelton to the Federal Reserve Board, the discussion has tilted to gold.
Gold is money, or a legacy form of money, Ms. Shelton contends, and the gold standard is a reputable, even superior, form of monetary organization. The economists can hardly believe their ears. The central bankers roll their eyes. How can this obviously intelligent woman be so ignorant? Let us see about that."
Trump Fed Pick Wants to Revive the Gold Standard - CBS News
"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."
--------------------------------------------------------------------------------------------------------------------------
Alexandria Ocasio-Cortez & Jerome Powell Discuss the Phillips Curve
Trump Adviser Larry Kudlow Praises AOC - Bloomberg
"The New York congresswoman, a rising star in the progressive wing of the Democratic Party, asked the Fed boss about the Phillips Curve, a theory used as a guide by monetary policy makers for decades. It suggests there’s a trade-off between low unemployment and stable prices.
But Ocasio-Cortez said many economists are concerned that the formula “is no longer describing what is happening in today’s economy” -- and Powell largely agreed.
“She got it right,” Kudlow told reporters at the White House later on Thursday. “He confirmed that the Phillips Curve is dead. The Fed is going to lower interest rates.”
Phillips Curve Takes a Hammering - Australian Financial Review
"The Democrat from New York quizzed Federal Reserve chairman Jerome Powell on the Phillips curve, a theory that says low unemployment will inevitably bring higher inflation, at a congressional hearing Wednesday.
A day earlier, Trump's top economic adviser Larry Kudlow also criticised the idea that there's a trade-off between low unemployment and stable prices.
Powell agreed the relationship was becoming less relevant, and said the evidence now suggests that the economy can sustain much lower rates of unemployment than previously thought."
------------------------------------------------------------------------------------------------------------------------
My added comments: When people start talking about money and monetary systems, it is sometimes surprising where they may agree and disagree. Looking at the news articles above, we can make a few interesting observations:
- President Trump aligns himself on the side of the central banks when it comes to Facebook Libra. Many would probably expect him to favor a private corporate enterprise offering a new competing product into the marketplace. But when it comes to money, the US government has been very consistent in its efforts to keep the US dollar as the global reserve currency. President Trump seemed to make it very clear he is on board with that concept in this Twitter comment.
- Even though my reading of what Dr. Judy Shelton has proposed regarding a return of gold to the monetary system does not suggest she expects to see the US return to the gold standard any time soon, that topic seems to have become a focal point of articles opposing her confirmation to the Fed. In return, supporters of her nomination have jumped in to defend the classical gold standard. Readers who want to see what she has actually proposed in terms of using gold in the system should watch her presentation here from April 2017 at the Kemp Foundation Forum. She proposed a gold convertible US bond as an experimental first step to see how markets would react. Pretty far from a return to a full gold standard as I understand her proposal. In recent interviews, she seems to indicate that she favors gradual changes in policy to allow markets to adjust to any changes rather than any sudden dramatic changes that might take markets by surprise.
- When it comes to money and monetary policy, you never know when people might agree on that you would never expect. In this case, Congresswoman Ocasio-Cortez suggests that the Phillips Curve model used for a long time by economists is no longer valid and Fed Chairman Powell tends to agree. Then top Trump economic adviser Larry Kudlow seizes on that exchange to say that AOC is correct on that point because the Trump Administration wants the Fed to ease up again on monetary policy. I suspect that Congresswoman Ocasio-Cortez was interested in this point because she has spoken favorably about Modern Monetary Theory policy which suggests that we should not worry about easy monetary policies and any related buildup of debt when thinking about how much money the government should spend to boost the economy. So, as I see this, they agree on one level but have very different ideas on whether the government or the private sector should be in charge of allocating any boost in the overall money supply.
No comments:
Post a Comment