News Note: Dr. Judy Shelton to Be Nominated for Position at the Federal Reserve

This news comes as no surprise as she has been thought to be the next nominee for some time and had confirmed that she was contacted for the position by the White House. Dr. Shelton kindly took some time last summer to do a brief interview here on her thoughts about the potential for monetary system reform. Below are some links to recent news articles and Twitter comments related to her nomination.

The President also announced he intended to nominate Dr. Christoper Waller of the St. Louis Fed to fill another vacant position on the Board of Governors. If he and Dr. Shelton are confirmed by the Senate, all Board of Governor seats at the Fed would be filled. Dr. Shelton was previously confirmed by the Senate for her current position at the EBRD (European Bank for Reconstruction and Development).

Judy Shelton when appointed to the EBRD

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President Trump's Tweet on the Intention to Nominate

Twitter reply from Dr. Shelton

Jim Rickards Twitter Comment


Wall Street Journal

"President Trump tweeted Tuesday that he intended to nominate economist Judy Shelton, the U.S. executive director at the European Bank for Reconstruction and Development, to become a Federal Reserve Board governor. She served as an economic adviser on Mr. Trump’s transition team and has worked for the Atlas Network, a think tank that has been critical of the Fed’s monetary policy and that has advocated for a return to the gold standard."


NBC News

"President Donald Trump intends to nominate Christopher Waller, executive vice president at the Federal Reserve Bank of St. Louis, and Judy Shelton, an economic adviser to the president during his 2016 campaign, to the Federal Reserve’s board."


The Hill

"President Trump announced Tuesday evening that he intends to nominate Christopher Waller and Judy Shelton to fill the two vacancies on the Federal Reserve board of governors."

NY Post

"Waller previously served as an economics professor at the University of Notre Dame. Shelton is a founding member of the board of directors of Empower America and previously served on the board of directors of Hilton Hotels, Trump wrote in a tweet Tuesday."

The Week.com

"A conservative critic of the Federal Reserve, Shelton served as an economic adviser to the Trump campaign, is U.S. executive director of the European Bank for Reconstruction and Development, and has a PhD in business administration from the University of Utah. Waller is director of research at the Federal Reserve Bank of St. Louis, holds a PhD in economics from Washington State University, and was once a professor of economics at the University of Notre Dame."

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My added comments: Readers here may wish to review some blog articles we have written here that cover Dr. Shelton (see links below).


Her Kemp Foundation Presentation in April 2017


Dr. Shelton calls for Monetary System Reform "linked in some way to gold" (Cato Journal - Spring 2018)


Brief Twitter exchange on her thoughts on a "new common currency"


Dr. Shelton - Her thoughts on the Potential for Monetary System Reform (also linked above)

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One more added comment: Dr. Shelton is sometimes portrayed as being an advocate for a return to a gold standard. However, my reading of her views suggests a more nuanced approach. It seems to me that she realizes a sudden conversion to a gold standard is unlikely to take place as I read and listen to her comments. 

In her speeches and articles I have linked above, please note that she tends to talk more about a possible first step being for the US to issue gold backed government bonds to see how the markets react (not a sudden return to a gold standard). In recent interviews, she has called for lowering the interest rate the Fed pays to banks for reserves over a gradual time frame (she believes this Fed policy may discourage banks from lending to small businesses). So I don't see her as calling for any kind of sudden radical changes. I do expect she would be bold about speaking up for ideas for reform and the proper role for the Fed that she believes in as she has always done in the past. The links above will give you a good overview on some of her views.

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Added unrelated news note: A group of Democrats in the US House issue a letter to Facebook asking them to stop moving forward on the Libra Project until Congress can evaluate the proposal more in depth. Here is one interesting statement in the letter (underline is my addition):

"While Facebook has published a "white paper" on these projects, the scant information provided about the intent, roles, potential use, and security of the Libra and Calibra exposes the massive scale of the risks and the lack of clear regulatory protections. If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability."

Dr. Judy Shelton - Thinking About a New Common Currency

This is a news note based on a recent twitter exchange with Dr. Judy Shelton. Dr. Shelton was an adviser to the Trump economic team and also a recent participant in the Kemp Foundation forum on exchange rates which we covered here. She is also talked about as a possible nominee for the Federal Reserve.

Dr. Shelton mentioned on her Twitter feed that she sees the gold convertible US bonds she talked about at the Kemp forum as "a first step towards a gold-linked common currency based on national currencies".  

When I saw her Twitter comment on this I asked her for a little more detail on what she has in mind since moving towards a gold-linked common currency would clearly be the kind of major monetary system change we watch for here. The result was this Twitter exchange you can see below:

Larry White‏ @lonestarwh

By gold linked "common currency", are you thinking of some kind of supranational currency or just the US dollar used differently?

Judy Shelton‏ @judyshel  7h7 hours ago

Judy Shelton Retweeted Larry White

Larry, I am thinking of a new common currency, voluntary, linked by gold (and silver) resulting from sovereign issuance of debt securities.

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Please note that Dr. Shelton has in mind a new common currency linked to gold and silver rather than the US dollar. This suggests some kind of common currency used globally on a voluntary basis. This is obviously significant news since Dr. Shelton does have input into the Trump Administration. 

Also, we have this recent Twitter comment by Jim Rickards (see below) in which he talks about the possibility of Trump calling for an international monetary conference at Mar-a-Lago. 

This gives us an idea what to watch for. If an international monetary conference does take place under Trump, we can expect that the kind of issues we cover here will be discussed and that Dr. Shelton may have some input at such a conference. We will keep an eye out for it.

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Jim Rickards‏ @JamesGRickards

Replying to @slowmohockey @Collide @kalaloke

When Trump convenes an international monetary conference at Mar-a-Lago you can say you heard it here first. Sarah got the scoop.

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Added note: Dr. Shelton did this recent interview on CNBC with Rick Santelli.
Added note 6-18-17: Dr. Shelton adds this comment on her Twitter feed.

Repost - Kemp Foundation Presentation by Dr. Judy Shelton

On April 20th, the Kemp Foundation held a forum on Exchange Rates and the US Dollar at the National Press Club in Washington, DC. The forum featured a very distinguished list of speakers and contributors. Dr. Judy Shelton, who we have featured here recently, was one of the speakers. Dr. Shelton worked as an adviser to the Trump economic transition team.

 

Below is the video of her presentation followed by a brief bullet point summary of her key ideas. After that are a few added comments.

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Bullet Point Summary:

- many (including Dr. Shelton) agree that existing floating exchange rate system is flawed

- the current system needs to be changed to restore a fixed exchange rate system

- currency manipulation by governments or central banks is a problem in the existing system

- US should provide global leadership regarding monetary system integrity

- Dr. Shelton proposes the idea of a gold convertible US Treasury bond

- she provides a detailed example of how such a bond might work in the real world

- she asks: if the US were to do this how might it impact other countries?

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My added comments: The convertible gold bond is is an idea Dr. Shelton has talked about for some time. My take on it is that she views it as kind of a first experimental step towards a fixed exchange rate system based on gold or some kind of hard anchor. She uses gold in her example because central banks already own gold in their existing reserves and gold has a history in the world monetary system.

Her proposal would not be an immediate major overhaul of the existing monetary system as I understand it. It would be sort of a test to see how it would work out. If it performed well, it might encourage the US and other nations to move back towards a fixed exchange rate system based on a hard anchor like gold.

I am presenting Dr. Shelton's video first here on the blog because in a way it seemed like it kind of lays the foundation for a broader monetary system overhaul proposal made by Dr. Warren Coats later that day in the forum. Dr. Coats proposes using the SDR at the IMF to replace the US dollar as global reserve currency, but in a much different way than the SDR is currently used. He wants it issued based on market demand by a Currency Board rule and tied to a hard anchor. He does not oppose using gold as the anchor if that is what is desired, but thinks that a broader basket of goods would likely be a more stable anchor than gold by itself. We have covered Dr. Coats proposal here, but in his presentation he covers how a Currency Board would work in more detail. I think both Dr. Shelton and Dr. Coats are both strong advocates of a sound currency unit which was a major theme of this forum. 

This forum is a great example of why it is important to get several experts like this together to exchange thoughts and ideas. I noticed how well Dr. Shelton and Dr. Coats presented very clearly what they are proposing in a short summary version all of us can understand. That is what this blog is all about. Trying to help the average person like myself get some understanding about these complex issues. These types of brief summary presentations laid out by highly credible experts in clear language is just what is needed to help us. I commend the Kemp Foundation and all participants for holding the forum and exchanging ideas. Well done!

Added notes: A thank you to Dr. Shelton for a retweet on this article.

This is the first of three articles on the Kemp Forum. Here is the article on Dr. Warren Coats presentation.

Kemp Foundation Forum on Exchange Rates - Dr. Judy Shelton Video

On April 20th, the Kemp Foundation held a forum on Exchange Rates and the US Dollar at the National Press Club in Washington, DC. The forum featured a very distinguished list of speakers and contributors. Dr. Judy Shelton, who we have featured here recently, was one of the speakers. Dr. Shelton worked as an adviser to the Trump economic transition team.

 

Below is the video of her presentation followed by a brief bullet point summary of her key ideas. After that are a few added comments.

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Bullet Point Summary:

- many (including Dr. Shelton) agree that existing floating exchange rate system is flawed

- the current system needs to be changed to restore a fixed exchange rate system

- currency manipulation by governments or central banks is a problem in the existing system

- US should provide global leadership regarding monetary system integrity

- Dr. Shelton proposes the idea of a gold convertible US Treasury bond

- she provides a detailed example of how such a bond might work in the real world

- she asks: if the US were to do this how might it impact other countries?

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My added comments: The convertible gold bond is is an idea Dr. Shelton has talked about for some time. My take on it is that she views it as kind of a first experimental step towards a fixed exchange rate system based on gold or some kind of hard anchor. She uses gold in her example because central banks already own gold in their existing reserves and gold has a history in the world monetary system.

Her proposal would not be an immediate major overhaul of the existing monetary system as I understand it. It would be sort of a test to see how it would work out. If it performed well, it might encourage the US and other nations to move back towards a fixed exchange rate system based on a hard anchor like gold.

I am presenting Dr. Shelton's video first here on the blog because in a way it seemed like it kind of lays the foundation for a broader monetary system overhaul proposal made by Dr. Warren Coats later that day in the forum. Dr. Coats proposes using the SDR at the IMF to replace the US dollar as global reserve currency, but in a much different way than the SDR is currently used. He wants it issued based on market demand by a Currency Board rule and tied to a hard anchor. He does not oppose using gold as the anchor if that is what is desired, but thinks that a broader basket of goods would likely be a more stable anchor than gold by itself. We have covered Dr. Coats proposal here, but in his presentation he covers how a Currency Board would work in more detail. I think both Dr. Shelton and Dr. Coats are both strong advocates of a sound currency unit which was a major theme of this forum. 

This forum is a great example of why it is important to get several experts like this together to exchange thoughts and ideas. I noticed how well Dr. Shelton and Dr. Coats presented very clearly what they are proposing in a short summary version all of us can understand. That is what this blog is all about. Trying to help the average person like myself get some understanding about these complex issues. These types of brief summary presentations laid out by highly credible experts in clear language is just what is needed to help us. I commend the Kemp Foundation and all participants for holding the forum and exchanging ideas. Well done!

Added notes: A thank you to Dr. Shelton for a retweet on this article.

This is the first of three articles on the Kemp Forum. Here is the article on Dr. Warren Coats presentation. On Wednesday there will be a review of the overall forum. 

News Notes: Trump on Facebook, Gold Standard Debate, AOC and the Phillips Curve

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.

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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."


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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."
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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."
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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.  

Jack Kemp Foundation Event - Forum on Exchange Rates and the Dollar

Dr. Warren Coats alerted me by email that he will be participating in a forum held by the Jack Kemp Foundation in Wasington D.C. on April 20th. The forum is on Exchange Rates and the US Dollar. This should be a very interesting discussion with Dr. Coats presenting a paper on his ideas for a role for the SDR. Dr. Judy Shelton will also be featured at this event and she may talk some about a role for gold. I feel sure she will be in favor of a stable currency environment as is Dr. Coats. 

Below is the text of the email from Dr. Coats about this event and a graphic providing more details on it that he included in the email. I'm looking forward to hearing more about this discussion by this distinguished panel. Hopefully, The Kemp Foundation will video the forum and provide a public link to it afterwards.

Update note 4-12-17 (afternoon): I have heard from Dr. Coats that he will provide a copy of the paper he will present at the forum so at the very least we will be able to feature that here even if no public video is available from the forum.

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Dear friends,

If you have time during the busy Spring Meetings at the IMF/WB, I hope you will join me at the National Press club for what I am sure will be an interesting series of discussions of the international monetary system, including my own discussion of the role of the SDR (see the link below). If you are interested, but unable to attend I would be happy to send you the paper I will present (once I have written it). 

Best wishes,

Warren

http://us2.campaign-archive1.com/?u=e1124afb1a72bbd1afdf94140&id=c125188e79&e=

Co-chairs Mr. James Kemp, President, Jack Kemp Foundation & Dr. Steve Hanke, Professor, Johns Hopkins University  invite you to A Kemp Forum on Exchange Rates and the Dollar featuring Dr. Warren Coats, IMF Economist, retired Dr. Brian Domitrovic, Professor, Sam Houston State University Mr. John Mueller, Fellow, Ethics and Public Policy Center Dr. Judy Shelton, Senior Fellow, Atlas Network Dr. Benn Steil, Senior Fellow, Council on Foreign Relations Dr. Songzuo Xiang, Chief Economist, Agricultural Bank of China Video Participants Hon. James Baker, former Secretary, U.S. Treasury Mr. Lewis Lehrman, Chairman, The Lehrman Institute Speaker Paul Ryan, U.S. House of Representatives Hon. Paul Volcker, former Chairman, U.S. Federal Reserve -- April 20, 2017 Conference 10:30 am - 4:00 pm Reception to follow 4:00 pm - 5:00 pm National Press Club Washington, DC -- For more information and to register, please click here: During the last decade, the world has been wracked by large exchange rate swings between the U.S. dollar and the euro, the two largest world currencies. China is now considering breaking its currency link to the dollar and devaluing. This exchange rate instability is bad for business, creating asset bubbles, unstable capital flows, price swings, and general uncertainty that weakens trade and undermines economic growth. The conference’s purpose, ahead of the IMF spring meeting, is to focus national and international attention on the need for a more coordinated and stable exchange rate regime among the Big Three currencies. Our model is the series of summits in the 1980s sponsored by the late-Congressman Jack Kemp, economist Robert Mundell, and Sen. Bill Bradley, which helped pave the way for the Plaza Accord. Sponsorships available, please contact Sean Rushton at srushton@jackkempfoundation.org -- The Jack Kemp Foundation is a nonprofit, tax-exempt entity organized under section 501(c)(3) of the Internal Revenue Code (IRC).  The Jack Kemp Foundation engages only in educational activities and does not engage in any lobbying or political activity as those terms are defined by the IRC. Contributions to the Jack Kemp Foundation are deductible to the donor to the extent allowed by law.   Copyright © 2017 Jack Kemp Foundation, All rights reserved.

Sean Rushton on the Dollar - Kemp Foundation

The Kemp Foundation recently held its forum on how best to reduce volatile currency exchange rates, especially in regard to the US dollar. Soon we will feature that forum and the information discussed and presented. But we can get an idea what the thinking is on this at the Kemp Foundation from this recent article in The Wall Street Journal by Sean Rushton. Mr. Rushton is the Director of the Kemp Foundation Project on Exchange Rates and the US Dollar. 

Below are a few excerpts from his article.

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"As the U.S. economy slowly recovers from its low-growth hangover following the 2008 financial crisis, the Federal Reserve is gradually tightening monetary policy. Meanwhile, President-elect Trump and the Republican Congress plan to spur growth through deregulation and cuts in corporate and personal income taxes. Yet the Reagan years proved policy makers should watch out for another threat to the improving economy: a soaring dollar.

In the early 1980s, the Fed’s tight monetary policy along with the Reagan administration’s tax cuts caused the dollar to rise dramatically relative to other major currencies, appreciating more than 50% from 1980-85. As the exchange rate soared, inflation plummeted from 13% in 1980 to below 4% in 1983, and stayed low—a stunning and welcome disinflation.

After the 1970s era of dollar depreciation and inflation, the rising dollar was a boon to consumers, and the supply-side policy mix associated with economists Robert Mundell and Arthur Laffer made the economy boom. In 1984 real GDP rose 7.3%.

Once inflation was down, however, the future Nobel winner Mundell and his ally New York Rep. Jack Kemp highlighted a new hazard: the skyrocketing dollar. The exchange rate’s sharp appreciation—necessary to get inflation down—meant falling profits for U.S. multinational companies, reduced competitiveness for domestic manufacturers of products such as autos and electronics, and steep declines in output prices for commodities such as oil, farm products and steel."

. . . . .

"Now—with the Fed saying it will raise its target interest rate repeatedly in 2017, continued monetary easing in other large economies, and a new president promising big tax cuts in 2017—there’s a risk that the dollar will soar to dangerous heights. Since Election Day, the dollar is up more than 5%.

If the already-high dollar does rise significantly, how will it influence an economy with low inflation and low velocity of money, and still recovering from a deflationary financial crash? How will it affect U.S. exports, manufactures, commodities, and blue-collar jobs? How many global debt defaults will it generate, and how will they affect banks? Could a trade war erupt if China devalues by a large percentage in response? Will the soaring dollar offset the positive impact of supply-side fiscal policy, such as the Trump tax cuts? Or will markets tank in advance and force the Fed to retreat from normalizing interest rates?'

. . . . .

"Removing the prospect of big dollar swings would be an enormous benefit to the long-term productive economy. Less volatility among the large currencies, perhaps assisted with a common external target or shared monetary rule, would be a major step toward stabilizing our crisis-prone system, restoring normal interest rates, lowering trade frictions, and returning to broad-based economic growth."

Please click here to read the full article

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My added comments: This article pretty well lays out the theme for the recent forum sponsored by the Kemp Foundation in Washington, DC. Dr. Warren Coats and Dr. Judy Shelton were both featured speakers at the event. It is pretty clear that most feel the current floating exchange rate system is flawed and needs to be changed. This is exactly what we cover here on this blog, the potential for major monetary system change in the future.

I am working on a series of articles to cover the overall forum, the presentation by Dr. Judy Shelton, and the presentation by Dr. Warren Coats. I have seen the presentations and they are very well done. 

My plan is to run these articles here over the next week and then re post them all in the first week of May so that they will stay visible to blog visitors for all of May. This forum was a great way to get experts who can clearly present their ideas all together in one place. That is a big help to those of us trying to learn about and understand these sometimes complex issues. I think readers here will benefit from the excellent presentations. I encourage readers to try and get others to read these coming articles because there is a lot of opportunity to learn quite a bit from these video presentations for the average person who would like to do so.

Dr. Judy Shelton Comments on the Potential for Monetary System Reform

Dr. Judy Shelton is the US Executive Director for the European Bank for Reconstruction and Development. She accepted the nomination for this position after a number of years as Chairman of the National Endowment for Democracy and Senior Fellow at the Atlas Network. 

Dr. Shelton has long been an advocate for monetary system reform which is something we watch for here. While the world is now focused on the trade dispute taking place between China and the US, Dr. Shelton recently offered this comment on her twitter feed suggesting that perhaps this might be the right time to think about "a new international monetary system". In her comment, she refers to this recent article appearing in The Wall Street Journal.

Naturally, this comment from Dr. Shelton caught our attention so we reached out to her to see if she would like to offer some additional insight on it. She kindly agreed to a brief Q&A interview to provide some expanded thoughts on the subject. Below are her comments on the potential for monetary system reform offered for readers here.

                       

                            

Dr. Shelton being sworn in as US Director for the EBRD by Secretary Mnuchin

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Q: The world is focused right now on what some are calling a "Trade War" between the US and China. What would it take to achieve a "win-win" solution and how do you see the prospects for that outcome?

A: It is not a "Trade War" so much as an intense, behind-the-curtain focus on what has truly been happening with regard to having reciprocal access to the markets available in both countries and addressing the lack of a level playing field. Free trade is a wonderful concept and can be most beneficial to all participants--but it requires that there be no barriers to entry, no artificial constraints that prevent potential consumers from making voluntary choices, no forced sharing of competitive technology. So far it seems to me that the U.S. has the advantage in asking China and other trading partners to abide by both the spirit and the letter of free trade. Our willingness to go beyond mere rhetoric on this point underscores our commitment to the ideal.

Q: Both the US and China have used the tool of tariffs so far. Now some are asking if China may be intervening to devalue the yuan as another tool. You recently offered this idea on Twitter (should we think about a new monetary system?) My question is: Do you think that out of this trade dispute that we might see the opportunity arise for discussions on ways to reform and improve the monetary system? 

A: Certainly, I am speaking only for myself in recounting my own long-held belief that a level playing field in the monetary realm is the only appropriate foundation for genuine free trade. The point of my 1994 book Money Meltdown: Restoring Order to the Global Currency System is that a new stable international monetary system is required to serve the needs of an open global economy with the goal of maximizing the potential for global prosperity. Tariffs can have an impact on trade flows, but financial capital flows are much more influential in determining economic outcomes. Why do we concentrate so much on tariffs when the effect of differential central bank decisions and exchange rate movements can easily offset whatever consequences were anticipated to be achieved through trade negotiations? 

It seems to me that by identifying currency manipulation as an unfair trade practice, the next logical step would be to define a more appropriate exchange rate system that would prevent exchange rate shifts from undermining the terms of trade--not only for exports and imports, but also with regard to the distortions and malinvestment consequences that occur when financial capital flows are responsive to contrived monetary signals carried out by governments rather than genuinely productive economic opportunities.

Q: What should be the goal for any reform of the current monetary system?

A: Again, speaking for myself: the goal should be to preserve the sovereignty of individual nations within the context of an international monetary system that facilitates legitimate free trade by effectively determining a universal standard of value that can serve as a unit of account for evaluating goods and services across borders and through time. It may seem ironic, but the classical international gold standard was more far-sighted and sophisticated in achieving this goal than any approach we have since had; it delivered far superior results in terms of productive economic growth and shared prosperity through free trade and capital flows than our current mishmash of exchange-rate arrangements. 

It makes little sense to have some countries intervene while others don't; to ignore the impact of central banks on exchange rates; to focus on tariffs while ignoring the problem of currency shifts that may overwhelm their impact. All the while, earnest businesses and individuals bring their goods to a supposed global marketplace to compete fairly--only to be confronted with unpredictable exchange rate movements that can turned legitimately-earned profits into currency losses. We need to embrace the sanctity of sound and honest money as the only logical  premise under which free trade and democratic capitalism can succeed around the world. 

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A thank you to Dr. Shelton for taking time from a busy schedule to offer these thoughts on what she thinks monetary system reform should look like. We will continue to watch current events to see if some kind of new momentum for monetary system reform might arise out of the current global discussion on how to achieve free and fair trade.

Added notes: Dr. Shelton has been an advocate for monetary system reform for many years. We covered her presentation at the Kemp Forum on Exchange Rates and the US Dollar and also her recent paper in the Cato Journal calling for reform. She is an outspoken advocate for sound money and is widely respected by economists around the world. She has also offered concrete proposals on how to bring gold back into the system in creative ways such as by issuing gold backed bonds.

This article will be added to our page of ideas for monetary system reform which offers a variety of ideas and proposals for reform from a broad range of experts. This page is the result of years of effort to collect these ideas in one place with many of the articles including direct input from the experts involved in the various proposals.