It is official: President Donald Trump is flying two doves over the Federal Reserve.
The president announced on Twitter that he is nominating Christopher Waller, an executive vice president at the Federal Reserve Bank of St. Louis, and Judy Shelton, the U.S. director of the European Bank for Reconstruction and Development, to the Fed Board of Governors.
I am pleased to announce that it is my intention to nominate Judy Shelton, Ph. D., U.S. Executive Dir, European Bank of Reconstruction & Development to be on the board of the Federal Reserve….
— Donald J. Trump (@realDonaldTrump) July 2, 2019
President Trump has said on multiple occasions that he wants lower interest rates. And he is going to get them no matter what.
Waller helped his boss, St. Louis Fed Bank President James Bullard, commit to lowering interest rates, asserting that monetary policy is in a new regime: Higher interest rates are unnecessary.
In an interview, Waller said:
“We didn’t see any overheating in the economy coming, so the question was: why are we raising rates? We didn’t see any reason to raise rates just for the sake of raising rates.”
Judy Shelton? Liberty Nation has the story:
Shelton presently acts as the U.S. executive director for the European Bank for Reconstruction and Development. Previously, she was an adviser to the Trump campaign and worked at the Sound Money Project, a group founded in 2009 to perform research and promote awareness regarding monetary stability and financial privacy. Shelton also penned two books, including The Coming Soviet Crash, which examined the Russian economy and its collapse.
In April, Shelton wrote an op-ed in The Wall Street Journal, titled “The Case for Monetary Regime Change.” Her supposition was that it is “entirely prudent to question the infallibility of the Federal Reserve in calibrating the money supply to the needs of the economy.” Why? She accurately blamed the Fed’s “influence over the creation of money and credit” for the 2008 financial crisis.
Last year, she wrote in a Cato Institute paper: “We make America great again by making America’s money great again.” One way to achieve this, she suggested, is to link the U.S. dollar to gold or another commodity rather than blanket trust in the federal government.
Speaking in an interview with Fortune during the 2016 election campaign, Shelton was blunt in calling for “a fundamental reassessment of the global monetary order.” She outlined her concerns over central banks around the world acquiring corporate assets and the Federal Reserve prolonging the normalization of interest rates. The economist ultimately believes that the central bank is the “biggest risk” to the economy. “I think it’s perfectly legitimate to question whether the current monetary system we have is working, and whether we’ve solved the imbalances that led to the last crisis,” she said. That is some serious libertarian, anti-globalist speak that the Fed needs right now. Of course, there is always a but…
A True Inflationary
Unfortunately, Shelton now holds positions that contradict past statements and mirror the central planning measures of the Keynesians. This has been a common trait with past Fed picks, including Marvin Goodfriend and Nellie Liang – at least she is not proposing to eliminate cash.
Recently, in a separate interview, Shelton endorsed near-zero interest rates, which would certainly please President Trump who has demanded the central bank cut rates. Moreover, she does not like the policy of paying interest on excess money that financial institutions hold at the Fed to set rates because it enables these banks to hold funds rather than lend to potential borrowers. Instead, Shelton would institute rock-bottom rates again and sell off the Fed’s holdings of Treasury securities and government bonds to prevent skyrocketing price inflation.
However, these policies would have the reverse effect, unleashing a tidal wave of inflation (the expansion of the money supply). First, cutting rates would produce more dollars and create price inflation. Second, there is approximately $1.2 trillion in excess reserves, so if that money seeps into the system, then the money supply would spike by $1.2 trillion.
Where the heck is Candidate Trump when you need him?
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