"It's Not Some Barbarous Relic" - Trump Adviser Urges Return To Gold Standard

Tyler Durden's picture

Submitted by Chris Matthews via Fortune.com,

Q&A with Dr. Judy Shelton, the only female economist advising the Trump campaign.

Donald Trump is no policy wonk.

He is pitching himself as the best man for the presidency based on his track record as businessman, and his ability to surround himself with the “best” people—not on his knack for writing white papers. This, of course, means that it is important for voters to understand whom he is surrounding himself with, and what sort of ideas they hold.

With this in mind, Fortune reached out to Dr. Judy Shelton, one of two economists recently named to Donald Trump’s economic advisory team, and the only woman to hold that title. Shelton is a senior fellow and co-director of the Atlas Sound Money Project, whose mission is to promote the principles of sound money and raise awareness of what they see as the inherent problems of our current monetary system. Dr. Shelton first rose to prominence when she predicted the economic collapse of the Soviet Union in 1989, two years before it transpired.

Fortune discussed with Dr. Shelton what sort of advice she is passing along to the Republican nominee and what she thinks about the biggest economic questions of the day. The interview has been edited for length and clarity.

How did you become involved with the Trump campaign?

Dr. Shelton: I have over the years advised a number of Republican candidates, going back to Jack Kemp and more recently Marco Rubio, Ted Cruz, and Ben Carson. I’ve worked for a long time with Stephen Moore and Larry Kudlow, and Larry asked me if I had some thoughts for the Trump campaign on the issues I discuss most, namely international monetary relations, currency, and trade issues. I’ve been intermittently sending Larry my thoughts in the form of memos on these issues.

Have you spoken with Mr. Trump directly?

I met him back in the early nineties at some gatherings, both social and business related. But I haven’t spoken directly with him since he’s been a candidate. I have been communicating through [Trump national finance chair] Steve Mnuchin and [economic advisor] Larry Kudlow.

Your first book was on the economic collapse of the Soviet Union: How does that experience inform how you look at the world?

Four years ago I wrote an article for The Wall Street Journal titled, “The Soviet Banking System—and Ours.” What concerns me is that central banks around the world, the ECB, the Bank of Japan are now buying corporate assets. I’m wondering how far away we are from the Fed thinking it needs to branch out and buy corporate assets. Will these corporate assets be those from firms that are politically connected?

My work on the Soviet Union was an analysis focused on the banking system, and how the banking system in the Soviet system became a way to channel credit to state-owned institutions and state-owned enterprises. And I worry that banks are becoming partners with the state in managing the economy. I’m very uncomfortable with how complicit banks are becoming through the their mandatory membership in the Federal Reserve.

If you had been Fed Chair in 2008, how would you have changed monetary policy?

The Fed’s ultimate responsibility is acting as the lender of last resort. They did what they had to do in terms of lending to distressed institutions, but the short answer is that I would have gotten back to normalization of interest rates much more quickly.

More broadly, I think we need a fundamental reassessment of the global monetary order. I’m glad that Chairman Kevin Brady of the House Ways and Means Committee has proposed a monetary commission and really looking at what is the relationship between economic performance and the exchange rate regime, and to whether we need a rules-based monetary policy, and what should be the role of central banks.

You’ve written before about going back to some sort of gold-based monetary system. Is that something the U.S. could do unilaterally, or would we need to convene other nations and get them on board?

I’m not opposed to a new Bretton Woods conference, and if it takes place at Mar-a-Lago, I’m fine with that. But anything the U.S. does because we print the international reserve currency, unilateral action would almost instantly be accommodated by other countries.

In terms of gold being involved, some people may think of that as a throwback, but I see it as a sophisticated, forward-looking approach because gold is neutral and it’s universal. It’s a well-accepted monetary surrogate that transcends borders and time. If you look at the foreign reserves of the most important countries, they keep them mostly in gold. I don’t want to read too much into it, but it proves that gold is not some barbarous relic.

Would the first step in that be issuing gold-convertible bonds?

Don’t attribute this idea to the Trump campaign, but it has been something that I have been proposing for years now. A gold-backed bond was first proposed in 1981 by Alan Greenspan. I think the U.S. should issue them as an experimental pilot program, similar to the TIPS bond, that compensates people who are concerned about the future value of the dollar. For those who are concerned about a big financial meltdown, these bonds would give them some insurance, as gold tends to rise in price during periods of financial stress.

The Chinese would welcome this development, because it would likely be a stabilizing force for the value of the dollar and protect their dollar holdings. I also think they are the most likely country to provide a parallel instrument. If China were to offer a similar instrument where five years from now you can get back x amount in yuan or an ounce of gold, five years from now both the U.S.-issued instrument and the China-issued instrument are worth the same thing, an ounce of gold. So now you start getting projections of a stable exchange rate determined by market forces.

If this practice starts to spread to even more countries, you would start to see the semblance of a future stable exchange rate system with those exchange rates being determined by what market forces believe about the future value of those currencies.

What would you advise the Trump campaign about what it’s been saying about trade?

I like it whenever [Trump] says “I believe in free trade.” And he says it all the time. What he doesn’t like is allowing countries to engage in activities that undermine the principles of free trade. You can’t homogenize the cost of labor or labor standards or environmental standards. But what you can do is address the problems of our international monetary system.

It used to be economic doctrine that stable exchange rates brought about optimum financial flows and investment, and optimum decisions about where to produce goods and where to buy and sell goods and services. And I still think it’s the case that the proper monetary foundation for genuinely free trade has to be stable exchange rates. That way you can’t manipulate currency to get an advantage. Currency manipulation is like saying you’re competing in the 100-meter dash, and at the last minute one runner gets to redefine a meter as a centimeter, and still be declared the winner.

It’s not fair to say that people who are criticizing currency manipulation to be called protectionist. I give Donald Trump a great deal of credit for focusing on that issue.

Donald Trump has also made comments referring to a coming economic crisis. Do you think we should worry?

I commend him for being willing to talk about it, as it’s the elephant in the room. 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.

The Trump Campaign has argued for spending big on new infrastructure at the same time that it wants to build up the military and cut taxes. It hasn’t put forward much in the way of spending cuts, however. Do you think we need to be worried about deficits and the debt?

I’m always worried about deficits and the debt and ideally [want] a balanced budget. But these are really difficult times, and I think following the model of Ronald Reagan, where the focus was on pro-growth policies, is wise right now. On corporate taxes, I think the 15% rate will have a huge impact on small and not-so-small businesses. That’s fiscal stimulus, and I like that a lot better than stimulus that’s just more government spending.

The fact that Trump is a builder and a businessman makes me confident that he can bring his track record of finishing projects on time and under budget to the federal government. It’s the wasteful government spending that ends up being the problem.

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SMG's picture

Wow.  Go Trump!

knukles's picture

Fucking Awesome!

So this is why Big Money's All of a Sudden Buying Gold?

38BWD22's picture

 

 

I don't think a Gold Standard solves too much, some, but...

Gold is primarily a Store of Value, not a currency.

*   *   *

But, a gold-convertible bond would be of great interest.


TeamDepends's picture

Gold Certificates with Colonel Kurtz' picture on it, hell yeah!

DownWithYogaPants's picture

Sheeesh!  Someone needs to tell this lady to shut up until after the election.  Trump is not safe with the bankers on the loose if they take her seriously.

Nailguns whatever don't go pushing this idea too hard for now.  You're painting bullseye on the poor guys ass.

More paper gold!  Yay!

scm's picture

"Have you spoken with Mr. Trump directly?

I met him back in the early nineties at some gatherings, both social and business related. But I haven’t spoken directly with him since he’s been a candidate. I have been communicating through [Trump national finance chair] Steve Mnuchin and [economic advisor] Larry Kudlow."

LOLOLOLOLOL

all his loser supporters will think he said this.

Too bad the one that should matter is not saying any of this. Thump won't say shit about the fed. They are his masters.

"Outsider" is a fucking joke.
Next week he's going to lessen his tone on immigration (his supports will say to appease to the Mexicans to win against Hillary, BULLSHIT!!!!!) . But he won't tone down on the wall. The wall will still be built(lol). That wall is not to keep Mexicans out, its to keep us in you dumb fucks. RON PAUL WAS RIGHT. Wake the fuck up.
Thump/Clinton is going to turn this country into one big ass free range prison. Far worse than it is now. I hope you all happy with your votes (Clinton whores included)

SgtShaftoe's picture

Yes, walls work both ways.  A wall is a dumb idea.  The US has been served well by the immigrants who truly want to build prosperity.  A better idea is to remove the "free" incentives as Ron Paul advocated. 

scm's picture

YAY, someone with brain

SgtShaftoe's picture

To all you "wall builders":  The french tried that once.  It was called the Maginot line.  It didn't work out so swimmingly. 

"Fixed fortifications are monuments to the stupidity of man" - George S. Patton

Or in other words: Think hard retard. 

Seek_Truth's picture

scm = soros-commie-muslim?
scm = soros-clinton-masturbator?
scm = sion’s-corrupt-media?

PS- Do tell.

LetThemEatRand's picture

"scm = soros-commie-muslim?"

So SCM is pointing out that the advisor who speaks our ZH language hasn't spoken to Trump in 20+ years, making her comments less than insightful about what Trump thinks on this subject, and that makes SCM a soros commie muslim?  

scm's picture

He does have some well paid trolls. Always thinking of new ways to put someone down. Maybe mr " i love eminent domain" should just come take my property.

LetThemEatRand's picture

I could give a shit if Trump used eminent domain.  He's a real estate developer for fuck's sake, and it was perfectly legal when he tried to use it.  But I do get annoyed at the ZH worship-fest of a guy who wants to kill Snowden, give more money to the MIC, increase the deficit, moar torture, not end the Fed, and so forth.   Clinton may be the devil, but Trump ain't no angel.  Neither is worth our support or hero worship.

Seek_Truth's picture

Forgot about this thread- just checked back in.

90% of scm comments denigrate Trump.

This is, in "detective speak." what we call a "tell."

 

 

As to your comment, LTER, yes- neither is worthy of hero worship, and Trump is no angel, true.

I will still vote for Trump (the unknown), rather than Hillary(the known).

scm's picture

"Detective speak"
Just trying to save the country from fools like his supporters.
Just in case you didn't notice too. In 100% of my posts i don't endorse anyone other than Ron Paul. And he isn't even running. So who am I trolling for then?

Seriously. I can't believe people are falling for thump. Do you people even listen to him?

bloofer's picture

Whatever Trump may or may not be, he has provided a platform for airing the real views and real grievances of what I believe to be a large majority of US citizens--views that the PTB has long believed to have been suppressed, if not eradicated. I think they're probably deeply shocked to learn how many people think they're full of shit.

Even if the election is rigged, and WE are told that Hillary won by some tiny percentage, THEY will know the real results of the election. They've already been sent a message. The election results--the real ones--will send them another.

How will they respond to this message? So far, all they've done is double down on the MSM propaganda and censorship. And it's not working.

scm's picture

First off "tried to use it" WRONG!!
https://www.washingtonpost.com/news/volokh-conspiracy/wp/2015/08/19/dona...

Second off, it doesn't bother you, because he has not tried taking you shit YET

third, all laws are justified in your eyes. Even the immoral ones. Try finding some principals to stand on.

Fourth, Yup, you are a thump supporter.

cowdiddly's picture

my name is Pedro

I come from Mehico

and I work for 5 dollars a day

and Donald gonna take my 5 dollas awawy OLE'

 

scm's picture

Today is your lucky day Pedro. The Donald has changed his RATpubliCON mind back to a DEMONkRAT and decided to let you stay and get a better minimum wage. And that is no fucking joke. That is his actual stance now.

cowdiddly's picture

Sure he will let you stay. Just apply for legal citizenship or work visa like everyone else did, anchor babys included and your more than welcome.But that Western Unioning  billions of money tax exempt.  wires out of the country every payday is a drain.

 He knows the wall won't do squat. Its a 2500 mile long humongus infrastructure project to get America back to work again and off our ass. Anyone that has ever taken even a basic econ class knows that that money will circulate and get spent in an economy by 7-10X.  And nobody and I mean NOBODY will blow money like a construction worker who has just worked 80 hrs and heading to a titty bar. Then you use that money for more bullet trains or whatever. and wala its booming again. Heck in truth Mexican American workers will do most ot the actual work just from demographics of the construction trades and project area. JOBS DUMMY and if Pedro was smart he would be all over this..

The Donald is smarter that he looks .

scm's picture

"Republican presidential nominee Donald Trump plans to present an immigration plan in Colorado Thursday that will include finding a way to legalize millions of undocumented immigrants"

http://www.univision.com/univision-news/politics/trump-now-says-he-plans...

Sounds like amnesty to me

83_vf_1100_c's picture

  Just try and hire a Mexican for $5 a day. Not gonna happen.

fukidontknow's picture

Taco emergency?

Call 9 Juan Juan. 

 

 

 

 

 

 

 

scm's picture

"The possible reversal over immigration policy by the Republican candidate would not be without precedent after Trump has shifted his position on a variety of issues during his campaign from banning Muslims to taxes, minimum wages and and abortion."

http://www.univision.com/univision-news/politics/trump-now-says-he-plans...

Supafly's picture

Trump, though he is a self aggrandizing douche, has been in a position of being subjected to advisors, like many politicians.  However, he has managed to be on the crest of wave rather than being buried by it many more times than not.  His crew is savvy and effective and ultimately have resulted in value added in most of his ventures.  That, in contrast to our blood sucking politicians, is enough for me.

scm's picture

Didn't one of his "savvy" crew just get caught in some Ukraine money scandal.

Lol. And you want him to vett refugees.

TrajanOptimus's picture

I love that woman, she is really sharp. Everything I have ever heard her say has been spot on.

She makes Yellen look like a dipshit.

Supafly's picture

I make Yellen look like a dipshit, and I've said some really stupid things here.

Escrava Isaura's picture

DC, your first statement is correct. The second tells me that you haven’t learned. Wondering why?

Wasn’t the dollar as good as gold? Now you want a bond?

 

 

Bastille Day's picture

Plus the gold is gone.  Been sold off long ago.  When someone finally decides to go back to the gold standard, they'll be all "holy shit it's really gone" and Rothschilds will be like "WE ARE NOW MASTERS OF THE UNIVERSE" cause they got the gold.  Not the gold at the bottom of the ZH lake, but the big gold.

gonetogalt's picture

All sovereign owned gold

 

All private gold sheckles

 

Which do you think is greater???

Bastille Day's picture

All the sovereign gold has been turned into sheckels.

bloofer's picture

Gold may be the only real money, but productivity is the only real wealth. If the owners of the gold would like to eat, sleep in a warm, dry place, and not have to run naked, they would have to exchange their gold for these things. Hence, unless some new kind of fraud is layered on "gold money," the gold would find its way into the hands of the producers.

Of course, the historic "gold standard" of frauds to prevent the migration of gold into the hands of producers has been the land tenure system of placing land ownership (in the economic sense) in the hands of rentiers--meaning that rentiers wholly control the means of production.

If you want to cut out the rentiers, a new land tenure system would have to be devised. This would be quite difficult. And such a system would need a few other tweaks, such as maybe a 50-year Jubilee to extinguish debt.

invest3's picture

Gold is money, everything else is credit. -- J.P. Morgan

Four chan's picture

first the government would have to buy gold to have a reserve. as it now has none.

fockewulf190's picture

I am 100% behind the concept of working for real money that can´t be printed into existance out of thin air. That being said, there are some potentially huge problems getting the dollar back on the gold standard, especially if we have been lied to for dozens of years.

The gold that the US owns, which is supposed to be stored at Fort Knox, West Point, and other locations, is almost certainly no longer there.  The audited history alone of these national gold reserves screams fraud.  Before a gold backed bond, let alone a new convertible currency, could be created, issued and accepted for international and domestic commerce, the issuer of such instruments is going to have to not only PROVE that the gold actually exists and belongs to the US, there needs to be an audit done at the same time which proves that said gold is not being supplemented from gold deposits held at the Federal Reserve Bank of New York for foreign nations...that of which, by the way, has also not been audited for years.

If somehow that all pans out, there are still a shitload of dollars out there.  Would gold have to be revalued?  More than likely.  How would you deal with mass conversion demands?  Close the window?  Again?

 

 

Agstacker's picture

"Money is gold, and nothing else."

 

J.P. Morgan

AlaricBalth's picture

Economic Advisor Larry Kudlow????
Is this a joke???

TrajanOptimus's picture

Yeah, that's a bit of a worry. I guess when you are looking for advice, it's best to get all advice so you can discern whats right and what isn't.

Farmer Joe in Brooklyn's picture

He spent the 1980's studying the "hookers and blow" economy...

fbazzrea's picture

looks like he was smart enough to consult her. ol' cliche but true that... it's not what you know but who. even if it's just for advice. and one thing for sure. if Kudlow's filter shorts the Donald, he's got a solution. "You're fired!"

anonnn's picture

BrettonWoods+IMF+SDR frauds
In 1944, the BrettonWoodsSystem created.
In 1969, the IMF created the SDRs [SpecialDrawingRights] valued in GOLD.
In 1973, after systemic fail, the IMF changed from gold to a "basket" of currencies.
From IMF website:
Basket of currencies determines the value of the SDR
The value of the SDR was initially defined [[1969]] as equivalent to 0.888671 grams of fine gold [[a fixed exchange rate]]—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies.
Here is a simple explanation of global bankers' deliberate mumbo-jumbo:
During WW2 international banking suffered chaos and settlement of international trade [between nations] was uncertain, at best.
The 1944 BrettonWoodsSystem was created to thus extablish the use of USDollars as valuable and dependable bank reserves for BW member nations, in addition to gold, for banks to settle international trade accounts [usu. yearly]. The BW created a pool of funds from contributions of each of the 45 member nations.
[See countries/amounts here: http://www.teamlaw.org/BWAgreements.pdf ]
The USA was uniquely rich with est. 15,000 tons of gold. So at BW, it was easy to agree to use convertible USDollars as reserves. It was clear to all BW members that 1 USD was guaranteed convertible into gold by the US Treasury.
This basis then led to most countries to hold reserve stocks of USD [equivalent to gold] plus some actual gold. Literally, the USD was "as good as gold".
At the same time, BW created the situation that , of all the sovereign currencies in the world, only the USD would now be accepted for payment "as good as gold". So the US began freely printing to excess.
Thus the trap: There was no BW provision fot loss of convertbility!
In 1973 Nixon defaulted on the promise to convert USD into gold; the trap was sprung.
IMO, the trap was quietly and deliberately included in BW. Otherwise, how could a room full of lawyers and financial ministers fail to make no provision for a US defaulton convertibility? Unthinkable? An oversight? The US would never do such a thing? Recall, the US had already defaulted in 1933 on USD-gold conversion after outlawed citizen ownership of gold, thereby defaulting on USD-gold convertibility by its citizens.
At BW, the US offer to supply unlimited USD convertibility into gold, available just for the asking, had to be too good to be true. A future failure to convert had to be a known possibility.
Meanwhile, where did all the excess USD go? Spent on what?
Reckless and wasteful spending of USD by the US gov on Korea, Vietnam, Navy nuclear fleet, Air Force latest and greatest, Army overseas deployments, rocketry, space satellites, NATO [I knew a/the major architectural contractor for many US-built airfields in Europe], CIA covert operations and , of course, influence peddling and bribery in limitless variety.
By 1969, the flood of USD in international banking reserves and accumulated foreign holdings of USD was apparent enough to predict crisis and, potentially, insolvency. US Treasury gold was being drawn down out of fear that USD convertability had its limits.
From IMF website http://www.imf.org/external/np/exr/facts/sdr.HTM
The SDR was created by the IMF in 1969 to support the [failing] Bretton Woods fixed exchange rate system. A country participating in this [new SDR] system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate.
The IMF's 1969 SDR was based on gold. Precisely, 1 SDR = 0.0888671 gram of gold, which was equivalent to 1 USD while 1 USD was still convertible to gold in 1969 in inter-nation trade.
As USD reserves piled-up in Europe and elsewhere from wildly rising exports to USA and USA export of capital projects, French Pres. deGaulle was advised by Jacques Rueff of the drain on US gold supply and the liklihood that if France' USD reserves were sent to US for conversion to gold, the US would default.
In 1971, it happened. Pres. Nixon announced the end of convertibility of USD into gold. Default on the terms of BW.
Then, in 1973 the gold-SDR became unworkable and the SDR "basket of curencies" was invented.
[from IMF website] But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF. ... in 1973, the SDR was redefined as a basket of currencies.
Then came the rise of credit-spending, which is a technology to bring future-spending into present-time debt. This pseudo-money was/is needed to mask the devaluation of currencies, wage devaluation, unemployment and under--employment. [And recall, the Great Depression began in 1929, when there were no food-stamps, no credit cards, no EBT cards, no Social Security* and no minimum wage.]
Apparently. the Cold War and other "anti-Communist" activities were enabled by funding via BW its guaranteed USD-gold convertibility. That enabled the 60+ years of monster spending momentum to bring us through the 1971 convertibility-default to the 2000 Crash and finally the 2008 bank-insolvency, which is on-going now globally in 2016.
Not to mention financial fraud of "derivative" trading [unlimited speculation by "experts"] , "financial engineering", secret manipulation of interest rates and markets, etc. There is now admitted manipulation of LIBOR**, stock markets, bond markets, mortgage document ucertainty, Deutschebank et al "fixing" GOLD and SILVER prices, ZIRP**, NIRP**, unfunded pensions, etc.
How else could this have happened?
*Social Security money was put into the Independent Trust Fund to be used to fund only the Social Security Retirement Program until the mid-1960s. Then, under Pres. Lyndon Johnson, SS money was put into the General Operating Fund , to be spent willy-nilly on whatever Congress wants. The orininal Trust Fund has only a paper IOU note to mark the change.
**London Interbank Overnight Rate, Zero Interest Rate Policy. Negative Interest Rate Policy

Escrava Isaura's picture

C’mon. Next time summarize, please. Then link.

 

bloofer's picture

Thank you. Excellent summary!

joego1's picture

SDR = basket case of fiat

Chris Dakota's picture
Chris Dakota (not verified) SMG Aug 21, 2016 7:58 PM

Trump is our chance to save the country. This is why the diseased people are trying to hurt him, us, the movement.

They are cancer.

SgtShaftoe's picture

No, Ron Paul was our chance to save the country.  Trump is simply an unknown quantity.  It's far too late to make meaningful change at this point as well.  Even if Ron Paul somehow won the presidency he couldn't save it at this point.   The world should brace for impact because it is imminent no matter who takes over.  Policies that are implemented by a president will simply make the difference in the resulting disaster be awful, or apocalyptic. 

Escrava Isaura's picture

Now watch how many up votes you’ll get by telling the truth versus gold is money nonsense, because 97% of dollar is debt issued by private banks.

 

Chris Dakota's picture
Chris Dakota (not verified) SgtShaftoe Aug 21, 2016 9:48 PM

like I said "they are a cancer"

If the Gary Johnson supporters were real this would bring them to Trump.

But they aren't real, many are Neocons and the rest just fake polling.

Croesus's picture

This will be spun as "Trump doesn't support the Free Market, or our benevolent Federal Reserve"....cue Shill-media BS, in 3, 2, 1.....