Skepticism greets Trump's latest Fed nominee

Why Judy Shelton's nomination is so controversial

Judy Shelton.
(Image credit: Sarah Silbiger/Getty Images)

"President Trump hasn't given up his dream of politicizing the Federal Reserve," said Felix Salmon at Axios​. After trying and failing to get two sycophants appointed to the Fed board last year — former pizza mogul Herman Cain and economics columnist Stephen Moore — Trump is back with another dubious nominee. Judy Shelton, an economic adviser to the president, holds views that could politely be described as fringe. She wants to curtail the central bank's independence, saying the Fed should have "a more coordinated relationship" with the president. She wants the U.S. to return to the gold standard — something most economists say would cause economic chaos. "For good measure, she also advocated getting rid of deposit insurance," which protects account holders' deposits of up to $250,000 at U.S. banks. Shelton's nomination might go the way of Cain's and Moore's, said Victoria Guida and Katy O'Donnell at Politico. At a Senate Banking Committee hearing last week, she "ran into a wall of skepticism." Sen. Richard Shelby (R-Ala.) said he was "troubled" by her writings, and Sen. Pat Toomey (R-Pa.) said her suggestion that the Fed devalue the dollar in response to currency manipulation by foreign nations was a "very dangerous path to go down." A single GOP committee member voting against Shelton could sink her nomination.

Shelton's only sin is challenging monetary policy groupthink, said The Wall Street Journal in an editorial. Her critics claim she's a goldbug, but Shelton doesn't want the Fed to return "to the 19th-century gold standard." Instead, she believes that by analyzing eras in which economies backed their currencies with gold, we can discover "revealing contrasts with the catastrophic misfires of our era of floating rates." Her opponents insist "this is revolutionary, but the late Fed Chairman Paul Volcker also recognized the benefits of stable exchange rates." Shelton is also right to be skeptical of federal deposit insurance, said Ramesh Ponnuru at National­​ Review. You only have to look at the 2008 crash to understand how the guarantee of a government bailout "has the downside of encouraging banks to take risks."

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