On Tuesday Reuters reported comments made by Republican senator John Thune:
Judy Shelton, U.S. President Donald Trump’s controversial pick to serve on the Federal Reserve’s interest-rate-setting panel, does not currently have the votes to win confirmation in the U.S. Senate.
Hope still remains as Senator Thune’s role as majority whip requires him to track votes made by Republicans; the official vote has not yet happened. In the senator’s words:
She’s a priority for the White House. It’s the Federal Reserve. It’s important. So, obviously, we want to get it done. But we’re not going to bring it up until we have the votes to confirm her.
The story is troubling because Republican’s have a 53–47 senate majority, but still not enough votes to approve the nomination. This raises questions for the Grand Old Party; mainly, what is the hesitation?
The Wall Street Journal echoed the “controversial selection” narrative:
Ms. Shelton has been a longtime proponent of a return to the gold standard, which would limit the Fed’s ability to influence inflation and employment, and concedes that her views are outside the mainstream of economics.
Of course, limiting the Fed’s ability to influence the free market, including inflation and employment is the purpose of the gold standard. The controversy centers around members of Congress and the Fed who may not want to concede the power to influence the market. It’s dangerous to those at upper levels of government and the Fed, as their control rests in the ability to manipulate interest rates and create US dollars in order to buy assets and run perpetual budget deficits.
A month ago a group known as “Fed Alumni,” comprised of various former Federal Reserve employees, as well as several presidents, published an open letter to the Senate with thirty-eight signatures asking them to reject the nomination. The number now stands at seventy-seven signatures.
Upon reading the letter, the problem with mainstream economics is revealed:
She has advocated for a return to the gold standard; she has questioned the need for federal deposit insurance; she has even questioned the need for a central bank at all.
The dogma is followed by hubris:
The Fed has serious work ahead of it. While we applaud the Board having a diversity of viewpoints represented at its table, Ms. Shelton’s views are so extreme and ill-considered as to be an unnecessary distraction from the tasks at hand.
If there is a controversy, it should be about the “serious work” the Fed has ahead of it. With the new goal of aiming to “achieve inflation moderately above 2 percent for some time,” it appears very few are asking the purpose behind this. Especially since the Fed is moving away from the belief in there being a tradeoff between inflation and unemployment, there seems little reason to push for higher price inflation any longer.
Contrast this sentiment with those in science, math, or physics, where questions and the ability to refute or prove theories allows these fields to advance. Yet economics is devoid of this advancement; as we can see, when someone offers ideas such as a return to the gold standard, the result is contempt. But it’s one thing to petition congress claiming lack of qualifications, yet quite another to offer coherent arguments, articulating where exactly the problem lies. So far, we’re still looking for a critique which goes beyond being discredited for brainstorming economic solutions.
This somewhat explains why economics is divided into “orthodoxy” and “heterodoxy,” which normally refer to religious doctrine—heterodoxy for beliefs falling outside the mainstream. Perhaps it’s time for the Fed to stop treating economics like a religion and start searching for the truth, where someone like Judy Shelton is praised instead of punished for questioning economic tradition.
Much uncertainty remains as we wait for 51 democratically elected senators to give their blessing, allowing Ms. Shelton to ascend to the hallowed halls of the Eccles Building, where she can join the ranks of those select few who have the almost godlike ability to decree paper (or its electronic equivalent) legal tender. Maybe long-standing beliefs like money creation leading to prosperity should be widely questioned: If it holds up to scrutiny then great; if not, then why should we adhere to it?
