Judy Shelton was nominated by Donald Trump for the Federal Reserve in 2019. Her nomination stalled with a 47-50 vote in the Senate in November of 2020 and her nomination was eventually withdrawn by Joe Biden in February 2021. More than 100 economists signed a letter opposing her confirmation saying her views were “extreme and ill-considered.”

Watching this interview of her with Keith McCullough is fascinating. I’m not a big fan of Keith’s, but this was a good interview. Obviously, as an Austrian myself, I’ve heard and am familiar with all of the arguments for the importance of gold and sound money. But hearing it from someone like Judy, a person who came very close to becoming a member of the establishment and the Federal Reserve, is quite interesting. This is a person who is or was personal friends with Alan Greenspan, Paul Volker, and many in the financial “establishment” and the Federal Reserve.

She makes so many interesting points in the interview.

The 261 million ounces of gold that the Fed carries on the balance sheet at $42 per ounce for a total of $11,000,000,000 has an actual market value of around 650,000,000,000. This is a point that Dan Oliver has repeatedly spoken about. He talks about the idea that at some point the gold on the Fed’s balance sheet will need to balance the debt that is on the same balance sheet. If the debt held on the Fed’s balance sheet today is approximately $7,100,000,000,000, then dividing that amount by the 261,000,000 ounces of gold would yield a current price of approximately $27,000 per ounce.

Judy doesn’t talk about this in the interview, but Dan Oliver mentions this constantly. During the massive bull market in gold during the 70’s and into 1980, gold topped out at approximately $800 per ounce. At that point, the gold held by the Fed matched the liabilities of the Fed. This was the free market putting the dollar back on a gold standard, albeit for a very brief period of time. I am confident that this will happen again in the future. The implications for the price of gold are obvious.

But getting back to the Judy Shelton interview:

Judy talks about the immorality of having a 2% inflation target by the Fed. This can’t be emphasized enough. The government and large asset owners are “skimming” in her words, but I think “stealing” would be even more accurate, that money every year from the poor and middle class that do not own assets. They’re also stealing it globally from anyone who owns dollars around the globe. As Keith points out, the whole game by the financially literate is to “own” inflation. But this can only be done by people who understand the system well enough to profit off of it. Those people are a tiny percentage of the overall population. This leads to tremendous friction and resentment in society. This resentment is what eventually ends up destroying civilizations and leading to revolutionary ideas like socialism, communism, Nazism, and all kinds of other disastrous ideas. Civilization itself is at stake in this battle of ideas.

She also talks about how the Fed is paying banks interest on their reserves held at the Fed. This is something that the Fed started doing recently and deserves a post of it’s own explaining how and why this is happening. Suffice it to say that if the average person understood how this works, they would be justifiably outraged. It is deeply immoral and outrageous, but that will need to wait for another time. Judy calls it an “ill-conceived” program. I couldn’t agree more.

The fascinating part is how this discussion is not with someone who is simply an outsider, but rather, by someone who has direct connections to the ruling elite in banking. Lots of people have said the same thing. Austrians talk about these topics all the time. The difference is that Judy is tied into the inner circle, and is one of the extremely rare people who actually has conversations with these morally compromised people in the corrupt institution known as the Federal Reserve.

Judy says that she sees this as a “moral issue.” She says that she views money as a moral contract between citizens and the government and that she thinks it is incumbent on the government to provide a meaningful unit of account and a dependable store of value. I couldn’t agree more.

Our entire government is completely corrupt and immoral, and until we get back to sound money, nothing is going to change. I’ve been pounding the table on this issue for several decades now, and I’m more convinced than ever that it is the truth. All of politics is essentially just bread and circuses, a distraction, from the real issue of sound money. The reason, of course, is that sound money is the only thing that can restrict the size of government. In the age-old, grand struggle of history, between freedom and coercion, sound money is THE key to victory. Of course a well-educated, moral population is key as well. But, the two go hand in hand, and I have virtually no hope of us achieving a well-educated, moral population without a sound money.

Judy talks about how hugely disruptive our current monetary system is to trade around the world. She says that not only is it not a good system, but that it is essentially an “anti-system”. It “rewards people with financial assets, creates a false sense of wealth and is uniquely vulnerable to reality kicking in and having some type of melt-down.”

All of Trump’s talk about tariffs is simply another disastrous idea layered on top of, and caused by, an incredibly destructive monetary system. These tariffs will lead to even more pain and instability for innocent people caught up in an incredibly destructive monetary policy. Tariffs lead to currency manipulation and trade wars, and trade wars lead to capital controls and shooting wars. We’ve known this for hundreds of years. Our ignorance is simply maddening. We never learn from history. This is about as basic as it gets when it comes to history. But Americans want their bread and circuses. They think that federal elections can change this. Sadly, I think they’re deeply mistaken. The only thing that can change this is a return to morality and sound money. It’s a learning problem, not an election or a teaching problem.

Lastly, Judy talks about an intriguing idea. This idea is tying federal debt to some sort of gold-backed bond, where the bond is redeemable in dollars or gold. She also talks about how these sorts of bonds could be replicated by the free-market and could even be tied into crypto somehow. I think all of this will eventually happen, not because the authorities will want to do it, but rather, just because the system we’re using now will create so much chaos that there will be no other choice in the end. The market will eventually end the Fed. Gold, with some modern technological innovation, will be restored as money again. The only question is how much pain we need to go thru before we get there.

It seems obvious that three things will all exist in the future; gold, government debt, and technology. It seems very logical to assume that these three will coexist and be combined in the future. Some sort of government bond, backed by gold, trading as a stablecoin, seems extremely likely to me. Studying history can be extremely frustrating. Seeing the same mistakes repeated over and over can be maddening, but, at the same time, history can also be exhilarating.

The flip side of seeing mankind make one imbecilic mistake after another, is the incredible resilience and creativity of humanity. The ideas and innovations that come about, often because of the pain and suffering created by bad ideas, are truly amazing. Optimism is the only reasonable attitude to have in the end. I think it is warranted given that we have thousands of years of human history behind us, all of it leading to this present moment where, despite all of our problems, we live better than any human beings have lived in history. There will be lots of pain along the way, but the future will be amazing!

I’m looking forward to reading Judy’s book “Good as Gold.” In the meantime, here is her interview: