Judy Shelton: The dollar was once 'as good as gold'

China Gold News

Translated from Chinese

Huitong Finance APP News - Dr. Judy Shelton, a senior fellow at the American Independent Institute and former President Trump's economic adviser, warned that with the rapid rise in U.S. debt levels, the stability of the U.S. dollar and the U.S. economy are facing an "existential threat." She added that it was time to return to sound money, and one historically proven option was to peg gold to the U.S. dollar.

　　The U.S. debt is quickly approaching $36 trillion, and servicing the debt already costs taxpayers billions of dollars each year. "Everyone is now on notice that paying interest on the debt is now costing taxpayers more money than paying for our defense needs," Dr Shelton said.

The US debt crisis is an 'existential' threat

　　In her new book, "Good as Gold: How to Unleash the Power of Sound Money," Dr. Shelton points out that in just over 50 years, the U.S. federal debt has ballooned from $400 billion in August 1971 to approximately $36 trillion. The exponential curve is also getting steeper year by year.

　　The latest estimates from the Congressional Budget Office (CBO) make things even scarier. CBO predicts that U.S. debt service costs will reach $10.6 trillion in the 10 years from 2024 to 2033, nearly double the original forecast in 2021.

　　"If you ask people, do you think America will still be around in 50 years? It's disturbing that they almost have to think about it," she said. "We hear so much about fiscal unsustainability, if we were Seriously, that's an existential threat. "I'm not predicting that in the United States, but I'm concerned."

　　The concern is that the U.S. banking system is becoming a utility, funneling credit back to the government to cover a widening revenue and spending gap.

　　"The Fed ultimately controls interest rates, and payment banks control them, rather than lending to private companies. That changed after 2008, when the Fed was given emergency powers to pay interest on reserve balances," she said.

Why the Fed is tied to U.S. debt levels and dollar depreciation

　　According to Dr. Shelton, the Federal Reserve, which is at the helm of U.S. monetary policy, has been complicit in all of this by excessively exercising its "unlimited" power.

　　She noted: "The Fed has been complicit in deficit spending by Congress and the White House, and we don't want the Fed to make monetary decisions based on the cost to the government of financing its debt. Still, many people are saying that our only way out is to use inflation. "Eliminating the U.S. government's debt is a disservice to American citizens because they don't like their purchasing power being eroded."

The Fed has become too prominent, too powerful, and too political

　　She added that Congress should consider reforming the Fed, questioning whether the central bank should have such unchecked power.

　　"Congress needs to consider whether the Fed should be allowed to have no limits on the amount of government debt it can buy, no limit on the amount of base money it can create at the click of a button, and no limit on the amount of money it can collectively provide to commercial banks and money markets at taxpayer expense," she said. There is no limit to the amount of interest a fund can pay. The Fed has become too prominent, too powerful, and too political."

　　She noted that the Fed can now even constrain the incoming president's economic agenda. "The Fed is not a small fry," she said. "I am troubled that the Fed is in a position that undermines the ability of a democratically elected president to carry out his economic agenda."

Why does the dollar need to be pegged to gold? The classic gold standard and Bretton Woods system

　　One of the key conclusions she draws in her new book, "As Good as Gold," is that the world's prosperity increases much more dramatically when currencies are tied to gold.

　　Dr Shelton writes in her book: "We need to initiate serious reforms aimed at recapturing the economic benefits gained earlier, whether that is restoring some of the rules that allowed the Bretton Woods system to operate for more than 20 years or exploring an update to the gold standard. New suggestions."

　　One reason she looks to gold for answers is that central banks around the world are adding to their gold reserve assets.

　　She said: “Why gold? It turns out that is the primary reserve asset held by most central banks. Interestingly, in the 53 years since the United States made there no formal link between the dollar and gold, we have retained 261 million ounces Gold. "We should have currency without its value being taken away and its purchasing power not being deliberately taken away from us. The dollar is not devalued by the Fed framework."

The dollar was once 'as good as gold'

　　Dr. Shelton has launched a bold new initiative to restore the dollar's link to gold, which had been suspended for more than half a century.

　　She said: “What we need to do is use gold reserves as specific collateral for a new fiscal instrument (long-term Treasury bonds), and we should have the Treasury Department issue Treasury trust bonds, the purchasers of which will be entitled to receive at maturity A dollar-denominated bond at face value or a prespecified amount of gold. I want to draw attention to the fact that the dollar was once as good as gold.”

　　The goal was to create a new debt instrument that embodied a commitment to maintain the value of the dollar with the purchasing power inherent in a specific weight of gold.

How much gold is there in the United States?

　　Dr. Shelton pointed out that the U.S. has more than 8,100 tons of gold reserves, making it the largest gold reserve in the world, and uses them to issue these new Treasury Trust Bonds. But the way gold is valued needs a closer look, starting with President Nixon closing the gold window.