The Senate is now clearly under President Donald Trump’s thumb. The Justice Department last week ceded what little claim it still had as the nation’s preeminent law enforcement agency as it succumbed to tweet pressure from Trump. One of the few remaining checks on presidential power, the Federal Reserve, is threatened with Trumpian domination in ways that could disrupt global financial stability and subject monetary policy to Trump’s mercurial whims.
Trump has nominated business administration specialist Judy Shelton to fill one of two seats on the Fed’s Board of Governors. The other nominee, Christopher Waller, should be a hands-down favorite for Missouri Sens. Roy Blunt and Josh Hawley to support for confirmation. Waller is research director at the Federal Reserve Bank of St. Louis and about as uncontroversial as a nominee can be.
Not so with Shelton. Her writings and public statements suggest she would do to the Fed what Trump has done to the presidency: turn it upside-down and inside-out. And not in a good way. Members of the Senate Banking Committee who questioned her during confirmation hearings Thursday signaled that Shelton is no shoo-in.
Most worrying among her statements is that she favors reducing the Fed’s independence. She wrote in a September Wall Street Journal op-ed: “It would be in keeping with its historical mandate if the Fed were to pursue a more coordinated relationship with both Congress and the president.” In other words, give politics a bigger role in Fed decision-making.
That position rankled even some ardent Trump supporters like Sen. Richard Shelby, R-Alabama, who told reporters Thursday: “I think the Fed should be independent and we should have mainstream people on there. I don’t think she’s a mainstream economist.”
“I just want to stress this is a dangerous path to go down,” said Sen. Patrick Toomey, R-Pennsylvania.
Shelton advocates returning the United States to the gold standard, a policy that this country abandoned in 1973. It would mean monetary policy would be based on fluctuations in the price of gold. If the price goes up, Federal Reserve interest rates would, in theory, go up commensurately. During the 2008 recession, the price of gold skyrocketed. Such a policy would have sent Fed interest rates far higher — the exact opposite of what the Fed correctly did to keep money pumping through the financial system and halt the economic collapse.
Shelton isn’t even sure a Federal Reserve is necessary. She prefers rigid policies that can’t adapt to economic fluctuations and crises. She’s into cryptocurrencies. She also favors a single currency for the United States, Canada and Mexico — along with open borders. She wants to get rid of federal deposit insurance for bank deposits.
