When you measure the value of your dollars, it should be as dependable as the number of inches in a foot. Judy Shelton understands this simple principle better than most. Her nomination to the Federal Reserve Board of governors will be voted on by the Senate Banking Committee on July 21. James Freeman explains in The Wall Street Journal why this has so many people so angry. He writes:
This year the Fed’s balance sheet surged to more than $7 trillion from a pre-Covid $4.2 trillion to offset the economic lockdowns. A slight recent decline offers hope that the money-printing festival may be winding down, which is unwelcome news for Senate Democrats who think the Fed’s purpose is to enable ever larger government.
At a Senate Banking Committee hearing earlier this year, Ms. Shelton reminded that there is a more important responsibility:
I keep going back to the fact that the power to regulate the value of U.S. money was granted by our Constitution to Congress. It’s in Article 1, Section 8. And in the very same sentence Congress is given the power to define the official weights and measures for our country, because money was meant to be a measure, to be a standard of value. I think that money has to work the same for everyone in the economy, and it’s important that it serve that purpose as a reliable measure, so that people can plan their lives.
I don’t see how you can have a free market economy if people can’t rely on the most vital tool that makes markets work. It’s through money that we transmit market signals. And you need clarity of those signals or supply and demand can’t figure out what’s the optimal solution. So … at the Federal Reserve is a responsibility to remember that money has to work for everyone and that in a sense it’s a moral contract between the government and the citizens.An editorial in the New York Sun wisely concluded: “It’s hard to imagine that a more admirable answer has ever been given to the Senate Banking Committee.”
As America’s economic rebound proceeds, it’s a highly useful reminder for the Fed as it faces a key question: How many dollars can it create before people start questioning the value of each one?
If Ms. Shelton’s strong and sensible voice can now be added to Fed policy discussions, credit is due to Senate Banking Chairman Mike Crapo (R., Idaho) for his patient effort to counter the usual Beltway caterwauling. Credit should also go to President Donald Trump for another great hire.
Read more here.
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E.J. Smith - Your Survival Guy
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