The Federal Reserve Is Out of Control (Uncut) 03-08-2025

The Federal Reserve Is Out of Control and Needs to Be Brought to Heel | Interview with Judy Shelton.

Because that’s going to be a big deal for Trump. He wants to really, really celebrate the 250th anniversary of the founding of our nation, of the signing of the Declaration of Independence. And I’m proposing to make it a 50-year bond.

You could also have shorter terms, but at least part of it, a 50-year gold convertible bond that would mature on July 4, 2076. Because I start from the idea, do Americans really think we’re going to be standing? Will the United States still be here in 50 years? And will we be standing tall? And I say that because we keep hearing everyone, including Fed Chair Jerome Powell, say that our fiscal situation is unsustainable. Monecco 64, home of alternative economics and contrarian views.

Well, today I have the pleasure of speaking with Judy Shelton. We’ve actually been in contact for a few years, but we’re finally getting together for an interview. Judy, welcome to the channel.

Thanks for having me. I’m happy that we can do this almost in person. Yeah.

And for the viewers, Judy Shelton has been a proponent of sound money for many years. And she was involved in the first Trump administration as an economic advisor. And then she became president of the European Bank for Reconstruction and Development, EBRD.

And then she was nominated to the board of the Federal Reserve, I think, in 2019. Unfortunately, the Senate didn’t get you through in that vote. But the reason I have you here, Judy, is to talk about your book, Good as Gold, which I’ve read some last year, actually.

And then I like to also talk about what’s going on in terms of sound money. Before we touch upon your book, I just wanted to tell you a little story that I had back in 2002. I went with my wife to the Mises Institute in Alabama for the 20th anniversary of that institute, Austrian School of Economics, and Ron Paul was there.

And he did some, like a lecture, and then I had a chat with him. And he told me about the incident when he was in Congress. He used to do the testimony, well, Alan Greenspan used to do testimonies with him in the House, I think, House Committee.

And he asked him once, and he brought, like the essay Alan Greenspan wrote, Golden Economic Freedom in 1966. And Greenspan autographed it. And he asked Greenspan, do you still believe in what you wrote? And at the time, of course, he was chairman of the Federal Reserve.

And he said, yes, I do. The problem is that the people, the public, they want inflation, not knowingly. They don’t want sound money.

So my question to you, Judy, do you think the American people are turning more towards sound money? Do you think there is a bit of a political move towards that? Yes. Mario, first, yes. I think that there is a political movement towards sound money and sound finances.

I mean, we just heard President Trump say the other day that he wants to pursue a balanced budget. We haven’t really heard a serious politician say that in a serious way for quite a few years. I really appreciate that story.

Alan Greenspan has been a great colleague, known him, I guess, 30, over 30 years. He first contacted me because he’d read my book on the coming Soviet crash. And so both while he was chair of the Fed, I visited him pretty often.

By that, I mean three or four times a year. I think he was very good at meeting with people to kind of get a barometer of what people, various thinkers were looking at and were interested in and were thinking about. I used to use that essay you referenced, Gold and Economic Freedom, when I taught international finance, actually at a graduate business school in Monterrey, Mexico.

And I would assign that with the name of the author, White It Out. And then I would ask the students the next day, who do you think wrote this? For instance, is this some radical leftist? Is it? And the students always would come back and say, well, it’s certainly not an economist. It’s an intellectual, but somebody who really hates government.

So it’s a libertarian. And they were just always shocked when I would say, well, this radical libertarian you’re talking about is the number one button down banker who happens to run the largest central bank in the world. And when I quoted from that same article in my book, Money Meltdown, came out in 1994, I needed to get the permission of copyrighted material from the author.

So that meant contacting, you know, it was published in Capitalism, the Unknown Ideal by Ayn Rand, a compendium of these essays. And it turned out that Alan Greenspan owned the copyright personally and he did not give permission. I literally called up immediately when I got that letter that he had not granted permission.

And I asked his assistant if I could meet with him the next day in his office at the Fed. And to my shock, but I was sort of angry, I think, I thought that was intellectual dishonesty. And I had never attributed that to him.

She said, yes, he’ll see you. And I marched in and said, we sat down on his little couch, not far from his desk. And he said, it’s not that I don’t believe it.

He said, in fact, I do still believe it. And he pointed to a little off room, a little closet. He says, I could go in there and re-quote myself.

But he said, but sitting there, and he pointed at his desk, which was surrounded by all of the Bloomberg terminals and all of the bond yields and stock markets around the world, he said, it would cause great disruption. And I kind of said, I think you have to say it. I mean, if you believe in sound money, and you believe that the discipline of a gold standard was a healthy thing, bottom line, I’ve heard him subsequently talk about it.

I understand. He says, we live in a democracy. We have fiat money.

So we have to control the supply of money. But nevertheless, we have chosen to have a central bank with fiat money. And he goes on to say, unless you do control the money supply, you either have to have a gold standard or currency board, or control of the money supply, or else you will have inflation with deleterious effect.

And he said, and that’s what history has revealed. But he ended up finishing that interview, which he did a year after he’d left the Fed, after 18 years. So in 2007, he left in January 2006.

He told David Asman at Fox Business News, he said, there are some of us, myself included, he was, I’m quoting him, who feel we did very well under the gold standard from 1880 to 1913. So I would just say, I don’t, I’d be surprised if he ever said the American people don’t want sound money. But I’m trying to explain from his point of view.

As a democracy, we elected members of Congress who gave certain powers to a central bank, going back to the Federal Reserve Act in the 30s. Therefore, he might say they decided that this central bank, the Fed, could decide what should be the rate of inflation. He in 1996, at a Federal Reserve meeting of the Open Market Committee, he said, I think our mandate for price stability means zero inflation.

It was Janet Yellen who said, no, I think low inflation meets the mandate. Yeah, I mean, 2% inflation seems to be the implied rate. But that’s 2%, I mean, in my opinion, it’s 2% theft every year from the currency.

But you spoke about the fact that, yeah, he said that the Fed, of course, was the Federal Reserve Act in 1913, was passed by Congress. And I mean, there’s stories that there weren’t many senators there to vote on it. They’d gone to, you know, home for Christmas.

But I mean, I’ve seen an article here, and I have to admit sometimes, and I’ll just share it here a little bit, Infowars and Alex Jones, they kind of exaggerate. But apparently, well, GOP legislators proposed end the Fed bill to abolish the Federal Reserve. So I think it’s Republican Senator Mike Lee from Utah, and also Republican Representative Thomas Massey from Kentucky.

I mean, it’s encouraging, but we’ve seen this before, also with Ron Paul. And I’ve seen, Judy, that you’ve pinned this story here about the gold-backed bonds, that a lot of people are talking about it, even on, I think this is Fox News, that Steve Forbes and Larry Kudlow. So maybe we could get into your book now, Good as Gold, and also what you think about the Fed.

If President Trump is really going to maybe get rid of the Fed, well, he can’t get rid of it. It has to be repealed, the Federal Reserve Act. You mentioned several great points.

I might just say in 1913, when the Fed was kind of invented, when we got it, we were still on a gold standard. And so really the goal of this Fed was to provide an elastic currency, because we were an agricultural nation, and there were times when it depended on the harvest cycle, when there wasn’t enough cash in banks. And it was sort of to smooth that out.

I was referring earlier to the Federal Reserve Act that kind of granted more powers. I think that was 1934. And then, of course, 1977 and 78, those were legislative acts, Humphrey Hawkins and such, that enlarged the capabilities of the Federal Reserve.

Mike Lee is big, big time. He is a great senator from Utah, a true constitutionalist, extremely influential and highly respected, a lot of integrity. He was talking, I did CNBC Squawk Box, I remember last November, and Mike Lee had also said, and the Fed.

And so our discussion around the table that morning was that I supported Mike Lee as a constitutionalist, and I thought that we needed to talk about the fact that Congress farmed out its constitutional responsibility to regulate the money to this federal agency, and then had very lax oversight, in that there’s no limit on how much debt the Fed can purchase, government debt. There’s no limit on how much money it can create with a keystroke. There’s no limit on how much interest it can pay to private financial institutions.

I think that’s pretty scandalous. And there was nothing to prevent the Fed from deliberately debasing our nation’s money unit, which I totally agree with what you said. I consider whether it’s 2%, 3%, anything above zero, to be expropriation.

So this is a very serious thing that Elon Musk, well, I’ll bring him up in a moment, but Mike Lee wants to pursue this and explore the constitutionality of Fed powers, I would say, and the Fed is a pretty radical thing to suggest. Massey, it doesn’t surprise me, he’s the Republican, the single Republican who didn’t vote for that last budget bill, and he also is very strong on sound money. But it’s the fact that Elon Musk is very supportive of Ron Paul these days, that I think that’s the most powerful indication that these things can now be looked at in a serious way, even though maybe it’s a little playful, but Elon Musk now suggesting that he and President Trump will personally do a walkthrough of Fort Knox, and the gold better be there.

All of that, I think, is certainly supportive of an audit the Fed approach. There would be a lot of people who would say, the fact that the dollar is our dominant reserve currency, something that President Trump has made very, very clear, it’s something he wants to preserve. He doesn’t want to lose the soft power inherent in having the world’s dominant reserve currency.

It’s a little too cavalier to say, let’s just end the Fed for me. Could I justify it intellectually? Yes, of course. Why would you, in a capitalist free market economy, grant to a small committee, none of whom anyone voted for, the power to control the most important price in a capitalist economy, which is the price of capital? You would never do it.

And since my background, going back a long time ago, when I was first at the Hoover Institution, and I ended up writing that book on the coming Soviet crash, it started out just as a very dry topic of the impact of Western capital on the Soviet economy. But that forced me to really get a feel for the internal monetary and credit and financial conditions existing in the Soviet Union. And what appalls me is how much our own banking system has come to emulate that Soviet Gosplan, the Gosbank, which they put in charge of managing the economy.

And all Gosbank would do, and it was considered the backbone of the Soviet economy, that goes back to Lenin, said we can take the example of Western banking and see how if you control the banks, you control the economy. And so all it really did was channel the deposits of workers back up to the government. And I see our banking institutions doing that now and becoming utilities of government instead of financial intermediaries that serve the private sector.

In our country now, more than half of the small and medium-sized businesses they’re borrowing, their loans, are not coming from banks. They’re coming from non-banking institutions. So that tells me our banks are just playing footsie with the Fed.

They get paid to do nothing, they have over 3.2 trillion in their cash deposits sitting at the Fed, and they are paid 4.4% to let that money sit dormant. I think if the American people understood that’s the way the Fed controls interest rates these days, they wouldn’t approve. Why shouldn’t that money go into the private sector or even into other U.S. Treasury securities to bring those yields down? So your question was, is the mood changing? I will go back and find that article you just showed me on Info Wars.

I know Steve Bannon has been saying things for years. I’ve done his program in the past about looking at the Fed, and we see that there is a movement to examine the powers that these federal agencies enjoy, and I think to challenge their outsized influence on the economy. And I hope this would lead through an audit the Fed approach to putting some parameters on what the Fed can do and can’t do.

Yeah, you mentioned the interest they pay on reserves. That’s something new that came out of the financial crisis in 08. And I think you mentioned this in this book.

And you also mentioned the Goss Bank and the central planning in this book. So that’s really interesting. Maybe about the Fed.

Yeah, I mean, I’m for ending the Fed, but if you can’t end the Fed, maybe go back to, I think it’s the pre-1935s that they couldn’t buy US Treasuries, I think it was. And from what I’ve seen in the beginning, the Fed’s balance sheet was mostly gold. And the only thing that they traded or discounted was commercial paper to keep the liquidity.

So, I mean, I would be, yeah, that would be a compromise, I think, to go back to something like that. Do you think that that might work? Or is that too radical without ending the Fed? Well, I’m not against radical per se. I mean, that really comes out of the Latin for getting to the root of it.

And I think the lack of sound money is really the fundamental issue, certainly for international trade. That’s been my focus. You have to have a level monetary playing field, or all of the rationale for free trade kind of disappears.

So I think, intellectually, I’m very closely aligned with you. And I actually admire that position. Because again, I talk about intellectual honesty, that’s probably what should happen.

I wish we could have people organically deciding whether they want gold or paper money. And that would be the way to have the money supply determined by people’s expectations in the aggregate. I have a lot more faith in the millions of people who make up the market economy than I do in that small committee, some of whom have never even been in business.

So I do appreciate that point of view. It’s just having kind of had a foot in both camps. I mean, I was at a think tank, I love think tanks, but I’ve also had a hand in some policy issues.

And so I guess it’s a slippery slope in a way. But for me, I feel like I would be, I can’t be a purist. I sound a little like Greenspan saying, you know, I still believe it.

But I’m trying to do something real that I think is actually doable, that nevertheless would be radical. I mean, for the Treasury to issue an instrument that had a formal link between the dollar and gold, to have any kind of link for the first time in over 50 years is radical. And I’m sure there’d be people saying, I mean, it happened during my nomination process, I was fringe, it was, I’m whispering to the crazy gold bug crowd.

When the Washington Post said that about me, I sent that op-ed to Greenspan. And he immediately emailed me back. And he said, if gold is such a worthless metal, why does the US government and all major governments hold so much of it? And I thought, you know, if people knew that a guy who’s been in the arena, who held that share, almost the longest serving Fed Chairman of the most important central bank in the world, if that was his reaction, then I can kind of discount, I’ve gotten a thicker skin, people who say, oh, you talk about gold, you don’t understand the real world of money.

Believe me, Paul Volcker, or Greenspan, or people who really know what’s going on. A good friend of mine, he’s in his 90s, in Paris, is Jacques de La Rociere. And he headed the International Monetary Fund, I think, starting in maybe 1987.

But for several years, he’s a big proponent of gold. And he thinks that we should bring it back into the system somehow. He likes that idea.

Because it would add discipline, because it would start to establish a neutral reference asset. And look, with our trade partners, to me, if they were to say, we’re going to run our own monetary systems, so that we always have a fixed exchange rate with the dollar, I would say, great. Because they all talk about a rules-based system.

By that, they mean from the 40s, Bretton Woods, and everything that followed. I would say that there was one big rule. You all kept your exchange rate within a 1%, very narrow range, above or below the dollar.

And our big rule in the United States was the dollar was convertible into $35 per ounce of gold. So if you want to talk about free and fair trading, then first, we have to get the money right. And then domestically, for the same reason you and I just talked about, I just think it’s outrageous that citizens don’t demand that the unit of account retain its value.

Why would they accept the deliberate debasement of the currency? I remember Bernanke once going before Ron Paul. And Ron Paul said, how do you define a dollar? And he said, well, it’s by what it will purchase. And Bernanke said, no, wait, look at Jefferson.

He defined a dollar with precision as a certain weight of gold and silver. And Bernanke says, well, we’re past all that. And he said, well, why do you hold gold? And Bernanke said, it’s just an asset.

And I loved it. He said, it’s tradition, isn’t it? Yeah, it’s just a residual, traditional, exactly. You remember that exchange.

And Ron Paul said, well, why don’t you hold diamonds if it’s that? And why do all the central banks, the European Central Bank, all of the major central banks, Germany, Italy, France hold gold. So the bankers, the central bankers actually do understand in a very sophisticated way. And when the members of the Fed, I refer to that 1996 conversation of what it means to have a mandate for stable prices, when they started exploring the notion of, well, maybe it is 2% or 3%.

The next day, the vice chair of the Fed, McDonough, I believe, he said, I don’t think we should decide. I think something like that should really go to the American people and that Congress should have to vote on it. Well, we’re still waiting for that vote.

Almost 30 years. Well, they didn’t reveal that was the official target until what, like 2012, was it? Yeah, I don’t. Yeah.

And the thing is, if you look at the Bank of England inflation calculator from 1821 to 1914, that’s when they resumed the convertibility after Napoleonic Wars, until the beginning of World War I, the CPI was average minus 0.1 every year. So the value, the pound bought more, slightly more, almost 100 years after. But you spoke about free trade, and that’s one of the really interesting things you mentioned here in the book, that if you want to have free trade, you have to have sound money everywhere and countries have to respect it, because if you don’t, countries will cheat by inflating their currencies.

And so, do you think that’s what maybe President Trump is trying to do with this tariff? It seems to be almost a game now. He put the tariffs on and say, I’m going to delay it for a month. Do you think he’s trying to get everyone on the negotiating table to negotiate something like that? And maybe you could explain to the viewers why it’s so important to have a fixed exchange rate.

In my view, it’s like, if we were to change the length of the foot or the yard or the weight every second and trade it in a market like the FX market, the world would be crazy. And I think it’s one of the reasons the financial markets and the economies are in so much trouble. Well, you’re right.

I think that the money is meant to be a measure. That was clearly the intent in the US Constitution. Article 1, Section 8 gave Congress the power to regulate the money in the very same sentence.

It gives Congress the right to define official weights and measures. So that’s what it was meant to be, a tool of measurement. Steve Forbes has always made that argument, that if you had a ruler or a yardstick and it changed day to day, how do you ever build anything? What a nightmare that is.

And it’s funny, you were kind enough to show that post I did. I actually posted that, that shows a picture of Steve Forbes and Larry Kudlow yesterday. And it’s had, I think, up to like 110,000 views, which is kind of a lot for me.

I mean, that’s twice the number of followers I have on X. So I sent a little email showing that post to Larry and Steve Forbes and also Steve Moore, who’s been a strong advisor to President Trump, and said, look, this has gotten, yeah, that’s what I sent them. And I said, this has gotten, at the time I sent it, it had 99,000 views. And I said, in less than 24 hours.

So I think, to go back to your original question, the American people are really supporting the idea. There’s a lot of momentum for a dollar as good as gold, not across the board. And I can tell you about that.

But as this initiative, to just do a treasury security that would have a gold convertibility feature. And all three emailed me within the hour. And I won’t reveal exactly what they said, but it ranged from love it, to we are supporting it, or we are promoting it.

That’s what he said. And another said, very kindly, you’re the gold standard. And this would be a brilliant, how do you put it, a gesture, only it was stronger than that, for Trump to do on the date I recommend in that post, which is on July 4, 2026.

Because that’s going to be a, so, but it’s a long term problem. Well, when do we hit the day one of the long term? I think with the Doge Commission, we’re finally approaching day one, where we’re going to say we have to, we have to move toward a balanced budget. And here’s a plan for achieving it.

And it has to mostly be a plan about cutting spending, but also increasing growth to increase revenues to do better than the 1.8% being predicted as GDP growth rate. So all of this is coming together. And, and I hope that those those three people, all of whom are influential with President Trump, I’m not saying that his own tariff policy is aimed at bringing us around to a new level international playing field, and that is all part of a plan.

I’d like to say that I’d like to think that I’m certainly pushing for that. And I talked about having the next Bretton Woods conference at Mar-a-Lago back in a op ed I did in 2016, for the Financial Times. And I was raked over the coals for it during the nomination process, because they said, Oh, she’s trying to drive business to Trump.

And I thought, that’s so silly. And meanwhile, now, he probably was voted on today. Scott Myron would be the new head of the Council of Economic Advisors for Trump.

And I know his, his appointment, his nomination was up for a vote today in the Senate Finance Committee. But he is now talking about the Mar-a-Lago Accord. And I don’t know what he might have in mind, he does have a 40 page treatise out about a new approach to international trade.

And he talks about the role of the dollar. But I was originally attracted to President Trump as a candidate in 2016, and wrote about that for the Wall Street Journal, because he was focused on currency manipulation. And I said, finally, here’s someone running for president, who acknowledges that when you have what they call competitive depreciation, being carried out by your trade partners, I’ve always said that’s not competing, it’s cheating, then you can’t have free trade.

And I’ll just close this thought by saying, with Mexico now, we’ve been on again, off again, with the 25% tariff. In 2024, the Mexican peso depreciated 23% against the US dollar, their largest trade partner. So if you put a tariff of 25%, you’re just barely about breaking even with the price advantage they gained against our domestic producers, in terms of competitive goods, they could offer them 23% cheaper just by the depreciation impact of their prices when translated into dollars.

So it looks to me like Europe is their central banks ready to lower rates. The People’s Bank of China has said they want to loosen monetary policy and engage in stimulus. And here we are at the Fed, kind of this wait and see attitude, but mostly hawkish.

And so I see us still at 4.4% as our target interest rate. And to me, this just shows that while the dollar in a way surprisingly has been weakening in the last couple of weeks, overall, I think that the trade weighted dollar value against other currencies has been to get stronger. And that puts our domestic producers at a disadvantage both at home and abroad.

I think the ECB actually, because we’re talking here on Thursday, the 6th of March, the ECB cut rates today, even though German government bond yields spiked massively in the last couple of days. What you said there about the devaluations are cheating. Do you think that’s, isn’t that like a symptom of like a Triffin’s, I think it’s a Triffin’s dilemma? Yeah.

Because if you have a currency that dominates the system instead of a neutral asset like gold, these countries that have, they’ll have to use the dollar, they’ll do anything to earn the dollars. But yeah, but I agree with you. I think though, in your book, Good as Gold, you did something that I like to do as well, is look at the price of gold and all the different currencies.

And there’s a website called fxtop.com. And you can go back to 1953. And most of the currencies, the dollar included, are down like 98, 99%. So yeah, I’m not saying that there isn’t currency manipulation.

But I think going back to a more sound system would help greatly. I wanted to touch upon GDP. I saw on your x page that you were talking about the plant fed GDP now that it’s dropped massively.

They’ve revised it from like 3% to minus 2.8. And I listened to a guy on x, I think he’s a precious metals dealer, I think, in the US. And he made a good point. In that, I don’t know if you’ve heard, there’s speculation that 2000 tons of physical gold have gone into the US in the last two and a half months.

And all physical, of course. And if you calculate that, it’s like 180 billion. So he says, because if you import a lot, that takes away from GDP.

And what I’m trying to ask you here is, with maybe, let’s say, with your Treasury Trust bond, which is what you call your gold MAC bonds, if you wanted to have enough gold to issue bonds, seeing that the debt is so high, wouldn’t it be wise to revalue that statutory price? And if you did, you’d need to do an audit as well. That’s the other thing. Because foreigners need to trust that the gold is there, right? So it’s a couple of questions.

What do you think the price, the statutory price, where do you think it should be raised to? And yes, do you think it’s also a possibility that might happen? Yes, let me take some of those. Yeah, sorry, the statutory price. You have the question I had.

I didn’t really get my second question, because I kind of lost my train of thought. Second question is, if that were to happen, have you got a timeline for an audit? Well, okay. So I’ll start with the audit, because in fact, I did get a note from Steve Moore today asking, but this was in reference to our trade balance figures came out.

And we have a record trade deficit, which people said, oh, that’ll give fuel to the idea of tariffs, because that feeds into what President Trump has said. And then an economist at Heritage, E.J. Antoni said, well, it’s because of the inflow of gold. So then it was sent to me by Steve saying, why is there an inflow of gold? And I said, well, the conspiracists would say it’s because Elon Musk is now talking about auditing Fort Knox, and Trump is saying, I’ll walk through with you.

And they’re saying that there’s a panic, because the gold isn’t there. And so the government’s trying to import a lot of gold. Now, I think the real reason, and I use a World Gold Council numbers, but they had a good data out today, and it covers the month of February.

And the U.S. has shown the largest inflow of gold for February. So I think you use two and a half months. And to some degree, there’s a continuation.

But they think it’s because it’s going into exchange-traded funds, into ETFs that hold physical gold. Like there’s iShares, there’s two spider funds that are ETFs that actually have physical gold. And the demand has been skyrocketing in the United States.

I’m not sure why. Some of it can actually be related to, I think they thought, concern over tariffs, a weak dollar, but also people see the price of gold going up. And maybe they think there’ll be confrontations with the Fed, that kind of uncertainty.

They want to have some part of their portfolio in these exchange-traded funds that hold gold, physical gold, which requires it then coming in. But also Costco, that’s our big discount store. They’re across the country and now in other countries around the world, Costco.

And they, two years ago, started selling gold. And they have a very popular one-ounce gold bar they make available to members at close to the market price of gold. And they can’t keep their stocks filled.

The demand is huge. And so I think there’s also, and they’re bringing in gold from RANDS, South African and other places, but they are making gold available to their members. You pay some small fee to be a member, to have the right to shop in that store.

And so there’s just big demand in the United States. Now, you brought up a couple of other points. Oh, what did you ask me about revaluing the gold? Yeah, because even at current prices, I mean, if you wanted to reliquify the treasury, $42.22, which is what the price is now, doesn’t make any sense.

So do you think it should be, it would be revalued and it would help, I guess, with your gold-backed bonds if the treasury had more, if the gold was worth more? That is the reason I said I’m trying to do something that’s really doable. Even if it’s a, this could be relatively small issuance. But let’s start with the fact that the US is the world’s largest holder of gold reserves.

We have 261 million ounces. And as you correctly said, to the penny, we carry them at that $42.22 statutory price. That’s going back to February of 1973.

People who care about all this, like you and me, are pretty clear that Nixon ended Bretton Woods in August of 71. But as you can read in Paul Volcker’s books, he thought we were definitely just going to reform Bretton Woods. And by that, he meant $35 was too cheap now because we had inflated.

We had inflated during the guns and butter issue when the US was financing Vietnam and big social security programs. And that inflation had gone around the world. And so countries were giving us dollars and saying, we’ll take the gold.

So he thought that maybe we’d have to go up to $38 or maybe $41. Finally, over that time between August 71 and February 73, it became clear we kept chasing the gold price and we weren’t going to catch up. So that’s when the Smithsonian Agreement, it was decided the price was $42.22. And so from then on, the US just has been holding the gold at that book value.

And the gold belongs to the treasury, the Fed holds it at the same value. The total value then of those 261 million ounces at that price is only $11 billion. But in fact, at the market price, we’re talking about over three quarters of a trillion dollar windfall, close to 800 billion.

And what I had suggested to keep my proposal even more enticing, I think it’s a win-win, but even more enticing is we could just keep that gold sitting there another 50 years. We could sell it. That would be a big mistake.

I say, let’s use it as specific collateral and warehouse it so it cannot be sold. Those are the family jewels. Well, this is a family emergency on this struggle to get back to fiscal sustainability.

Let’s have treasury issue gold-backed certificates, gold-backed treasuries, I won’t say certificates, treasury bonds with this convertibility option that at maturity, you can be paid either a face amount in dollars or a pre-specified amount of gold. And that way you lock it up so some future administration can’t just throw it down a rat hole of government deficit spending. Let’s use it to be this marker, this barometer that we’re really trying to get back on a path of sound money and sound finances.

And I’d like to see us over the next 10 years, not only quit the deficit spending, but begin to pay back our outstanding debt. And if you did a 50-year gold-backed bond, maybe you only increase the deficit 4 trillion more and the debt correspondingly in the next 10 years, and then you start paying back a trillion every year. Well, that would even out that after 50 years, you would pay off that last bit of outstanding debt.

And if at the same time, you’ve worked your way to zero inflation, this is to me where we want to be. That’s a very aspirational goal. But this would be a program treasury could do that would become, I think, it would garner a lot of attention in our own markets.

And I think around the world, I would like to see other governments also issue gold redeemable sovereign bonds, sovereign government borrowing instruments that are redeemable in gold and have a fixed value in terms of their own currency, denominating the bond, because then you even have the beginning of a future fixed rate exchange rate system. Because if all of these gold convertible sovereign bonds being issued by major governments around the world are ultimately convertible at some future date into a specified amount of gold, then you have the same as an old-fashioned gold standard in that they each have their own currency, but they can be valued relative to each other based on a shared common denominator, a neutral reserve asset. They’re all convertible into gold.

Therefore, there are implied fixed exchange rates between those currencies. And that’s the sort of accord I would like to see. And then maybe because President Trump has for so long said that depreciating your currency, and he mostly had China in mind, is an unfair trade tactic that really disadvantages our U.S. manufacturers, and those are the people he’s trying to protect now with tariffs.

I think that if he comes around to appreciating that this is ultimately what we want to bring about, I think that would show tremendous global leadership. And then you could make, I mean, Ronald Reagan, he said that his goal when he was running for president in 1980, he said that unless we restore some kind of gold backing to the dollar, we’ll never fight this crippling inflation. And he said, my first priority as president will be to make the U.S. dollar the most trusted currency in the world.

Now, I have spoken with the president about gold. He brought it up to me. And I’m the first to acknowledge that even if you look at Federal Reserve notes, just our paper money out there, we have $2.4 trillion outstanding.

70% of that circulates outside our own borders. If you were to just, you know, people say, well, why wouldn’t you just go on a gold standard tomorrow? Why not just end the Fed? Well, okay. Then all of our gold, even if it’s worth 800 billion, three times that amount in Federal Reserve notes, paper money.

So the gold would be gone and redeemed by the first third of that money coming back. So that’s not feasible to me. And I’m not sure we want to give up the power of having the world’s most powerful central bank.

We do still have, we recently tapped during COVID their lender of last resort powers. For me, it’s a matter of how do you carry out the transition? And it starts with this movement of people saying, we deserve sound money. We deserve an honest measure.

We deserve to be able to trust the U.S. dollar as a store of value. And when you have people like Mike Lee, Senator Lee saying, let’s audit the Fed, let’s talk about congressional oversight and whether the Federal Reserve is delivering the best economic performance. After all, the 2008 meltdown happened on the Fed’s watch.

So I think there’s reason to say if the goal of having the Federal Reserve was to prevent economic calamities and to ensure we never went through the Great Depression again, well, we did. Bernanke says that the negative economic consequences of 2008 were worse than what happened during the depression. So instead of having enlarged the Fed’s powers, which is what we did then and what we did after COVID, I think we need to start the movement that is doing the opposite.

And maybe even if we can get people to compare the yield on a gold convertible treasury bond compared to a traditional, just a nominal treasury bond in the same way that the Fed looks at tips, treasury inflation protected securities, which compensate the holder for inflation in the same way that this gold bond would compensate the holder for inflation, but just measured by purchasing power and gold, not by the CPI consumer. Well, okay. What I’m saying is that if the Fed might end up having to pay attention, if those differential rates of return on treasury instruments reached a certain point where the gap was, you had to notice it, maybe that would impose on the Fed certain actions regarding the money supply or regarding whether they were engaged in stimulus, move towards some kind of rule.

And that for me, it’s a matter of transitioning into a Fed that is less political, less powerful and less prominent. And I would quit the practice of allowing the Fed to pay interest on bank reserves on that cash. I would go back to at least the old fashioned way of forcing the Fed to engage in open market operations.

So at least they have to engage with supply and demand and market forces to determine the appropriate interest rate in the same way that Paul Volcker did. But I think it’s too much like the Soviet system to have the Fed say, we’re going to manage the interest rate by dictating to banks how much we’ll pay them not to lend out money to the private sector. That I think is a very unhealthy influence over our traditional banking financial intermediaries.

Just a quick question before we finish. You spoke about other countries maybe getting together and also issuing gold back bonds. Any view on what the BRICS countries and a lot of other countries have been doing since 2022 buying a lot of gold? Do you think that’s encouraging, especially like China, Russia and India and even Poland? Do you think they’re thinking maybe like you that eventually the whole world will have to have some kind of gold system with their bonds? I think they see that, especially China, as a way to have a superior challenger.

They resent that the dollar is the dominant reserve currency. They would like to have something that might be taken more seriously. And China has been very aggressive in setting up gold trading platforms, I think out of Shanghai.

They don’t promise any fixed convertibility between the yuan and gold. But if countries sell energy to China, say Russia, they make it extremely easy to pay for that in gold futures contracts that you can readily translate yuan payments into gold futures contracts. And so they’re trying to make that bid.

I think the US, since it is our forte, I mean, that’s our strong suit because we are the largest holders. So why keep that advantage sitting, doing nothing for us? Let’s let it work for us. So I would like to see the US and maybe in tandem with if not the European Central Bank, then individually, Germany, France, Italy, these other large holders.

Yes, Russia and India are in the top 10. They have large holdings. So if they want to do these instruments, then that might be a good thing because then it would prevent them from using competitive depreciation to some degree.

It would shame them. But I look at gold prices as you do in different currencies. And what I see, if you look at gold prices over the last decade, which for me is relevant because it was in 2015, when President Trump was first talking about running and first saying, I want to protect US manufacturers who our capacity has been hollowed out by the fact that the big competitor China has engaged in currency depreciation.

And certainly Japan has been guilty of that. And I looked at the currencies of our top five trading partners, Mexico, Canada, China, the European Union countries are the ones that use the euro eurozone countries that trade with us. And I did I name them all? I guess the UK is Japan and Japan.

The UK, we we we run a trade surplus with the UK. So we don’t have Japan on our on our list of I think Japan is the worst. If you look at the Japanese yen, the price of gold in yen.

Yeah, well, I looked, it depends what your span is. But I think the past decade is, is relevant, because I’m also looking at the hollowing out of manufacturing. I look at that past decade, when we first started noticing it, and it became a political issue, certainly with with President Trump.

And all of the currencies have debased against gold, certainly including the dollar, because I take the beginning price in each of those six currencies, the dollar against our five major trading partners, 10 years ago, and then right up to today. And you can see the dollar debased considerably. But all five of the trading partners debased more, and Mexico and Japan the most, but all of them.

So that’s where I begin to see, you could reasonably, based on that, say, we’re putting on a tariff, just to try to neutralize the negative impact that has had, because your goods are priced cheaper, when it translates into dollars. And we’ll, we’re not going to, where we run afoul, and we get, we don’t gain on this at all, is when we have Treasury twice a year, have a publication, which they’re required by Congress to talk about the exchange rate practices of our trading partners and to name countries that are manipulators. And it almost never does.

It almost never does. It doesn’t. And I think it’s because it differentiates.

It says, it tries to prove they did it on purpose. To me, it doesn’t really matter. Call it no-fault depreciation.

It still has the same exact negative consequence. I mean, I don’t think it would comfort workers in Ohio or Michigan to say, well, they didn’t mean to underprice you by having their currency go down against the dollar. Don’t make it a matter.

Let your central bank do what it wants. And if you decide you want to try to do whatever it takes to have a fixed exchange rate with the U.S. dollar, great. The point is, if you want to be a trading partner, either you don’t have this currency depreciation, or you accept that we’re going to impose a tariff.

Just, there are many things people want to impose tariffs for, right, from fentanyl to immigration. For me, these are harder things. The socialist wing of our political spectrum, say Bernie Sanders, would say, well, they don’t have the same high labor standards, the way they treat their workers.

They don’t have the same environmental standards. They don’t honor human rights. All of that, true.

But those things are much more difficult to measure. The currency is quantitatively measurable. And you just say, that’s it.

We don’t blame you. You do whatever you need to for your currency, as we will do. But we’re going to, if you want to be part of our trade partnership, those are the rules.

Great. Thank you, Judy. So, good as gold, I guess you can find it on Amazon.

And just one quick question. Do you think President Trump will try to get you on the board again of the Federal Reserve? You know, I just, I don’t, I don’t speculate on that. And I’d be happy to tell you the day that No, it’s just some of the viewers asked to ask you.

But yeah, that’s just, anyway. I’ll just say it meant, it continues to mean a lot to me that he not only nominated me, but re-nominated me, even after our election of 2020. He went to bat for me.

The way our legislative process works at the end of the year, all those nominations are defunct. But in those three weeks before inauguration of President Biden, he re-nominated me. And Larry Kudlow kindly informed me, he said, it’s highly unusual, but he re-nominated you, and you should always know he supported you.

And then I think Biden dropped it, right? Day one. He withdrew the nomination. Do you think President Trump has read this book or? Well, I won’t, I won’t say.

I’m in the process of getting it to him. And that has been initiated. Okay, great.

Judy, it was great talking to you. And I think we went over that 40 minute, but I guess we could have gone on for a lot longer. No, I’m delighted.

You and I, I always learn a lot from you. You know, I follow your writings very closely. Those are ones I read.

And so that’s why it meant a lot to me that we could have a one-on-one. I’m honored that you invited me and I really enjoyed it. Well, I’m honored that you accepted my invitation as well.

Thank you. Thanks.