What A Full Audit Could Reveal (Uncut) 02-21-2025

why not have no Central Bank whatsoever and no Authority targeting inflation or growth or employment and just leave everything to the free markets I think that is the question of the moment and I think we’re fast approaching some kind of resolution Congress farmed out its own responsibility from Article 1 Section 8 to regulate the money to this government agency whose record on delivering stable money has has not been very impressive it’s my pleasure to welcome back the show Dr Judy Shelton senior fellow at the independent

Institute former economic advisor of President Trump and we’ll be talking about her outlook for the economy what should be done under the Trump Administration when it comes to legislation around Financial assets consumer protection and a very interesting development which is the possibility of a gold-backed uh bond that may or may not be introduce what could that do to our system welcome back to the show Dr Shelton good to see you good to see you happy to be with you I want to talk about some recent

developments here um around consumer protection take a look at my screen this is from CNBC Trump’s acting Consumer Financial Protection Bureau Chief halts all supervision of of companies um Trump recently installed a new head of the US Consumer Financial Protection Bureau and instructed staff on Saturday evening to suspend all activities including the supervision of companies overseen by the agency escalating the new administration’s efforts to neutralize the government government Watchdog uh Russell Vault also announced on Saturday

evening on Elon musk’s social media platform X that he was zeroing in or out rather the agency’s funding for the next fiscal quarter saying the more than $700 million in cash on hand was sufficient I I I wonder how this development actually impacts consumers can you comment on what’s going on and your thoughts around this uh I’m extremely in favor of it I was delighted and posted the letter that Russell vout who is our the head of the Office of Management and budget um sent to Chairman Jerome Powell at the Federal

Reserve saying since the um Consumer Financial Protection Bureau gets its funding from the Federal Reserve and we need to notify you every quarter how much we need I am notifying you that we need zero and that we have received too many funds and that the agency is engaged in activities not consistent with the objectives of President Trump and um I I just love it I do not see the cfpb as protecting consumer rights I see it as infantilizing consumers and it has a bias of of assuming that any voluntary

contract to borrow money from a financial institution um renders the the lender um uh incapable of understanding in their contractual obligations so I see it as a bullying institution I don’t think that it has legitimate funding it’s supposed to be funded by um the Federal Reserve so that it’s not subject to an appropriation from Congress so of course it’s already operating beyond what I think are acceptable parameters for government agency but but the laughable part is that the Federal Reserve is

running at an operational loss so it has no profits out of which to finance another agency in short I’m I would love to see it ended and I’m delighted that the head of our uh om seems to be aligned with that objective okay so you’re not in favor of the cfpb which according to this article the Congress created in the wake of 2008 uh to supervise uh and I’m quoting this article here consumer facing Financial companies like Banks title lenders mortgage Originators cash transfer services to pre to prevent unfair

deceptive and abusive practices and other predatory conduct in which way has the cfpb deviated from this original goal Dr Shelton well I suffice to say it is really the pet project of Senator Elizabeth Warren it was brought about in the aftermath of the Global Financial meltdown of 2008 and basically set up to to to make out Banks to be Financial predators and as I say this ties into this attitude of of um infantilizing borrowers and I just think that um it does far more harm than good and it it

does not need to exist I think that it would be very important to consolidate the regulatory framework that affects financial intermediaries and um getting rid of this institution would be a first step toward doing that well what should be the correct approach to I guess moderating or supervising uh consumer companies and Banks and lenders and making sure that predatory practices aren’t common practice well I’m not sure what you mean by predatory practices I mean fraud is fraud and if you want to file an

individual case against a bank for that then um you know you have the the rule of law behind you but to have a government agency that’s that’s somewhat Rogue because it is not responsive to Congress because it brags that it doesn’t have to go to Congress for funding means that it just carries out a separate agenda in particular that of Elizabeth Warren who has never met a bank nor any other private business that she doesn’t assume is is uh ready to inflict pay and predatory pricing and is out to get the consumer instead of

providing fighting for for goods and services in a free market economy so it has nothing to do with do Frank this cfpp well a lot of things were adopted in the wake of Dodd Frank that really don’t go to the heart of the problem I mean here you had the Federal Reserve empowered to calibrate the appropriate level of money and credit for the economy let alone the world given that our Central Bank is the most powerful and then with with no predictions by anyone on the governing board of the Federal Reserve you have a stupendous

crash close to the depression in terms of its economic negative consequences and the if if the FED wasn’t responsible for that then then I don’t know what other government agency should be declared responsible and uh instead of constraining the fiscal and monetary actions leading to that we just set up a number of additional bureaus and and um Bureau ratic governance structures that really didn’t go to the heart of the issue which is having sound money that really reflects the the level of supply and demand for loanable

capital in our economy well here’s a clip from a recent Senate Banking Committee hearing from earlier this week take a listen we’ll respond together chair Powell if the cfpb isn’t on the job right now then who is administering JP Morgan or Wells Fargo’s consumer compliance exams to ensure that they are following the law Senator I I believe that um and you would know uh that Dodd Frank moved all authority for um examinations in the consumer space to the cfpb we we still have some jurisdiction the cfpb is not there examining these

giant Banks to make sure they are following the laws on not cheating consumers who is doing that job say no other Federal regulator no one in other words let’s just respond to that no other Regulators on the job I mean can you comment on that I mean yeah I thought that was a needless concession by chairman Powell and you have the office of the controller of the currency you have the Federal Deposit Insurance Corporation as I say you have rule of law with regard to fraud or illegal activity by any institution not just

financial institutions so I think he should not have conceded even the impression that somehow people who put money in a bank are going to be subject to fraud and there will be no consequences for the institution that that conduct such fraudulent activity okay so uh just to close off on this particular topic and we’ll move on if you were advising the Trump Administration today uh what actions should they take to I guess Safeguard consumer safety forget you know the assumption that banks are operating

under predatory practices just helping consumers navigate our current economic environment what should generally speaking who should be overseeing this well are you separating the the provision of financial services from any other institution or company that provides goods and services to the public I mean you’re already saying that there’s something different about financial institutions that people are not capable of deciding whether to do business with them but as I say I think the the key is to

streamline the the institutions we have multiple layers of financial regulation and for the FED to say we take no responsibility for the behavior of banks I find that odd and I that’s why I was surprised at that statement by chair Powell but mentioning OCC FDIC and the FED itself I think you can streamline that but to to go Beyond uh whatever protections we want to provide through the FDIC and just the legal system that protects private property rights and and would would investigate any individual

offense against a citizen who files a report against a bank or any other Institution for uh fraud but to call predatory suggests that people um were victims of financial institutions and so far I think you have to apply for a loan or it is your your initiative to put savings with a bank so those are that’s the approach that I would take okay I understand let’s take a look at this one more my screen one more time all aspects of the government uh must be fully transparent and accountable to the people no

exceptions including if not especially the Federal Reserve Elon Musk is basically calling for an audit of the FED apparently it’s never been done in history correct me if I’m wrong Dr Shelton uh but uh can you comment on whether or not first of all you agree with Elon Musk and second if you do what should this audit look like well I definitely agree but it is not true to say the FED is not audited it has is subject to a financial audit it files um quarterly um uncertified reports and then an annual financial report that

gives both the financial statement and the balance sheet for the Federal Reserve so that is is carried out by an independent auditor but the audit of of the FED um is based on a different set of accounting principles that is the Federal Reserve does not abide by Gap by generally accepted accounting principles it has its own approach called the the system um open market Comm approach it’s Soma and the way that it it defines the value of Securities the way that it um accounts for losses on Securities the

way it even defines uh its income statement is not what I would consider straightforward accounting for example uh the FED has gone from running a profit basically uh from the interest income it gets off its own portfolio uh relative to the interest it pays on cash reserves held by um member banks and banks are required to be members and hold cash Accounts at the Federal Reserve up till about two years ago they always earned a profit and then the Fed was required to remit virtually all of those profits basically 90% back to

treasury but that changed roughly September of 22 and so now the F the FED is is running an operating loss and it is over 200 billion in accumulative losses but whereas the remittances from the Federal Reserve to the treasury before for some 10 years before if we just look at those amounts um were to were a total of a trillion dollars in in revenue from the FED that then fueled the treasury budget it went into revenues for the US government and and congressmen would routinely thank the FED for for this windfall that it

provided it was one of the largest sources of revenue certainly in the top half dozen to the federal budget that stopped but they do not count the accumulating losses as as um expenditures of the budget instead again through the accounting fictions that the fed uses they call these accumulating losses a deferred asset and so I think that has totally compromised not just the fed’s own independence which it likewise as we talked about the cfpb the fed’s own independence as you’ll find on their website has a lot

to do with their assertion that they don’t have to go to Congress to appropriate funds to run their operation well now they do only instead they just create what they need to pay off the banks are still paying interest on reserve balances to cover their own expenses but instead of showing that as an expenditure of government they are recording that as a deferred asset president Trump has suggested that the president sit on the board of the FED in some capacity now this is a hypothetical of course he

hasn’t signed anything like this into action as an executive order but I’m just wondering whether or not this may be a solution to have members of either Congress or the administration be on the FED for more transparent oversight well referring back to that same um site on the Federal Reserves website defining why they are independent within government as an agency besides the assertion that they fund themselves which we know is not true they also say they are independent because they do not allow sitting

members of Congress or the administration to serve on their board but I think it’s very important to to point out that this this seeming prohibition against a revolving door or that kind of a a complicity between the executive or legislative branch with the Federal Reserve does not work in the other direction we saw how Janet Yellen went from being the chairman of the Federal Reserve to serving as treasury secretary for an Administration we saw that LE Brainard who was vice chair of the Federal

Reserve literally walked out the door and went to the White House and became the President’s chief economic advisor a highly and necessarily partisan position since she would be the chief economic advisor with regard to to to defining and implementing the president’s uh economic agenda so um the talk about serving on a board what what I respect about President Trump is he he said clearly I don’t think I can order the FED to to decrease or raise interest rates he said but I think I have a right to express my opinion and I certainly

agree with that and I would think that anyone at the FED would be sufficiently interested to hear the economic ideas or just the opinion with regard to monetary policy of the president and it he doesn’t do it in secret he tells tells his ideas very openly I I wouldn’t I wouldn’t Shield my ears from hearing that and pay attention instead to the the 300 economists who work at the FED many of them newly mined for from grad school many of whom have proved consistently wrong uh I would say in the aggregate fed predictions have not been

very impressive so um knowing that the FED share meets weekly for breakfast if not more often with his Secretary of the Treasury um I think it’s kind of silly for people to say that there should be no interaction between the president and the chairman of the fed and in fact if people went back and read the legislation commonly called Humphrey Hawkins from 1977 and 78 together the Federal Reserve Act and the Humphrey Hawkins Act of those years contrary to saying that there should be total Independence this is

ironic the word independent or Independence is never mentioned in that very lengthy legislation instead it says repeatedly that there should be more integration among Congress the president and the Board of Governors of the Federal Reserve I said that during my own hearing and was accused of being against Central Bank Independence I said I am reading your words I am reading the literal language of of the legislative act from Congress that emphasize the need to work together and have coordination between the president

Congress and the Federal Reserve okay well let’s talk about monetary policy now this is an article about you uh Judy written by CNN um right before the election Trump’s former pick to join the Federal Reserve has proposed what they call a radical solution to solve inflation um Judy Shelton a controversial Economist their words not mine who has been floated as a potential pick by former president Trump uh to lead the FED if he wins in November uh has proposed radical solution the FED should aim for no inflation at all have

you tell us what uh you meant by this I think you said this in an interview with CNN stable inflation is an oxymoron because it means it’s not stable what what should they be doing instead you know it’s funny to me first of radical is a is a good term radical comes from the Latin word for root and it means to talk about something fundamental sure and what could be more fundamental than than assuming that the money you’re you are required to use it’s legal tender that the US dollar should be a reliable unit of account

that it should deliver stable purchasing power and serve as a Dependable store of value and if you look at the fed’s Mandate which they invoke often it says that they are to achieve stable prices it doesn’t say that they should seek to deliver stable inflation even low inflation and in fact if you look at the transcripts of Federal Reserve Open Market Committee meetings going back to July 1996 you will hear a fascinating debate between at the time um fed chairman Alan Greenspan and fed Governor Janet Yellen

discussing what does it mean to have a mandate to achieve stable prices Greenspan said I think it has to mean zero inflation zero inflation and so if we’re going to have a inflation Target that would be the logical Choice she argued that no you need to it’s a grease the wheel um um model that her husband who’s a very prominent Economist um talked about quite a bit and it’s very Keynesian and it’s the idea that if you have some inflation through money illusion uh you could end up carrying out your economic goals better

and and it relies on this reasoning that let’s say there’s an economic downturn and and if money was actually stable if you had zero inflation then many companies might decide to cut the salaries of their employees by let’s say 1% she argued that psychologically people don’t like that and so instead that things would work much more smoothly in the economy if you had say a 2% inflation rate because then you could you could give someone a 1% raise and they would feel like like they had been rewarded and their good work had been

acknowledged but in fact you were delivering a 1% cut in their real wages because of inflation and and she she she supported this approach by saying that her husband had conducted a survey of workers where it asked them um would you be okay to get um a a 1% increase if inflation was the same as that just to see if people paid attention to real wages versus say a nominal increase and she felt the results reflected more than half of the people saying I would be okay getting a raise that kept me even with inflation

but she said and this is in the transcript you will all be happy to hear that when we asked uh Economist the same question would you consider yourself doing well if you got a A 1% raise and we just had 1% inflation almost all of them said no and it reflects that there was laughter around the table I took this to be a a moment of great huus that somehow economists were deemed to be more Savvy that they would recognize that a nominal increase in your wages that was dwarfed by an increase in inflation or even neutralized by an

increase in inflation was no great thing but what has stayed with the fed and then became formalized many years later because actually following this discussion at the FED it was decided not to say If the Fed were to choose a low inflation as their target as their definition of stable prices because that’s something that probably should go to Congress and be subjected to to the opinion of the American people through their elected representatives the FED people at the time thought it was dangerous for the FED to say that they

were going to deliberately decrease the purchasing power of our nation’s money unit because they felt in some ways that made their job easier so um I I think zero inflation is the appropriate Target and um I would love the day that there’s no difference between the real rate of interest and the nominal rate of interest because the real rate of interest reflects real supply and demand for Capital instead of the FED manipulating the interest rate in an attempt to to respond to inflation and employment goals let’s take this thought

exercise one step further what if hypothetically if we were to have a command economy whereby the Federal Reserve instead of targeting an inflation rate targets a real GDP rate so let’s say they want a real GDP growth rate of I don’t know 3% every year and so if nominal GDP is 5% that would imply that you need inflation rate of 2% so yeah I would not be a fan of that I okay I kind of cut my my teeth where I first had a a postdoctoral um Fellowship out of Stanford at boou Institution sure when I was studying the um money and

banking system uh and and Current financial conditions of the Soviet Union and that essentially the system you just described um reminds me of what they had through G bank which was um having the banking system which was part of the government central government dictating uh interest rates handling all the loans channeling um Savings of workers up to the government to cover the debt that the government had to issue to cover the gap between revenues and expenditures from the socialist economy and so for me that

would be a nightmare to have the FED targeting and attempting to manage uh GDP growth and to to go to any kind of system where they are distorting the price of capital to achieve um economic OB objectives I would rather trust the free market economy to make those determinations so that begs the question why have a central Authority or Central Bank at all let’s just take the Other Extreme we had one extreme in this prior example of of a command economy governed by a central bank why not have no Central Bank whatsoever and no Authority

targeting inflation or growth or employment and just leave everything to the free markets I think that is the question of the moment and I think were fast approaching some kind of resolution uh it it’s a whirlwind and in this past week we’ve had um Elon Musk endorsing the idea that chairman Powell at the Federal Reserve should be replaced by Ron Paul Ron Paul of course the former US um representative from Texas famously wrote a book in 200 n called n the fed and now Elon Musk who is pushing the idea of auditing a number

of government agencies across the board has supported the idea of Starting by putting Ron Paul in a position to audit the FED not in the way that I discussed earlier but operationally to bring up its its practices of paying Banks effectively not to make loans and of keeping 7 trillion in its own portfolio and to put some kind of limits on how much debt the FED can buy how how much money it can print and to um even look at its currency swap Arrangements which it relies on in in instances of of financial Market

meltdowns there there I think is a a mood now to question the FED whether it could go that far um I’m not sure but you have people like Senator Mike Lee saying that the FED has gone beyond its its constitutionally intended Powers basically Congress farmed out its own responsibility from Article 1 Section 8 to regulate the money to this government agency whose record on delivering stable money has not been very impressive you’ve been an advocate of a return to the gold standard could a return to the

gold standard like Breton Woods be or act as such a constraint like you referenced I would not go back to any prior system but I would take the lessons from both the classical International gold standard from 1880 to um 1914 and also the 30-year era of the Bretton Woods international monetary system which was a gold exchange standard something different than a gold standard and that for from 1944 to 1973 delivered decreasing inequality of wealth um fantastic productivity uh broader Workforce participation and uh in general um

delivered an economic boom not just for the United States but around the world it was very powerful and that was based on fixed exchange rates anchored by a dollar convertible into gold at a fixed rate I think that that delivered a level international monetary playing field that is really the only appropriate Foundation consistent with the principles of free trade I think um president Trump has been brilliant in pinpointing currency manipulation as an unfair trade practice and has allowed our trade Rivals to take

advantage um of our own productive capabilities our own manufacturers and workers and subjected them to very unfair competition so that would be the lesson of of the Breton Woods era but if you go back to that earlier classical International go standard now you’re talking about the era of President McKinley who we have heard again president Trump talk about with with great respect and he brought in the uh Gold Standard Act of 1901 and he really based his approach to to economic growth as um as needing a

sound foundation and so he was he liked the gold standard for that reason and during that era uh the United States was incredibly successful in delivering new innovation and raising the level of prosperity and living standard standards um across Society in the United States and I think that reinstituting in some way a new focus on the importance of sound money and this would coincide with our renewed Vigor to restore sound finances to the federal government is is part of what we’re calling a golden era

um a golden era corresponds to um the kind of gold standard principle that that a free market economy um is able to flourish based upon because you get accurate price signals it it it supports individual liberty and people saying I can decide what to buy what to sell whether to consume or invest whether to save based on accurate price signals it’s the distorting of price signals through monetary policy that I think has caused um the Great interruptions in our economic well-being and when you say it raises the very

question of why do we need a Fed that question was posed to Alan Greenspan who who was one of the longest serving Federal Reserve chairman um 18 years about a year after he left it was in 2007 he left in January 2006 he was asked that question by David asman on on Fox Business News well why do we we need a central bank and instead of belittling the question or scoffing he said you ask a very interesting question and he explained that if you’re going to have Fiat money which means money is is money

because the government says so it means I declare so be it from the Latin you have to have some means of controlling the quantity and further quoting Greenspan he said unless you have a currency board or a gold standard we have seen throughout history that unrestricted money supply leads to deleterious inflation and negative Economic Consequences and he ended up saying quoting him there are many of us myself included who believe we did very well on the goal standard so I think that well that to me

coming from a practitioner not just not a theorist but someone who was in the arena should have received much more attention and I can even tell you that when I was a nominee um and I was being um criticized for bringing up the the advantages that from a goal standard that we should try to to bring to a future approach to money um Alan Greenspan sent me an email saying if gold is such a worthless metal why does the US government and all other major governments hold so much of it and so now this is becoming a big question

as we look at the Gold we do hold as the world’s largest holder of gold reserves it has come to be worth so much more than we’re carrying it on our books as a monetary asset that I think it opens up new possibilities for recapturing some kind of dollar gold link yeah I want to touch on the gold backed bonds that you talked to me offline about in just a minute but just going back to what you said about Greenspan’s comments it’s very interesting because I know Greenspan was a monetarist and so his

statement that you need some sort of governing board to limit the quantity of money I presume rest on the assumption that the quantity of money dictates inflation and so my question is well there to my understanding there’s no legislation or piece of law that puts a hard constraint on how much money that the FED can print so you know if we have a Fed that is supposedly there to limit the quantity of money but there’s no constraint on how much money they could print what is the point I guess the constraint is

inflation but Powell doesn’t even believe money printing money causes inflation so that constraint doesn’t exist for every fed right so I I what’s your answer to this I might first object um I would not call Alan Greenspan a monist my officite at at Hoover was down the hall and and up a few steps from Milton fredman’s and um Milton fredman it has also stated that a goal standard is wholly consistent with International free trade but you can have at most either no Central Bank or one Central Bank what we have and now I’m talking

about the international aspects we have competing central banks and most of our trade partners are in the current process of devaluing their currencies against ours and and so this I consider a highly unfair trade practice but um when you talk about our domestic economic approach and controlling the money supply I don’t think you can separate that from International but but let’s try no Congress has put zero constraints on the amount of money that the Federal Reserve can can print and what the FED did it

monetized the debt particularly after covid um over four trillion in debt that the FED purchased but then to prevent that from causing inflation because the fed’s mechanism normally it when it buys treasury debt from Banks and broker dealers it does it by just with a key stroke it just shows that their cash account at the FED went up by the amount of the value of the security that the the FED bought from them so if a bank says we’ll sell you to the FED a million doll fiveyear treasury security the FED

says done and they just mark up that cash account and say you now have an extra million in there um what happened when they bought these trillions in US treasury debt the reserves the cash reserves of the banking system as a whole went up over thousand times from what they had been going back to the 2008 crisis and then they just had hardly Whitted that down that amount of reserves before Co it just takes forever and so meantime the FED had received permission to pay interest on reserves as an emergency measure

taken in October 2008 and they paid almost nothing for many many years um which was another reason Bernan at the time said this will not be a problem people might think it’s funny for the FED to be paying Banks not to make loans paying them to keep their money in cash on the other hand we’re only going to pay maybe a quarter percent but that’s when the FED funds the main interest rate was zero or near zero well once two years ago we got up to this maximum rate as the Fed ratcheted Up interest rates at record

levels to combat what what got up to over 9% inflation in July of 2021 it was costing the Federal Reserve so much money to pay those banks that as I say they started running at an operating loss just since March of 2022 so in less than the past three years the Federal Reserve has paid commercial Banks over a half trillion in interest so the fact that it bought bought the debt and and seemed to monetize it didn’t really cause the inflation as much as the fiscal spending did because what the FED did is Corral

that money the FED would create has created the trillions they currently still over 3.2 trillion in cash reserves sitting at the FED dormant doing nothing but because it pays Banks 4.4% that’s just an easy profit for the banks they don’t have to do anything they don’t have to have a loan officer they don’t have the guarantee against it it’s government guaranteed they’re getting 4.4% to leave money sitting there dormant in their cash account so the FED has corraled that money as base money so that it doesn’t get into the

economy so that it doesn’t cause inflation and to me the the best thing the FED could do is stop that practice it as I say it was an emergency right to pay interest on res reserves it should quit paying interest on reserves because then where would that money go I think the bulk of it would go into other US Treasury Securities we would not have this weird gap between the fed’s target interest rate and what’s happening with the tenear treasury because to a bank what’s the difference between getting

4.4% on cash from the fed that’s government guaranteed versus having a treasury a five or 10 year treasury that’s also paying interest and is government guaranteed um if you didn’t have that deal from the FED I think you would have two choices put it into other government securities or actually make loans to the private sector and both of those Alternatives would be a much healthier thing for our financial intermediaries to be doing than to be engaging with the FED playing footsy with the FED over the

the rate that they pay on reserve balances okay so you talked about the idea of a gold-backed bond I think is an idea you’re working on right now um and so two-part question what is it what does it do and um how would this solve any of the current problems that you’ve talked about so far well this is extremely current just last week um treasury secretary Scott bessent during an oval office interview when he was flanking president Trump um president Trump was talking about a sovereign wealth fund and asked

him to expound upon that and he said over the next 12 months we’re going to do some amazing things we’re going to monetize the asset side of the US balance sheet if you look at the US balance sheet basically we have liquid monetary assets and that’s cash and gold our gold reserves and you have illiquid Assets in the form of of land and buildings if you’re going to monetize those assets the easiest one in the world is to revalue those gold Holdings the US is the largest holder of gold reserves in the world which is part of

our Legacy of having served as the anchor for that Breton Woods international monetary system I mentioned earlier that system officially ended in February of 1973 so the 261 million ounces that the United States government is holding were are carried on the books of Treasury at the statutory rate or price of $422 per troy ounce because under Britton Woods the dollar it took $35 to to be converted into an ounce of gold and as that system started to fail because the US was inflating um we tried to chase it higher

we thought of resetting the rate at Paul vuler was involved in this resetting it at $38 an ounce or $41 an ounce finally we got to $422 an ounce and could not catch up the US dollar had inflated to where the market price of gold was out running any convertibility rate that we could attempt to put into stone so we carry that money we carry that Reserve asset at a total value of 11 billion if you mark to Market those 261 million ounces it say 2900 per ounce of gold you are approaching 800 billion let’s say 756

billion at today’s price and has been higher than that in the last day or so a windfall profit potentially worth three4 of a trillion dollars is getting the attention not just of the treasury secretary we’re seeing a bid to have a make Bitcoin a strategic Reserve asset that plan is also based on on taking a piece of that revaluation and buying Bitcoin with it for the US government I don’t think Bitcoin needs a help I love alternative currencies I I don’t want to do anything to inhibit the crypto

community and the whole psyche and and culture of of decentralized Finance but gold is legally part of our foreign reserves other currencies and and gold so I would rather use the gold to have it serve as collateral for a gold back Bond longterm and I’m specifically saying a 50-year gold back Bond because it’s been just over 50 years since there’s been any link between the US dollar and gold if the US Treasury as an initiative ordered by President Trump said we are going to formally have a new treasury security

we’ll call them treasury trust bonds that give the purchaser the bond holder the right to redeem at maturity the principal amount in either the face amount denominated in dollars or as a portion of gold I think that would get the world’s attention it could potentially end up being a security very much like a tips Bond a treasury inflation protected security which the Federal Reserve looks at to get a sense of aggregate expectations about inflation but based on the Consumer Price Index that because

a tips Bond reimburses the bond holder for the impact of inflation defined by an increase in the CPI a holder of a treasury trust bond would be able to be reimbursed for loss of purchasing power in terms of gold which could be a surrogate for the real economy and for Commodities it would just be an option for investors in US treasury debt who might say I want to retain purchasing power I’ll make a loan to the US government but at the end I I see the price of gold as a surrogate for purchasing power and so I would like the

option at maturity to be paid out in a pre-specified amount of gold rather than the face amount and so you now put the burden on the US government on both monetary and fiscal policy to do better than Market expectations with regard to preserving the purchasing power of the dollar and I think truly aiming for stable prices as a mandate of the fed and and in conjunction with a balanced budget sorry it just just to note on that you would you it would be possible to redeem for gold at the spot price at maturity or no

it would be pre-ordained okay what we could say is let’s do this example and and I’m gonna say 50 years and for for a reason but 50 a 50-year bond was considered under treasure mey during the previous Trump administration because I was involved at in the transition as lead adviser for international Affairs at Treasury and 50 years was considered but they didn’t go that route they still go with 30 as a maximum but other countries France has a 50-year bond it’s not that unusual you could do it but an

easy way to think of it is let’s say gold is 2900 today would you rather have um$ 28 $2,900 today or an ounce of gold your answer might be I’m indifferent because that’s the price all right 50 years from now would you rather have $2,900 or an ounce of gold and and you would say I’m sure that an ounce of gold will be worth more because even even the FED if it if it achieves its Target we’re talking about debasing say a $1 becomes um 37 in 50 years at 2% inflation so you’d clearly rather have that if you put

$2900 as the face amount the principal amount everyone’s going to want to have the gold in 50 years is there some amount that you could put that would be the equivalent of someone holding a traditional treasury security but also a call option on on on gold the future price of gold and if the US put its gold as specific collateral to ensure that every Bond holder could be paid off then to me what you’re looking at is is people focusing on the difference between a Fiat money treasury security and a treasury security where

the dollar is literally as good as gold which is what we had for so many years in our country and during its most successful times and so I believe a goldbeck bond the pricing the maturity these are open options but I think we could start by securing the windfall profit and revaluing these which would be an 800 billion shot to either The Sovereign wealth fund or or to treasury revenues or however you want to hold that windfall gain but you would be preventing the gold from being sold which I think would be disastrous anyone

who would want to just sell the gold and use the money now and until you get the budget in order that would be sending it down a rat hole in my view but if you used the collateral of these revalued gold reserves to back a formal treasuring offering it would not be the largest um segment of treasury debt out there clearly but it wouldn’t be the smallest if you used all of the gold to back a new offering you could decide whether you pay interest in dollars or gold leading up to that you could decide if

it is a zero coupon Bond that’s what I recommend it could be it could be initially made available as a um uh type E Savings Bond you could limit it only to us residents with social security numbers and um and it’s a kind of thing maybe people would buy for their grandchildren or you could then you could issue stable coins or authorize stable coins that hold as reserves these particular treasury Securities or that hold some percentage among their portfolio of Treasury Securities the ones that are backed in

Gold you could start to magnify the impact Beyond just the value of our gold reserves and I think this would actually prompt other countries including China and including European Union countries because they own large gold reserves to issue the same type of bond now you’re going Way Beyond just doing a novelty issuance symbolic and Powerful as a marker for Future Sound finance and sound monetary approaches but you could be you could be setting up the beginning of a new Breton Woods type system because if if a number

of countries the primary trading partners in the world participating in a system where they all issued Sovereign government bonds that could be redeemed in gold at a future date then then now you’re setting up a foundation where all currencies are convertible into the same neutral reference asset I.E gold that is very much capturing the major advantage of the prior International gold standard everyone had their own currency but it had to be defined in terms of a specific weight of gold so I think you would have

the beginnings of of stable exchange rates and the closer you got to the the universal or comparable Redemption dates for maybe an array of sovereign debt issuances by by governments you could use this even as a way of setting up a trading partnership only among countries willing to abide by some kind of a gold redeemable Sovereign obligation and or those same countries if they weren’t willing to do that you could say well then you understand that any tariff we would direct it you has to reflect the the devaluation of your

currency in terms of gold relative to the devaluation of our currency in terms of gold so that it doesn’t become um an exchange rate Battle of of deliberate currency manipulation you can call it no fault but you can reflect the fact that as much as our own dollar has devalued against gold in the last 10 years the currencies of our top top five trading partners um Mexico Canada European Union China and Japan have devalued more in terms of gold and if you just wanted to apply a tariff saying we’re just

leveling up the monetary playing field and the fact that your currency distorts the competitiveness of our own manufacturers and we have to account for that to make it a level international monetary playing field they should have to accept that so I I think that a goldbeck bond may sound like like a novelty but in fact the potential to become very useful instrument both to the fed and for our trading posture and with regard specifically to tariffs and and what is the um rationality for terrorists reflecting the different

differential currency impact I think it could be extremely powerful very interesting let’s follow up on this development um as you and your colleagues work on it some more but I appreciate your insights Dr Shelton work can to learn more uh about you you referenced you have a book by the way called uh as good as gold um where can we find that book for example well it’s it’s yes it’s um good is gold how to unleash the power of sound Mon it’s published by independent Institute um it’s been it’s currently on three of

Amazon’s best lists for different categories monetary policy and um Economic Development policy um so it’s it’s easy to find on it’s selling well I might say that any royalties uh will go to Independent Institute um and um that book gives the details for exactly this proposal excellent so we’ll put the links down below and um and the independent Institute thank you for your time Dr Shelton we see speak again soon thanks for returning to the show been a pleasure thanks David byebye thank you for watching don’t forget to like.