Gold Makes a Comeback—And Judy Shelton Joins the Fray

Gold is experiencing a notable resurgence, reflecting a cycle of sentiment that has characterized economic uncertainty since the abandonment of the Bretton Woods gold-exchange standard in 1971. Its price recently surged past $2500 an ounce, marking it as one of the top-performing assets in 2024, driven by ongoing economic instability and geopolitical tensions. Reports from the World Gold Council reveal that central banks have been particularly aggressive in acquiring gold, with purchases reaching 1,037 tons in 2023—making it the second-highest annual acquisition ever recorded. This trend underscores a concerted shift as more central banks indicate intentions to bolster their gold reserves—29% of those surveyed plan to increase their holdings in the upcoming year, the highest level since 2018.

This growing importance of gold in financial systems has sparked renewed discussions surrounding sound money, cryptocurrencies, and the viability of a new gold standard. Judy Shelton, a former economic advisor during the Trump administration and advocate for sound money, is gaining attention with her book “Good as Gold: How to Unleash the Power of Sound Money.” Shelton is optimistic about gold’s future role in monetary policy, pointing to the substantial gold reserves held by the U.S.—261.5 million ounces—as a solid foundation for integrating gold back into the country’s monetary system. Her perspective resonates amid increasing financial instability, where gold is seen as a safer asset to invest in against the backdrop of rising inflation and concerns surrounding U.S. fiscal health.

In her discussions, Shelton proposes a novel approach to gold convertibility, contending that direct access to gold for Americans has fallen by the wayside since the Classical Gold Standard era. Her solution involves introducing a new financial instrument: Treasury Trust Bonds, zero-coupon securities that provide bondholders with a choice to redeem their bonds either for their face value in dollars or for a predetermined amount in gold at maturity. This would effectively represent a tangible connection between U.S. currency and gold, Reestablishing a measure of fiscal responsibility and individual rights with a promise of sound fiscal management.

Shelton’s proposal, while modest compared to historical gold-standard suggestions, aims to create a solid foundation for potential future monetary reforms. She anticipates that successfully implementing these Treasury Trust Bonds could lead to broader acceptance and expansion of sound monetary policies globally. Central to Shelton’s argument is the necessity of curtailing the Federal Reserve’s powers to prevent discretionary monetary policies that can lead to instability, a criticism she levels at both the Bretton Woods system and modern central banking practices. She emphasizes that accountability lies with shared market interactions rather than centralized authorities, challenging the efficacy of government-driven economic management.

Her critique extends to the inherent flaws within modern monetary systems, drawing parallels between current practices and historical failures of centralized economic planning. The lessons drawn from the Soviet Union and contemporary central banks illustrate the dangers of replacing market-driven outcomes with bureaucratic oversight. Shelton believes that, ideally, a central bank should endeavor to emulate the natural economic activities that would occur under a gold standard, fostering a system that highlights individual rights and free-market principles. By advocating for a return to a form of convertibility, she foregrounds the argument that individuals should have the power to influence the money supply rather than leave it solely in governmental control.

In conclusion, Shelton’s advocacy for Treasury Trust Bonds and broader reforms in U.S. monetary policy represents a pivotal moment for the discourse surrounding sound money. Her book makes a compelling case for reinstating gold as a cornerstone of American fiscal policy. She strives to inspire a new wave of enthusiasm for monetary freedom, hoping her vision of a future in which payments in dollars are seen as “literally as good as gold” resonates in national conversations. The potential historic impact of such changes could redefine both domestic and global monetary systems, reinvigorating discussions about the role of gold in modern finance and the overarching principles of economic freedom.