Paul Mueller’s review of Judy Shelton’s book “Good as Gold: How to Unleash the Power of Sound Money” highlights the author’s lifelong advocacy for sound money and her compelling argument for reinstating the gold standard. Shelton proposes that the U.S. dollar could be effectively tied to gold through the issuance of federal treasury bonds that contain gold-redeemability clauses. The book delves into contemporary debates regarding monetary policy, including the level of discretion afforded to central bankers, the benefits of fixed versus floating exchange rates, and the implications of currency manipulation by governments seeking export advantages. Ultimately, Shelton argues that sound money serves as a foundation for creating a stable and prosperous economic environment.
The crux of Shelton’s critique lies in the unpredictable nature of the current monetary system, particularly the Federal Reserve’s discretionary policies. She asserts that the seemingly countercyclical measures taken by the Fed often result in confusion and inconsistency due to the long and variable lags associated with monetary policy. Her assertion is backed by historical observations from economists like Milton Friedman, who accused policymakers of responding inadequately to changing economic conditions. Consequently, the rapid shifts in interest rates enacted by the Fed—from nearly zero to over 5% in a short span—have destabilized various sectors, including banking and commercial real estate, leading to significant economic turmoil and eroding public confidence in the dollar.
Shelton further identifies the pernicious consequences of a depreciating dollar—growing inequality in the distribution of wealth, increased asset prices that benefit investors while harming savers, and convoluted pricing mechanisms. The effects disproportionately harm those on fixed incomes and compound the challenges faced by small business owners. By revealing the contradictions inherent in current monetary policies, she emphasizes the need for more predictable and stable monetary arrangements that would benefit the broader economy. Moreover, she articulates how financial institutions and businesses are compelled to spend resources on hedging against currency fluctuations, which she refers to as “financialization,” diverting valuable resources from productive investment.
The discussion of economic theories in Shelton’s book extends to her analysis of contrasting views on monetary policy, specifically between Milton Friedman and Robert Mundell. While both economists champion free markets, their ideologies diverge on the best approach to currency stability. Shelton’s advocacy for a gold standard aligns more with Mundell’s vision of reducing currency manipulation—the variance in currency value as countries seek to gain competitive advantages through devaluation. Although Shelton’s plan outlines a framework for mitigating currency manipulation, skeptics argue that it may not adequately deter countries from pursuing depreciative policies even under a gold standard regime.
The logistics of transitioning to a gold-standard monetary system raise additional questions. While it might appear archaic, Shelton’s proposal suggests a feasible path for reintroducing a gold redeemable currency through the modern financial framework. This includes incorporating gold clauses into government bonds, which could effectively validate the dollar versus gold and mitigate depreciation concerns. By presenting currency as a standardized measure rather than a fluctuating policy tool, Shelton’s work calls attention to the historical and legal imperatives that reinforce the integrity of currency as a public good.
In conclusion, Shelton’s advocacy for sound money, as outlined in “Good as Gold,” presents an invigorating challenge to prevailing monetary frameworks. By promoting policies that can restore stability and reduce the discretionary power of financial entities, her work encourages a transformative view on money that aligns with principles of economic freedom and prosperity. Despite the potential resistance from established financial interests, Shelton’s proposals serve as a foundation for discourse on restoring confidence in the monetary system through sound principles that prioritize long-term growth and stability. Thus, “Good as Gold” not only critiques the current state of monetary policy but also proposes a vision for future reform that remains grounded in the tenets of sound economic management.