She has Trump’s support but Fed nominee’s track record raises eyebrows

Judy Shelton has spent her career pushing for free markets and criticising the far-reaching power of the Federal Reserve — an institution she may join as a governor and could one day lead, given the right chain of events.

Yet Shelton’s track record is packed with incongruities, ones that have raised eyebrows among Senate Republicans, imperiling her nomination to take one of seven seats on the Fed’s board in Washington. Republican senator John Thune told reporters last week that while Shelton’s confirmation remains a priority for the White House, she does not yet have the necessary votes.

Judy Shelton has been a longtime critic of the Federal Reserve.
Judy Shelton has been a longtime critic of the Federal Reserve.Credit:Bloomberg

Shelton has made contradictory statements about issues of importance to a future central banker: She once pushed for higher interest rates and a return to a gold standard before backing away from those positions as she sought to secure President Donald Trump’s nomination to the Fed and congressional support.

Those inconsistencies extend to her private life, where she has failed to apply her public view that markets and businesses should operate unencumbered and free of government interference to her own backyard.


Over the past several years, Shelton and her husband have gone to court to block mining projects near their home — a manor on a former plantation outside Fredericksburg, Virginia, that once served as Confederate Gen. Stonewall Jackson’s winter camp. While the would-be miners argued that their operations would be good for the local economy, the Sheltons and their neighbours seized on zoning rules to try to block them, arguing they would provide too little benefit to outweigh added truck traffic, lost property value, environmental damage and disruptions to the local peace.

“She espouses this free enterprise notion,” said Emmett C. Snead, who found himself in the Sheltons’ cross hairs when he tried to start a sand mine near their home. “She says one thing in the world, and does a different thing here.”

Shelton and her husband have also tried repeatedly to squash other proposed mines that they viewed as a threat to their bucolic community, which borders the Rappahannock River. The Sheltons filed a complaint against a company owned by another neighbour, Larry Silver, over a project that they argued would detract from their property value and undermine their efforts at historic preservation. The complaint noted that Silver had also installed a “spiteful” hog farm on his property, which is adjacent to the road that leads to the manor.

Shelton did not respond to emailed requests for comment for this article.

Local land-use disputes have little bearing on Fed policy, but the potential for a disconnect between what Shelton says and what she actually believes has become an issue in her nomination.

She is a longtime critic of the central bank who has questioned its basic usefulness — asking in a 2009 opinion column, “Why do we need a central bank?”— but she courted a seat at its policy-setting table. She spent years criticising low rates and easy money, but had a change of heart once Trump was elected. And though she has been a career-long champion for the gold standard, she downplayed that view during her bid to secure confirmation.

Shelton has the support of President Trump.
Shelton has the support of President Trump.Credit:AP

Shelton’s enigmatic background has fuelled concerns about which version of the nominee would show up to the Fed, if she should win confirmation. Two Republican senators — Susan Collins of Maine and Mitt Romney of Utah — oppose Shelton’s nomination. Republican senator Lamar Alexander has indicated that he would like to wait until after Congress passes a new coronavirus spending package to vote on her nomination.

“My major concern is that I don’t think that she will be independent enough,” Collins said last week.

If she loses four of the Senate’s 53 Republicans without gaining support from Democrats, she cannot win confirmation.

“We want to help her get through,” Thune told reporters last week, signalling that Shelton did not yet have the backing of enough senators. “When it’s right, we’ll move.”

Shelton has overcome Republican opposition in the past, hurdling early objections from the Senate Banking Committee to advance to the Senate floor on a party line committee vote. And Trump still “strongly backs” Shelton for the board, White House economic adviser Larry Kudlow told The New York Times last week.

Even some of her one-time legal targets have come around to support her. Silver said in an email that his problems with the Sheltons had been resolved. “Judy Shelton is a great choice picked by President Trump,” he added.

Shelton, 66, earned a doctorate in business at the University of Utah and in 1985 joined the Hoover Institution at Stanford University, where she focused on the nature of money and wrote about the coming crash of the Soviet Union (which she advised to pursue a gold-backed rouble).

She began to push for a return to a system in which global currencies could be converted into gold, or some other rules-based monetary system — changes that would have upended the Fed’s modern function, which is to both maximise employment and keep inflation steady. It does so by making money cheaper or more expensive to borrow to guide demand, unfettered by the constraint of gold convertibility.

Her theories were offbeat, even then. Her colleague at Hoover, the famous free market economist Milton Friedman, responded to a 1994 Wall Street Journal column Shelton had written on stable exchange rates by saying that “it would be hard to pack more error into so few words.”

Republican senator John Thune told reporters last week that while Shelton's confirmation remains a priority for the White House, she does not yet have the necessary votes.
Republican senator John Thune told reporters last week that while Shelton’s confirmation remains a priority for the White House, she does not yet have the necessary votes.Credit:AP

But her ideas found purchase among a crowd of right-leaning policy thinkers. She spent 1995 and 1996 as a staff economist for the National Commission on Economic Growth and Tax Reform, chaired by Republican politician Jack Kemp, plunging headlong into the supply-side economic orbit — a group that believed growth could be created by lowering taxes and reducing red tape. The Kemp circle was populated by people like Kudlow and Stephen Moore, once a potential nominee for the Fed board himself and now a fan of Shelton’s.

“She believes in the idea that we need a monetary system that is pro-growth,” Moore said in an interview in the summer. “There’s this idea in the media that the Fed is like the pope — that they’re infallible.”

Kudlow supported Shelton’s nomination to the Fed and pushed to get her through the Senate Banking Committee, where Republicans initially expressed concern about her changing views.

That included a sharp reversal on low interest rates. Shelton had written in 2013 that “​loose monetary policy is bad for you and for your economic prospects.”

In 2016, she used an editorial to praise Trump, who at that time was also critical of low interest rates, writing that the presidential candidate believes that “the low-interest-rate regime engineered by America’s central bank has not stimulated real growth but has rather created a ‘false economy’ that could lead to the next global financial meltdown.” He understood that low rates were unfair because they helped wealthy investors at the expense of savers with interest-bearing accounts, she said.

But when Trump won election, he began pushing for lower interest rates, and by mid-2019, so was Shelton. She told CNBC that July that the Fed should not “pull the rug out from under” Americans who were invested in the stock market.

She also reversed course on pushing for a currency anchor. In early 2009, she led a column with the sentence, “Let’s go back to the gold standard.”

When she testified before lawmakers in February 2020, she seemed to walk that back. Asked about the gold standard, she said, “I would not advocate going back to a prior historical monetary arrangement,” adding that “money only moves forward.”

As recently as 2018, Shelton had made a case that Trump had hinted at his support for gold, that his administration could undertake global monetary reform, and that doing so would restore “fiscal discipline”— not overspending out of government coffers.

“We make America great again by making America’s money great again,” she wrote.

Practically every mainstream economist opposes tying the value of the US dollar to an anchor like gold, and many say it would be economically damaging.

“There would be real costs involved,” said David Beckworth, a senior research fellow at the Mercatus Center at George Mason University, adding that a return to a gold standard would be “destabilizing.”

The New York Times

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