Let's say you are deciding between two models of Federal Reserve candidates. One has no fixed principles and embraces whatever is most politically expedient; the other has a blind commitment to a dangerously wrong set of beliefs.
To borrow from "Hamilton": I know it's lose-lose, but if you had to choose?
Or maybe you don't. Because with Judy Shelton, you can get both.
Last week, President Trump announced plans to fill two vacant Fed slots with Shelton, now U.S. executive director at the European Bank for Reconstruction and Development, and Christopher Waller, the research director at the St. Louis Federal Reserve Bank. Waller has kept a low profile but looks like a serious researcher and reasonable candidate.
The same cannot be said of Shelton — who appears to have deftly tricked the president into thinking she supports all his bad ideas, when she actually supports different, possibly even worse, bad ideas.
Shelton, a denizen of the Republican gold-bug circuit, in some ways resembles Trump's two recent failed Fed picks, Stephen Moore and Herman Cain. Like them, she decried monetary and fiscal stimulus even while we were on the brink of depression (when a Democrat happened to be president) but she supports ultralow rates and shrugs off deep deficits now, when the economy is much stronger (and — can it be coincidence? — a Republican occupies the White House).
Back during the Obama years, easy money and profligate fiscal policy were about to stoke "ruinous inflation" and debase the dollar, Shelton argued. Zero-percent interest rates were equivalent to stealing from savers. She argued that the Fed should stop trying to make its (supposedly) favored politicians look good or inflate financial markets.
Today, she has been transformed. Or she wants her audience of one to believe so, anyway.
She believes interest rates should be cut to zero. The Fed should support the president's agenda. And the central bank should help prop up markets, after all.
People can evolve. What's striking about Shelton's evolutions, however, is that they concur exactly with what the president wants to hear.
These about-faces call into question whether she would safeguard the Fed's political independence, a feature necessary for it to function. Trump, after, all has made clear he's looking for a puppet, having been disappointed that the four sitting board members he previously chose haven't done his bidding.
Besides the flip-flops, Shelton has demonstrated her personal loyalty with effusive praise of the president. She has also pointedly mentioned, multiple times, that Trump's Mar-a-Lago Club would be a lovely place for a major international monetary conference, a Bretton Woods for the 21st century.
This brings me to what her actual monetary policy views are. And they’re doozies.
There is one doctrine Shelton has consistently promoted, for decades, including in recent public comments. It's sometimes difficult for laypeople (probably including the president) to decipher, unless you understand the "sound money" or "dependable dollar" code of the crank right-wing fringe.
Her radical vision involves replacing the Fed's mandate of stable prices and maximum employment with a gold standard. The gold standard is roundly rejected by economists and was abandoned ages ago, worldwide, for good reason. Gold prices are volatile. A gold peg also crimps liquidity in times of crisis (as it did during the Great Depression). She also wants the rest of the world to adopt some version of the same thing, resulting in either fixed exchange rates or even a single global common currency. That's where Bretton-Woods-at-Mar-a-Lago comes in.
There's a lot to say about why such a system would create more severe business cycles and more international financial contagion. For now, it's worth pointing out that if Trump actually understood what Shelton is promoting, he probably never would have tapped her for the Fed — because it contradicts so much of what he stands for. Such a system would mean ceding U.S. sovereignty over its currency, as well as tighter monetary policy and (at least theoretically) tighter fiscal policy, too.
"She's riding two horses at the same time," says American Enterprise Institute fellow Desmond Lachman.
Shelton has tried to reconcile her grand, globalist, un-Trumpian vision with Trumpian policy goals with some skillful sleights of hand. In a recent Washington Post op-ed, for instance, she complained that other countries are cutting rates to manipulate their currency (what Trump wants to hear) but proposed as a solution a new "dependable dollar" (an unsubtle wink to her fellow gold bugs).
But if confirmed to the Fed, she might eventually have to choose a lane: lackey or crank.
Catherine Rampell
Catherine Rampell’s email address is crampell@washpost.com. Follow her on Twitter, @crampell.