(Original caption) New York, New York: The gold bars are weighed on a giant scale on the golden dome of the Federal Reserve Bank.
Bettmann file
There is a weapon Trump’s administration will have to release to launch a huge, very necessary revision of the Federal Reserve. The Ministry of Finance should issue government bonds linked to gold. These titles will provide a simple, daily measurement as to whether Washington undermines the integrity of the dollar or maintains its value.
Economist Judy Shelton was noted in her sperm book Good as gold: How to release the power of healthy moneyprovides a model for how this would work. Washington would sell a bond of zero housing with maturity, let’s say, five years. The deeply positive kiss: during maturity, the investor would make a choice – he will take the main back to dollars or gold. For example, you buy a five -year gold bond for a million dollars. At the end, the bond would allow you to get cash or a certain amount of gold, in this case, about 280 ounces.
If Washington and Federal Reserve abuse, as they have in the recent past, you can collect $ 1.5 million worth gold. Washington will leave aside a certain amount of 261 million ounces of gold to meet its potential obligations. The beauty is that every day people could see if Washington confuses with the value of the dollar.
A weak dollar would mean that Uncle Sam would lose gold. Instinctively, most people would not want this, knowing that this is projecting problems. The price of these gold bonds would be a large barometer of Washington’s financial health.
Gold maintains its inherent value better than anything else on earth – and has been for thousands of years. It is in constant value what the northern star is in navigation. It’s an accessory. When the price of gold varies, it is a reflection of changes in the value of the dollar, not in the yellow metal.
These days, investors hunger for inflation protection. That is why they have bought about $ 2.6 trillion in titles protected by Treasury inflation, advice, although the nominal interest rate is low compared to regular Treasury bonds.
Golden ties will also become a weapon against the very devastating philosophy that guides the federal bank’s policy: the belief that prosperity causes inflation. Fed is afraid that a live economy will send higher prices. It does not distinguish between the costs rising from natural disasters, pandemic locking or government policy, such as taxes and sales regulations and classic inflation that comes when you reduce the value of the dollar.
Judy Shelton rightly gives the point that we need to exclude the Central Bank’s handling the cost of capital to stimulate or limit economic activity. This socialist thought must attack.
The money measures appreciate how a watch measures time, the ruler measures the length and the scale measures the weight. We all know that markets work better with steady weights and measures.
Fed should only focus on maintaining the value of the dollar. Should not try to handle economic activity. Should not handle interest rates. It is an absurdity that a three -month treasury will yield 4.3%. A market interest rate would probably be half that.
Gold bonds would help to highlight how the Fed’s true mission has been made. It would be the beachhead for long time reform.
