Shelton, The Fed, And The Realization Of A Liquidity Trap

Shelton, The Fed, And The Realization Of A Liquidity Trap

Summary Shelton is full of inconsistent and incongruous views on monetary policy. Shelton’s nomination by Trump is not surprising as he has been lobbying the Fed to cut rates in the misguided belief it will support economic growth. There is absolutely no evidence that the Fed’s "zero interest rate policy" spurred a dramatic increase in lending over the last decade. This idea was discussed in more depth with members of my private investing community, Real Investment Advice PRO . Last week, President Trump nominated Judy Shelton to a board seat on the Federal Reserve. Shelton has been garnering a lot of "buzz" because of her outspoken and alternative stances, including "zero interest rates" and a "gold standard" for the U.S. dollar. But, Shelton is full of inconsistent and incongruous views on monetary policy. For instance, in 2017 she stated: "When governments manipulate exchange rates (by changing interest rates) to affect currency markets, they undermine the honest efforts of countries that wish to compete fairly in the global marketplace. Supply and demand are distorted by artificial prices conveyed through contrived exchange rates. Businesses fail as legitimately earned profits become currency losses," In short, when the Fed, or any central bank/government, lowers or raises interest rates it directly affects the currency exchange rates between countries and, ultimately, trade. However, when recently asked on her views about whether the Fed should cut rates to boost economic growth, she said: "The answer is yes." So, the U.S. should lower rates as long as […]

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