Power & Market

On July 2, 2019, President Donald Trump nominated Mrs. Judy Shelton to join the Federal Reserve Board of Governors. She has a distinguished career as an economist and even co-authored a book called Roads to Sound Money, which supports ideas such as sound money and individual liberty. To those who support the free market and monetary/fiscal responsibility, her nomination is nothing short of a Godsend. But as of Tuesday’s vote, the Republican majority Senate still has not confirmed her nomination. Despite this process being highly bureaucratic and requiring many if’s, she actually still has a shot! CNN reports:

The final vote was 47-50.

The 50 votes against Mrs. Shelton include:

Senate Majority Leader Mitch McConnell, who had initially voted for the nominee, switched to vote against her, giving him the procedural right to bring her up for another vote in the near future.

Mitch switched his vote, utilizing a “procedural right,” something most citizens could never cite nor likely even knew existed.

However:

Sen. Chuck Grassley, a Republican from Iowa, announced he would have to quarantine after potential exposure to Covid-19 and miss the vote -- his first missed vote in 27 years. He joins Florida Republican Sen. Rick Scott, who announced Saturday he would be away from the Capitol for the same reason.

“If” the two Republican Senators were in attendance, and “if” Mitch voted for Shelton, then things would look much different; but that did not happen. So where does that leave things?

Should there be another vote, CNN goes on to say, it will likely be scheduled after Thanksgiving. But this complicates things as:

Sen.-elect Mark Kelly, a Democrat who won a GOP seat in the special election in Arizona, is expected to be sworn in, meaning there would likely be one more Democratic "no" vote…

This wouldn’t bode well, as the Wall Street Journal reports that Democrat Mark Kelly would be sworn in on Nov 30, if combined with the three Republicans Mitt Romney, Susan Collins and more recent “dissenter” Lamar Alexander, it would make an already slim “yes” confirmation all the more difficult.

Once the math, voting strategy, and party lines become drawn, a new question arises:

When did the Federal Reserve governor nomination become “partisan politics” in Washington?

Even the Wall Street Journal notes:

Party-line votes for Fed board positions haven’t occurred before, reflecting the institution’s apolitical nature. 

For all that’s been said about this “controversial” pick, Mrs. Shelton would have only one vote on a seven member board. She’d hardly be a threat to stopping the (unofficial goal of) US dollar debasement overnight, nor would she be able to implement a gold standard anytime soon. But what she has already done, even if inadvertently, is illustrate various problems with the way this system of democracy and central banking works. Since her nomination, we’ve seen countless displays of this “system,” which appears to not even help those it claims to serve.

Republican Senator Lamar Alexander displayed this on Monday when he came out against Mrs. Shelton, as CNBC quotes him saying:

I don’t want to turn over management of the money supply to a Congress and a President who can’t balance the federal budget.

Lamar is just one of 100 elected Senators, chosen “by the people” to represent their interests. In this case, they must confirm someone to serve on the board of governors to manage the nation’s central bank, an idea championed by many anti-capitalists, including Karl Marx.

Nonetheless, as the system is currently designed, it requires elected Senators like Alexander to be charged with managing the economic affairs of the entire nation; whether these senators understand economics is besides the point. Luckily, in instances where an elected official doesn’t understand, or wishes to be rid of someone with an idea they disagree, they can employ demagoguery to sway public opinion. As noted above, the Senator can paint a picture that the nation’s money supply would be somehow handed over to the President and Congress. This is misleading because it completely misunderstands the notion of sound money, limited government, and the control of the money supply, all which underline the gold standard.

If Judy Shelton does not get confirmed to the Federal Reserve, we lose an opportunity to expand the knowledge base at the Fed. We’ll have to add that to the list of things gone wrong in 2020, then move on. This leads us to the inevitable, unpleasant question: If not Judy, then what must the next candidate say or do in order to appeal to both sides of the political aisle?

Recently, I told my wife that the 2020 election follies made me think of John Milton. She commented that I may have been the only one in America to make that connection to the second most important author in the English language, after Shakespeare, best known for his poetry. After all, very little of this year’s politics has been poetic (though it could be argued to fit somewhere in Paradise Lost). I was thinking of Milton’s prose.

The primary reason is that well before America was founded, Milton famously argued for freedoms of speech and the press, and against censorship in England. His defense of freedom of conscience and religious toleration later powerfully resonated with America’s founders, as is most evident in the First Amendment to the US Constitution.

In contrast, we have of late been experiencing a widespread attack of censorship, which has not just limited citizens’ freedom of expression, but undermined Americans’ ability to inform themselves before voting for who will represent them. Because it originated with private actors rather than government, even though the intent was to dictate the government chosen, it was not a violation of the First Amendment. But the consequences of multiple powerful actors putting all of their thumbs on the same side of the scales they intended voters to use was, and remains, a serious threat to America. So it is worth remembering John Milton’s words on behalf of freedom of belief and expression, and their connection to our ability to discover truth.

• Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties.
• Truth….Let her and falsehood grapple.
• Who ever knew Truth put to the worse in a free and open encounter?
• Truth…needs no policies or stratagems…to make her victorious. These are the shifts and the defenses that error uses against her power.
• There is no learned man but will confess he hath much profited by reading controversies—his senses awakened, his judgment sharpened, and the truth which he holds firmly established. If then it be profitable for him to read, why should it not at least be tolerable and free for his adversary to write…it follows then, that all controversy being permitted, falsehood will appear more false, and truth the more true; which must needs conduce much to the general confirmation of an implicit truth.
• If it come to prohibiting, there is aught more likely to be prohibited than truth itself.
• No institution which does not continually test its ideals, techniques and measure of accomplishment can claim real vitality.
• When complaints are freely heard, deeply considered, and speedily reformed, then is the utmost bound of civil liberty obtained that wise men look for.
• Knowledge forbidden? Suspicious, reasonless. Why…?
• Truth and understanding are not such wares as to be monopolized.
• When language in common use in any country becomes irregular and depraved, it is followed by their ruin and degradation. For what do terms…which are at once corrupt and misapplied, denote but a people listless, supine, and ripe for servitude?
• How oft [have] nations gone corrupt…by their own devices brought down to servitude.
• Discern…in what things persuasion only is to work.

Not only was Milton an important advocate for freedom to discover truth without artificial constraint, he was an influential defender of other liberties whose defense relies upon that discovery. America’s founding generation echoed him in several ways. In fact, one could say that is best reflected in the Declaration of Independence’s assertion of unalienable rights to “life, liberty and the pursuit of happiness,” which, while more famously connected to the thought of John Locke, can also be collapsed into the word liberty, as Milton used it, as our right to life is part of our liberty and our ability to pursue happiness is the result of liberty.

In contrast, much of what has been proposed by politicians this year has involved widespread invasions of our liberties, disguised by focusing only on those promises to give, without much mention of the corresponding unavoidable promises to take from others to do so. His words sharpen our ability to judge that deviation from the ideas that created America.

• No man…can be so stupid to deny that all men naturally were born free, being the image and resemblance of God himself.
• The whole freedom of man consists either in spiritual or civil liberty.
• [God] created them free and free they must remain.
• Liberty…who loves that, must first be wise and good.
• None can love freedom but good men; the rest love not freedom, but license, which never hath more scope than under tyrants.
• Nations grow corrupt, love bondage more than liberty.
• [Those] with their freedom lost, all virtue lose.
• Liberty of conscience…above all other things ought to be to all men dearest and most precious.
• Liberty hath a sharp and double edge, fit only to be handled by just and virtuous men; to bad and dissolute, it becomes a mischief unwieldy in their own hands: neither is it completely given, but by them who have the happy skill to know what is grievance and unjust to a people, and how to remove it wisely; what good laws are wanting, and how to frame them substantially, that good men may enjoy the freedom which they merit, and the bad the curb which they need.
• Love Virtue, she alone is free.
• Is it just or reasonable, that…voices against the main end of government should enslave [those] that would be free? 
• They who seek nothing but their own just liberty, have always right to win it and to keep it, whenever they have power, be the voices ever so numerous that oppose it.
• Who can in reason then or right assume monarchy over such as live by right his equals, if in power or splendor less, in freedom equal?
• The power of Kings and Magistrates is nothing else, but what is only derivative, transferred and committed to them in trust from the People, to the Common good of them all, in whom the power yet remains fundamentally, and cannot be taken from them, without a violation of their natural birthright.
• It is lawful…for anyone who have the power to call to account a tyrant.

Americans have been major beneficiaries of John Milton’s literary blows for liberty against tyranny through his political impact on our founders. But this year’s dramatic violations of our freedom to seek the truth and express our views to one another, and its widespread proposals to violate other core liberties, show that heritage to be at serious risk. Revisiting Milton’s arguments in these areas is a good way to recognize the risks we have already been exposed to and their ominous implications for the future and a good source of reinforcement for the principles our country was founded upon. And at their heart is his conclusion that free we must remain.

In addition to the gains in the stock market on Monday, uncertainty about covid, and the economy, is another concern regarding the outcome of this election, as reported by CNN:

This week, all eyes are on the Trump-appointed General Services Administration administrator, Emily W. Murphy, to recognize Joe Biden as the winner of the election and president-elect.

This high-ranking bureaucrat has the job of “officially affirming Biden has won the election on behalf of the Trump administration,” something which, so far, has yet to occur. Moreover, the US Senate outcome is still not officially set, although Republicans had a narrow lead at the start of the week. Assuming Biden is inaugurated and the Republicans hold the Senate, what, if anything, could this mean for the Fed?

First, Judy Shelton’s long shot at joining the Fed has now become an even “longer shot.” Considering Trump couldn’t even persuade fellow Republicans like Mitt Romney or Susan Collins to vote for her, it’s unlikely Biden would have much more success. The nominations expire when Congress is adjourned at the end of the year. So her appointment probably won’t happen.

As for promotions of central bankers, various reports from the mainstream media are saying Governor Lael Brainard could be asked to leave the Fed’s inner circle to become secretary of the Treasury, making her the first woman in history to hold that position.

Regarding the role of the Fed chair itself, it remains to be seen whether Biden would prefer to continue with Powell. As a registered Republican, Powell would likely have support from a Republican-controlled Senate. In the middle of a global pandemic, as David Wessel of the Brookings Institution said to the Washington Post:

No president likes to replace generals in the middle of a war.

Of course, sometimes the “war” can be waged by the state upon its own people, as in the case of the war on drugs or the war on poverty, etc. In the case of monetary policy, the war waged by the inflationists on the general public continues. We are often told mild inflation is good and to not worry about the money supply, the debt levels, and currency debasement. In the press, Reuters explains:

Modern Monetary Theory, the idea that governments which print their own money can and should spend whatever they want provided it’s fuelling [sic] economic growth and productive employment. Biden is already a partial convert, with Stephanie Kelton, an MMT proponent, on a task force that in July laid out 110 pages of policy recommendations.

Imagine the Fed in 2021; no Judy Shelton, a governor with respect for sound money. Combine this with a president considered a “partial convert” of MMT, we can only imagine what kind of money expansion programs will be crafted. Maybe Biden takes the MMT spending-to-prosperity approach, then at least we can have a (very) faint hope that a Republican-controlled Senate could try to stop him. If so, imagine a gridlocked US Congress; fiscal stimulus bills would become very difficult to pass. Who would be charged to “fuel economic growth” if not the Fed?

While we wait to see who will head our government into the new year, and while we expect a new change in government could also bring changes to the Fed, we cannot reasonably expect these changes will amount to anything more than superficial. Unless a hard money advocate, or someone with an understanding of free markets, whether from within Congress or the Fed, is appointed, there is little to no indication that policies will change drastically.

Bernanke lowered interest rates and increased the money supply during the last recession. Jerome Powell did the same during this recession. Until someone in a position of authority can explicitly address the problems, and eventually reject this doctrine, it won’t make much difference who runs the central bank. The Fed seems to be running on autopilot, sticking to accommodative policies, with press conferences between policy decisions to remind us this is indefinite. Should we have a lame duck presidency, expect the Fed to do “whatever it takes” to get the wheels of commerce turning again.

The mainstream pro-Biden media is poking fun at Donald Trump’s suggestion that there could be fraud involved in the post-election receipt of mail-in ballots. Apparently they’re not familiar with the election-theft case of Lyndon Johnson, who would go on to become president of the United States.

The entire matter is detailed in Robert Caro’s second book in his biographical series on Johnson. The book is entitled Means of Ascent.

Johnson election theft took place in 1948, when he was running for the Democratic nomination for US Senate against Texas Governor Coke Stevenson, one of the most admired and respected governors in the history of the state.

In the primary election, Stevenson led Johnson by 70,000 votes, but because he didn’t have a majority of the votes, he was forced into a run-off. The run-off was held on a Saturday. On the Sunday morning after the run-off, Stevenson was leading by 854 votes.

As a New York Times review of Caro’s account stated, the day after the run-off election it was “discovered” that the returns of a particular county had not yet been counted. The newly discovered votes were overwhelmingly in favor of Johnson. Then, on Monday more returns came in from the Rio Grande Valley.

Nonetheless, on Tuesday, the State Election Bureau announced that Stevenson had won by 349 votes. Nothing changed on Wednesday and Thursday after the election. On Friday, precincts in the Rio Grande Valley made “corrections” to their tallies, which narrowed Stevenson’s lead to 157.

But also on Friday, Jim Wells County, which was governed as a personal fiefdom by a powerful South Texas rancher named George Parr, filed “amended” returns for what has become famous as “Box 13” that gave Johnson another 200 votes. When all was said and done, Johnson had “won” the election by 87 votes.

It was later discovered that one of Parr’s men had changed the total tally for Johnson from 765 to 965 by simply curling the 7 into a 9.

Where did the extra 200 votes come from? The last 202 names on on the election roll in Box 13 were in a different color ink from the rest of the names, the names were in alphabetical order, and they were all in the same handwriting. When Caro was researching his book, he secured a statement from Luis Salas, an election judge in Jim Wells County, who acknowledged the fraud and confessing his role in it.

As the Washington Post reported, to investigate what obviously appeared quite suspicious Stevenson employed the assistance of Frank Hamer, the Texas Ranger who had trapped and killed Bonnie and Clyde. It was to no avail. Johnson got a friendly state judge to issue an injunction preserving the status quo, after which the Democratic executive committee, by one vote, declared Johnson to be the winner.

Stevenson took the matter to federal court but the Supreme Court punted, declaring that it had no right to interfere with a state election.

So, Lyndon Johnson stole the election and ended up going to Washington as Texas’s US senator. Ironically, if Stevenson had become the state’s senator instead, Johnson would never have been selected to be John Kennedy’s vice presidential running mate and, consequently, would never have been president.

No wonder Donald Trump is worried about those Democrats! For that matter, those Democrats should be just as worried about those Republicans! 

Originally published by the Future of Freedom Foundation.