25 Nov 2024 - Reviving the Gold Standard: Judy Shelton’s Proposal for a Gold-Convertible Treasury Bond

Gold prices are significantly down on Monday morning. As the U.S. enters a shortened trading week due to the Thanksgiving holiday, the general market sentiment appears more optimistic, which is unfavorable for precious metals typically seen as safe-haven assets. This improved risk appetite can be partially attributed to President-elect Trump’s selection of hedge fund manager Scott Bessent for the position of Treasury Secretary. The appointment of a financial industry insider to this key economic role has seemingly boosted investor confidence in the incoming administration’s economic policies. The price of gold is trading at $2642.39, down $73.80. The price of silver is trading at $30.39, down 95 cents.

Judy Shelton, a long-time advocate for sound money, has proposed an innovative approach to reintroduce a gold standard for the US dollar. Her plan involves issuing a 50-year Treasury bond that would be convertible into gold, potentially to be initiated by President Trump on July 4, 2026. This proposal aims to address the current monetary system’s shortcomings and restore stability to the dollar by tying it back to a tangible asset.

The concept of a gold-convertible Treasury bond serves multiple purposes. Firstly, it provides a mechanism for discovering the appropriate price for gold convertibility without the need to abolish the Federal Reserve or make drastic changes to the current monetary system. Secondly, it would effectively utilize the United States’ substantial gold reserves, which are currently undervalued on government ledgers. By offering gold redeemability, the government could potentially issue extremely long-dated debt at lower interest rates, as the risk of future dollar devaluation would be mitigated. This approach aligns with Shelton’s view that currency should be a standardized measure for public use rather than a policy instrument for managing the economy.