Gold is rising and so is the typical gold standard nostalgia which erupted every time price inflation, banking crisesand/or debt concerns they reappeared after the collapse of Bretton Woods gold exchange standard in 1971. Surely the rise of the precious metal, as usual, signals that all is not well.

Earlier this year, the precious metal rallied over $2500 an ounce to all-time price highs, making it one of the best performing assets since 2024, following a price gain of 13 percent in 2023 — the result of persistent economic and geopolitical uncertainties. More interesting, perhaps, World Gold Council reports that central banks have been the most aggressive buyers of the precious metal, buying 1,037 tonnes of gold in 2023 alone – the second largest annual purchase on record – after a record 1,082 tonnes in 2022. Indeed, a survey by The Gold Council revealed that 29% of central bank respondents planned to increase their gold reserves in the coming year – the highest percentage since the World Gold Council started this poll in 2018.

A recent one piece in The Times (from London) sums up the moment:

Gold, it seems, can no longer be ignored. The prospect of lower US interest rates, a weaker dollar and concerns about America’s debt sustainability should lead to lots of retail and institutional money flocking to gold… There is even talk that the new long-dated currency created by the expanded Brics countries will be backed by a range of assets, including gold. A century after the demise of the (classical) gold standard, which collapsed in the interwar years amid a decline in central bank cooperation on how to manage the metal, gold is quietly becoming a more important feature of our financial system, rather than an old fashioned. relics from the 20th century.

All this led to many discussions about sound money, cryptocurrencies and even feasibility a new gold standardas the latest headline from former Trump administration economic adviser and longtime sound money advocate Judy Shelton attests—Good as Gold: How to Unleash the Power of Sound Money— currently a best-seller on Amazon.

Shelton, speaking by phone from Paris on her way back from a recent meeting in New Delhi of the Mont Pelerin Society — the free-market economics conference founded by Friedrich Hayek and Milton Friedman — remains surprisingly upbeat about the monetary outlook. of the precious metal, despite countless setbacks over the past fifty years.

“We they have gold,” she says, pointing to the U.S. government’s reported holdings of 261.5 million ounces — more than any other nation. “Why not use it?”

An inveterate sound money championShelton claims that the present moment is particularly favorable, especially at the international level. The fact that gold buying by central banks has reached near frenzy “bodes well for serious consideration of a new proposal,” she says.

And she has one, of course: a well-articulated plan to reassert convertibility into gold for the average American for the first time since his time. Classic gold standard (1815-1914); although starting exclusively by holding gold-linked US Treasuries. For Shelton, dollar-to-gold convertibility—her ultimate goal for the entire US monetary system—is essential: It would not only mean fiscal and monetary rectitude; “provides the ultimate simple rule for regulating the money supply in accordance with individual rights and free market principles,” one of the book’s key arguments.

Her proposal calls for a new issuance of zero-coupon Treasury securities – called Treasury Bonds – that offer lower interest rates than conventional Treasuries (thereby reducing current deficits), but with the distinctive feature that they can be redeemed at maturity either at par nominal. in dollars or to a predetermined gold equivalent — at buyer’s discretion.

In other words, if monetary policy continues on its current path and the purchasing power of the dollar declines significantly, it could result in a significant loss of US government gold. If not, and the United States straightens out its finances, most of the bonds would likely be redeemed in dollars. In essence, they would provide a “trust but check provision,” as Shelton calls it, putting the nation’s gold holdings on a new determination to demonstrate fiscal and monetary rectitude. “All the officials have to do to make the show a success is exceed expectations,” she explains. If they do, the bonds will have paved the way “for the United States to issue a dollar-denominated financial instrument that is literally as good as gold.”

Admitting that her proposal seems modest compared to the “impressive gold standard proposition” that came out of the US Gold Commission in the Reagan years, Shelton argues that by successfully establishing this type of “beachhead for sound money” and “balance sheet for fiscal and monetary integrity,” monetary reform would likely follow substantial here and abroad. even resulting in a new international monetary system based on gold.

In that case, the power of the Federal Reserve would have to be substantially reduced, of course. Describing her economic views as “closer to the Austrian school than others”, despite her long-standing association with proponents and supply-side theory, Shelton agrees with the Austrians that the fatal flaw of Bretton Woods (1945-1971), as well as a host of other Rule-based proposals are that they ultimately rely on the “discretionary inclinations of technocratic authorities.” Indeed, she admits that the classical gold standard of the late 19th century was “much better” than the Bretton Woods gold exchange standard (where individuals were denied direct convertibility) as a result of that “it is given to individuals, not to the government, the power to control the money supply.”

Moreover, the new book makes it clear that 1) central planning does not work and has never worked, either in the old Soviet Union or in modern central bank policy; and therefore that 2) “the Federal Reserve’s displacement of free market outcomes may one day breed the same kind of cynicism that caused the collapse of the Soviet approach.”

The bottom line for Shelton is that “the highest level of performance a central bank could aspire to would be to match the economic interactions and outcomes that would likely occur under a gold standard,” an argument her book makes by studying previous results. monetary systems. Alternatively, she adds, alluding to Hayek’s the most famous book“replacing the acumen of designated monetary authorities with the common acumen of hundreds of millions of people making voluntary transactions to facilitate their daily needs and future dreams is akin to choosing the path to serfdom.”

In short, while Shelton’s new plan may represent yet another less than ideal monetary reformit would certainly mark a positive step in the unambiguous direction of sound money; and possibly with some real teeth, as she points out Good as gold. Perhaps it will even generate local enthusiasm for true monetary freedom, which is why she hopes the bonds will be ushered in 2026, the 300th anniversary of the Declaration of Independence.

Indeed, the new book presents such a robust and articulate defense of free-market capitalism in the context of American history and its founding principles that it makes us wonder whether the prospects for sound politics are any better today because Judy Shelton was blocked from joining the Federal Reserve in 2020 and instead continues unholy to spout its sound money message.

With the new book, Shelton has doubled down on everything she’s done tagged as a member of “Crank right fringes” and inhabitant of the “golden plug circuit” by mainstream writers and analysts in 2020. And her Treasury Trust Bond plan—and a larger vision for sound money—will succeed, she says, if she leads the nation toward a future where “paying in future dollars is literally as good as gold.”

“That,” she says, “would be historic.” It certainly would.