Judy Shelton, the candidate proposed by Donald Trump to integrate the committee of governors of the Federal Reserve is in favor of returning to something similar to the gold standard, but using cryptocurrency technology.
The United States Federal Reserve (FED) is an independent government agency that acts as a central bank. Basically its tasks are the management of monetary policy and the regulation of the financial system. Its members are proposed by the president and approved by the Senate.
As part of its mandate, the FED deals with the regulation of interest rates and the availability of money to boost the growth of the economy and prevent the risk of inflation and recession.
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What is the gold standard
The original money worked like a promissory note. Basically one could go to the issuer and exchange it for the amount of valuable minerals that appeared on each bill. Gold was used in most countries. This system ensured that each banknote had a solid backing.
Now, the rulers were never able to adjust to a budget so they usually resort to two mechanisms; or go into debt or issue money. In the first case, you have to use the reserve of value to pay. In the second, there ends up having more bills circulating than available support.
One way or another lThe national currency ends up devaluing and inflation increases.
At the end of the Second World War it was decided to adopt the US dollar as the reference currency for world trade. It was a good decision as the dollar was still backed by the gold standard. However, the country abandoned it in 1971.
With US international leadership under discussion, countries such as Russia, China, Iran or Venezuela are looking for other alternatives to the dollar for international transactions. Should other nations join in, this could have disastrous consequences for the US economy. What Shelton proposes is to restore confidence to the dollar by reducing the margin of the North American government to do what occurs to it.
I think what the gold standard represents is monetary discipline itself. Money is supposed to be a unit of account, a reliable measure, and a reliable store of value. It should not be subject to who the chairman of the Federal Reserve is.
According to Shelton, an adaptation of the gold standard method can be done using cryptocurrency technology. It is not the first time that she has championed the use of a digital dollar as a way to help preserve the primacy of the US currency around the world.
A digital gold standard. What can cryptocurrencies contribute?
A cryptocurrency is a digital asset that functions as a medium of exchange wherein individual records of coin ownership are stored in a decentralized, computerized database using uStrong cryptography to secure transaction records, control the creation of additional digital currency records and verify the transfer of ownership of the currency.
Their characteristics are:
- The system does not have a central authority, its management is distributed throughout the network.
- The system defines whether new cryptocurrency units can be created, defining the form of their creation and the assignment of ownership.
- Ownership of cryptocurrencies can be demonstrated exclusively by cryptographic means.
- The system allows transactions in which the ownership of cryptographic units is changed.
- Validation of each transaction can only be issued by an entity that proves current ownership of those units.
The candidate considers that This system is better than the current one in which a dozen people who meet eight times a year make decisions that affect the functioning of the entire economy
As he says
If the success of capitalism depends on someone being smart enough to know what to do, we are doomed.
Agreeing with cryptocurrency advocates, Shelton thinks that Cryptocurrencies are a way for national currencies to be immune to any government's attempts to "manipulate" their value.
The bad news is that Judy's mindset is too much for traditional Democratic and Republican politicians. His nomination is still delayed.