Time for a Reasoned Debate over Monetary Policy

The following letter was sent to the editors of the Wall Street Journal in response to a April 22^nd opinion piece by Judy Shelton entitled “The Case for Monetary Regime Change.”

Judy Shelton, a long-time participant at Cato’s Annual Monetary Conference, may be nominated for one of the open seats on the Federal Reserve Board.  In her recent Wall Street Journal op-ed, “The Case for Monetary Regime Change” (April 22), Shelton recognizes the limits of monetary policy and the case for a rules-based monetary regime in place of the present system of discretionary government fiat money.  If she is nominated by President Trump and confirmed by the Senate, she will be a strong voice for sound money and for considering fundamental reform (see, e.g., https://www.cato.org/cato-journal/springsummer-2018/case-new-international-monetary-system). Indeed, in her WSJ article, she suggests that “intellectually fair-minded people should be able to debate the pros and cons of alternative monetary approaches without rancor.”  I hope the White House, Congress, and Federal Reserve are listening.  She concludes by welcoming “the Fed’s newfound ‘patience’ in appraising economic and financial developments.”  However, she could strengthen her argument by noting that “patience” is not a substitute for a credible, long-run monetary rule in bringing about macroeconomic stability and reducing regime uncertainty.

James A. Dorn
Vice President for Monetary Studies
Cato Institute