On July 5, CNBC treated the world to a tour de force of cognitive dissonance courtesy of Rick Santelli and Trump Fed pick Judy Shelton.
For those lucky enough to have missed that farcical segment, Rick pretended to be indignant about the fact that Judy is a laughing stock, and Shelton reciprocated by proving that she is, in fact, someone who cannot be taken any semblance of serious.
“It just depresses me that nobody seems open minded to protect what’s in our wallets”, an ostensibly incredulous Santelli sighed, in a bid to pretend like Shelton’s idea to return the world to a gold standard is a good one.
For her part, Judy lamented the reality of negative rates, which she said disincentivize people from “investing that financial seed corn in the possibility of a greater harvest.”
(And yes, that is a direct quote. She said “that financial seed corn”.)
Despite Judy’s concern for your “seed corn”, she argued, during the same interview, for Fed cuts at a time when the unemployment rate is sitting a five-decade nadir.
See, when you’re a prospective Trump Fed nominee, that’s what you do. You sing the praises of a new gold standard, talk about how inept central bankers are and then, without so much as a hint that you understand the irony inherent in what you’re saying, you proceed to insist that the Fed needs to cut rates immediately. Stephen Moore did the same thing.
Unfortunately, CNBC felt the need to subject the investing public to another installment of the Santelli-Shelton charade on Thursday, and it was almost as silly as the previous episode.
“The effect of a 25bp [rate cut] is like tasing an inert body”, Shelton mused, in a wholly disturbing choice of metaphor that makes you wonder how many “inert bodies” Judy has maybe “tased” in her day. “It’s not causing any growth to be stimulated”, she continued. (Shelton called for a 50bp rate cut last month.)
She proceeded to compare 2019 to the 1930s. “It is having an effect in currency markets, and we’re in a very dangerous situation”, she warned. “It’s not unlike the 1930s when you had beggar-thy-neighbor competitive depreciations”.
(If the video does not load, please refresh your page – full clip here)
As you can see, Judy went on to implicitly accuse the ECB, the BoJ and the PBoC of manipulation, which means she’s playing to an audience of one in these interviews (Trump).
It’s worth noting that Santelli and Shelton aren’t necessarily correct when it comes to suggesting that this is having an outsized impact on FX markets. They are right in principle, but the reality is a bit more nuanced.
“Despite the strong market pricing of more central bank easing and the sharp move in rates, FX has not moved by much this year [and] G10 currencies remain broadly where they started, while FX volatility has reached new lows”, BofA wrote Monday, adding that “the G10 FX correlation with central bank balance sheet changes and policy rate changes has declined to almost zero from already low levels and there is no correlation between the change in what market is pricing for central bank policy rates and G10 FX”.
Pressed by Santelli on whether any of this makes any sense (i.e., whether it’s a good idea for the US to effectively make things worse by getting into the “manipulation” business), Shelton said this:
Got that? Judy says “it would be nice to be virtuous in a vacuum, but I don’t think we have that luxury”.
There’s your cognitive dissonance.
What Shelton is saying is that while she doesn’t condone competitive devaluation/easing, you can expect her to support currency intervention and rate cuts as a member of the Fed. Because while that’s not something somebody who is concerned about protecting your “financial seed corn” would normally be into, it’s necessary right now because other countries are ripping America off.
The rest of the conversation revolved around Shelton simply regurgitating Trump’s talking points and parroting his FX tweets, only in language that doesn’t sound like it walked out of a grade school insult contest.
To be fair, Shelton and Santelli do have some good points – they are, after all, high functioning adults, unlike the President and unlike Stephen Moore.
Our gripe isn’t with the legitimate points, but rather with the fact that the only reason Judy is doing these TV cameos is to ingratiate herself to Trump with belabored attempts to fuse her unorthodox views of monetary and FX policy with the president’s penchant for pro-cyclical everything.
It’s undoubtedly true that central banks are, to a certain extent, playing the “manipulation game” (as Trump calls it) by resorting to more and more accommodation. But let’s not forget that if it weren’t for this administration’s trade policies, the outlook for global growth and trade wouldn’t be as dour as it currently is, which means that in the absence of the trade war, we probably wouldn’t be plunging headlong into competitive easing.
What exactly does “Dr.” Shelton have a graduate degree in? Ass kissing?
The Wikipedia entry for Judy Shelton is an entertaining read. A few highlights:
During the Obama years, she criticized the Federal Reserve’s low interest rates.[11][12][13] During the Trump presidency, she advocated for the Federal Reserve to adopt lower interest rates as a form of economic stimulus.
Before Trump became president, she was a longtime advocate for free trade, but after he became president, she supported his administration’s trade war with China.[4][10]
In 2000, she advocated for open borders with Mexico.[10]
(Can we assume Shelton is no longer an advocate for open borders with Mexico, though it isn’t stated there?)
Shelton also holds a MBA and Ph.D in business administration from the University of Utah.[6][7][8]
yeah, Judy’s a hoot.
Reality really TRUMPS fiction these days.