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Why Fed Bugs Really, Really Hate Gold

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Judy Shelton, a Trump nominee to the Fed Board of Governors, may not have coined the excellent term “Fed Bug,” but she used it to delicious effect in this 2019 Financial Times interview:

“People call me a goldbug, and I think, well, what does that make them? A Fed bug,” she says.

Can anyone the ​New York Times attacks this dishonestly be all bad?

For our purposes, Fed Bugs are people with a faith-based belief in the power of central banks (and central bankers) to engineer economic growth using “monetary policy,”despite decades of history and current evidence to the contrary. They believe tinkering with inputs and rates and velocity and flows somehow makes us richer in terms of productivity, goods, and services. They believe in financial alchemy, as economist Nomi Prins puts it, rather than precious metals. They believe paper has value so long as government issues it and legislates its use. Most of all, they believe in technocratic control over money in the economy. 

Central bankers almost by definition are Fed Bugs, but so are most monetary economists, financial journalists, and politicians. And they all hate gold with a passion. The reasons why are multifarious, but ultimately flow from their fundamental resentment of any money they do not control and cannot design. Central planning requires central money, and gold stands apart by it very decentralized nature. It is indifferent to human conceptions, and can be discovered and summoned from the earth only with tremendous risk and effort. It cannot easily be manipulated or destroyed, and its value cannot be decreed (though they try mightily). It is unchanging, unyielding, and stubbornly at odds with the political visions of Fed Bugs. 

And so they hate it. 

They hate gold because it never goes away and never goes to zero.  It holds monetary value intrinsically, without the imprimatur of a sovereign or government. Gold does not need the state or its bankers to operate as money, because individuals choose it as money on the market century after century.

Even after more than a century of political efforts to erase gold’s status as money, the public still view it as such. Gold quietly serves as a lingering rebuke of the entire political fiat money project—even as central banks are forced by circumstances to buy and hold it as collateral, as the ultimate hard currency and liquid asset for their balance sheets. In fact, central banks steadily bought or repatriated huge amounts of physical gold in recent years, despite the supposedly strong world economy prior to the Covid crisis. 

During the transitional period leading up to the full adoption of the Euro across 12 original Eurozone countries, Germans in particular secreted away millions of deutschmarks in mattresses, closets, and safety deposit boxes. More than a decade after the Euro came into widespread use, Germans still held €6.6 billion(!) in unconverted deutschmark notes and coins according to the Bunesbank. The reason for this is very simple: those Germans distrusted, and continue to distrust,  the stability and purchasing power of the Euro. They fear a crisis, however unlikely, and protect themselves by holding a “harder” currency in case the Euro depreciates rapidly someday.

In other words, they prefer “buying” peace of mind by holding deutschmarks to converting them to Euros and buying goods or services. In the same way and for the same reasons, more and more Americans prefer exchanging some of their paper US dollars for physical gold. 

And yet the media campaign against gold continues. With Congress ordering magical fiscal bailouts from the Treasury, Trump conjuring up continued $600 weekly unemployment payments by executive order, and the Fed adding assets of every dubious stripe to its swollen $7 trillion balance sheet, gold prices predictably spiked to over $2,000 per ounce last week. Right on schedule, Fed Bug journalists respond with a litany of “Gold is foolish, don’t buy it!” articles. In fact they sound like real estate agents in reverse: there is never a good time to buy. Gold goes up relative to the dollar, it’s overpriced and poised for a big fall. Gold falls below $1,100, as it did in 2015? See, we told you this worthless shiny metal was headed down!

We rarely see this level of media vitriol and meta-analysis directed toward, say, the latest pump and dump medical device stock duping day traders on Robin Hood. The share price of bankrupt Hertz car rental goes from $20 to .80¢ and back up to $5 in a matter of a few months with little public ire or fanfare. And yet gold, the hated and denounced relic of late night Fox News infomercials, outperformed equity markets over the last 15 years despite its monetary rather than investment status.

Gold is still here. FDR attempted to ban its private ownership and force conversion into dollars in 1933; Nixon eliminated the right of foreign governments to redeem US dollars for gold in 1971. Both men acted without Congress; both knew what their actions meant for savers and inflation. But gold has not faded away, if anything it grows in importance as fiscal and monetary policy across the West becomes increasingly unmoored.

Here is what Ludwig von Mises had to say gold as real money 100 years ago: 

What the United States needs is not the gold-exchange standard but the Classical gold standard, decried by the inflationists as orthodox. Gold must be in the cash holdings of everybody. Everybody must see gold coins changing hands, must be used to having gold coins in his pockets, to receiving gold coins when he cashes his pay check, and to spending gold coins when he buys in a store.

What a wonderful vision, and not an impossible one. Uncle Sam and virtually all western nations have embarked on a campaign of money creation unlike anytime in human history. Where it all leads, and how long it lasts, cannot be predicted. But a global currency crisis, precipitated by a falling US dollar and finally arriving here at home, is hardly unthinkable. At that point we may see a new supranational currency created, or we may see a flight to known commodity money like gold. When they day comes you might want some gold coins jangling in your pocket, or at least some gold-backed zeros in your digital accounts. 

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Mises Wire

The Mises Institute exists to promote teaching and research in the Austrian school of economics, and individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. These great thinkers developed praxeology, a deductive science of human action based on premises known with certainty to be true, and this is what we teach and advocate. Our scholarly work is founded in Misesian praxeology, and in self-conscious opposition to the mathematical modeling and hypothesis-testing that has created so much confusion in neoclassical economics. Visit

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