This Is What They Don't Tell You About Money And Gold | Prof. L. Randall Wray

## Gold and the Myth of the Safe Haven The conversation dismantles a common investing myth: that gold is a perennial safe haven and superior store of value. The point is blunt and useful — gold’s price goes up and down, and over long stretches it does not reliably outperform other assets once inflation is accounted for. If an investor bought gold at its 1980 peak and held it through subsequent decades, the inflation-adjusted value today would be roughly where it started. By contrast, a broadly diversified stock index bought at the same time would have produced substantially higher real returns. The implication is not that gold is worthless — it is a real asset with industrial uses, jewelry demand, and an almost certain positive floor — but that treating gold as a guaranteed inflation hedge or as money in the modern sense is a mistake. This reframing matters because many people choose gold as a defensive position precisely to “preserve” wealth when they distrust fiat money or central banks. The discussion highlights how such attitudes often rest on selective readings of historical endpoints (e.g., comparing prices in 1800 and 1900 under a gold standard) while overlooking the volatility that occurred in between. Those ups and downs were driven by genuine macroeconomic events — wars, depressions, and banking crises — which undermines the simplistic narrative that gold provides steady protection against monetary mismanagement. ## Distinguishing Real Assets from Monetary Assets A central analytical contribution of the exchange is the clear distinction between real assets and monetary assets. Real assets, like gold, land, or a factory, have physical or productive uses that confer intrinsic value independent of promise or denomination. Monetary assets, by contrast, are claims — liabilities issued by someone — denominated in a money of account. Coins, banknotes, checking deposits and even corporate coupons (like pizza vouchers or airline miles) are useful because they are somebody’s promise to provide something of value and because they serve as the unit in which prices and debts are reckoned. This distinction dissolves common confusions. People refer to cash colloquially in multiple ways: physical bills and coins, bank deposits, Treasury bills, even highly liquid securities. But liquidity varies across these instruments. A paper dollar in your pocket is different from a bank deposit, which is a claim on a bank, and both differ from a Treasury bill, which is a government debt instrument. Their functions overlap — they can all serve as stores of value or media of exchange to varying degrees — but treating them as interchangeable misses how modern economies actually coordinate exchange through debts and promises. ## The Nature of Money: Units, Debts, and the Role of the State A useful conceptual clarification offered in the discussion is that money plays two separate roles: it is both a unit of account and a set of liabilities denominated in that unit. The “money of account” is the abstract measuring rod — the dollar, pound, euro — in terms of which contracts, taxes, prices and wages are stated. The physical or electronic tokens we call money are records of debts and claims that operate within that unit of account. Thus, to be “money” in the meaningful macroeconomic sense, an instrument is normally someone’s liability and denominated in the prevailing money of account. This idea illuminates why nation-states matter for monetary systems. When a sovereign issues liabilities denominated in its own money of account, it is able to supply and enforce a unit that the private sector must use for taxes, fines, and official obligations. That binding link between the state and the money of account gives state-issued monetary liabilities a special, foundational role in the economy. It also clarifies why private tokens — airline miles, store vouchers, or corporate “currencies” — can function for specialized purposes but lack the universal acceptance, legal backing, and tax coherence that make public money foundational. Prof. L. Randall Wray’s point that paper notes and coins are the debts of public institutions (the central bank or treasury) is important: they are not mystical objects but liabilities that facilitate settlement. This reframing strips away much of the rhetoric that paints fiat currency as mere “control” or duplicity. Money, properly understood, is a social and legal technology embedded in the state’s capacity to denominate, enforce, and accept obligations. ## Cryptocurrencies: Speculative Asset, Not Monetary Anchor The conversation gives a clear verdict on Bitcoin and many cryptocurrencies: they are best understood as speculative, non-monetary assets rather than functioning money. Bitcoin’s appeal is primarily as something investors buy because they expect its price to rise. That expectation undermines its use as a medium of exchange. When its price is rising, few holders want to spend it; when it’s falling, few sellers want to accept it. Its volatility and lack of an issuer’s obligation mean that it does not reliably serve the three classic money functions (unit of account, medium of exchange, store of value) in the way sovereign-issued claims do. There are deeper reasons, too. Modern money depends on being someone’s promise in a currency of account — a financial liability someone else will accept to settle obligations. Cryptocurrencies are not backed by a sovereign’s willingness to tax, nor are they tied to an economy’s accounting unit. Their use is therefore limited to exchange among those who mutually accept the token and to speculative trading. That does not preclude cryptocurrencies having niche utility or acting as speculative “digital commodities,” but it does undercut the narratives that present them as substitutes for state-backed money or as automatic protections against inflation. ## Central Banks, Money Supply, and Inflation: Separating Myth from Mechanism A crucial and practical thread of the discussion addresses the perennial confusion about what central banks “control.” The popular story — central banks press a button, print money, and thereby set inflation — is easy to understand but empirically misleading. Modern central banks largely abandoned strict money-supply targeting decades ago because the empirical relationship between broad money aggregates and inflation proved unreliable. Attempts in the late 20th century to fight inflation by constraining money growth did not behave as theory predicted, and policymakers shifted to interest-rate and balance-sheet tools. Quantitative easing (QE) is an instructive case. QE involved central banks purchasing government bonds and other securities from banks, exchanging these assets for central bank deposits. That operation changed the composition of bank portfolios — replacing long-term securities with reserves — but did not mechanically multiply “money” in the way many imagine. With reserves in banks’ accounts at the central bank, whether and how these translate into broader credit and spending depends on the behavior of banks and nonbank borrowers, the demand for loans, and fiscal conditions. In short, central banks influence financial conditions and interest rates, but they do not unilaterally control the entire private-sector money stock in a vacuum. This view echoes the Modern Monetary Theory (MMT) frame that Prof. Wray has developed: for a sovereign that issues its own currency, the central bank and treasury operate within a system of public liabilities and private claims. Monetary policy sets interest rates and liquidity conditions; fiscal policy determines the net financial assets available to the private sector and the real resources the government is willing to demand and employ. Understanding the division of labor — who issues liabilities, who enforces the unit of account, and who spends into the economy — is more informative for inflation debates than simplistic money-sup

This Is What They Don't Tell You About Money And Gold | Prof. Randall Wray Gold, Crypto, or Tulips? Which one should you buy to be "save"? Or how about Foreign Currency? Would that help? Well, let's put it this way: It's hard to beat the FED. In today's episode, we are going to do a deep-dive into monetary theory and the intricate workings of fiscal policy. My guest today is Dr. Randall Wray, a Professor of Economics at Bard College and a Senior Scholar at the Levy Economics Institute. Professor Wray is a great authority on Modern Monetary Theory and the financial system. Which is what we (again) want to talk about today. Professor Wray, welcome. Professor Wray's Articles: https://www.levyinstitute.org/publications/l-randall-wray #M3 Some of the commentators say, no, no, no, gold prices only go up. It's been true for the last decade or so. But if you had bought gold at a previous peak around 1980 and you held on to it, today, even after this big speculative bubble that we've had, you're back at the 1980 price, inflation-adjusted. Because, of course, we've had inflation over this period, but you have just broken even in terms of inflation. #M2 Hello, everybody. This is Pascal from Neutrality Studies. And today I have with me for the second time Prof. Randall Wray, who's a professor of economics at Bard College and a senior scholar at the Levy Economics Institute. Prof. Wray is a great authority on modern monetary theory and the intricate workings of the financial system, which is what we want to talk about again today. So, Prof. Wray, welcome. #M3 Good to be back. #M2 I was recently at an interesting conference, a resource investment conference, and there I heard again, like so many times before, people talking about the issue that only gold and minerals are real assets, are real money, because printed money that the central bank issues is just the government trying to control us all. And I hear that narrative quite a lot. Could we maybe talk a little bit about gold? You made an interesting argument about why buying gold might not be the best strategy after all. Could you maybe expand on that a bit? -- 1 of 15 -- #M3 Yeah, sure. So what I had claimed last time I was on is that the price of gold goes up and it goes down. And some of the commentators said, no, no, no, gold prices only go up. It's been true for the last decade or so. But if you had bought gold at a previous peak around 1980 and you held on to it, today, even after this big speculative bubble that we've had, you're back at the 1980 price, inflation- adjusted. Because, of course, we've had inflation over this period, but you have just broken even in terms of inflation. And this is sort of funny because people think, well, gold is a very good inflation hedge. You protect yourself if you hold gold. But if you had held gold, you only would have maintained a constant value relative to the dollar, inflation-adjusted. OK, what if instead you had done what most investment advisors would tell you to do, which is buy an index of stocks, say the Dow? If you had bought the Dow approximately at the same time, inflation-adjusted, it is worth way over 10 times as much as it was in 1980. You would be more than 10 times better off if you had bought stocks. Now, stocks, of course, go up and down too, but historically, over longer periods of time, stocks beat inflation by quite a bit. Over a fairly long period of time, since 1980—I don't know how old you are, but probably many of the people listening to this weren't even born—gold has only managed to recover its inflation-adjusted value. Another thing that people say is, well, if you're on a gold standard, that will keep the value of your currency constant. And then maybe if they looked on the internet, they saw that the price level in the United States in 1800 was approximately the same as the price level in 1900. And they say, see, we were on a gold standard. It kept the value of the dollar constant. But the reality is, if you look in between, the price was going up, it was going down, it was going up, it was going down. I mean, the price level taken as a whole. Because typically what it would do is go up when we had a war, and then the price level would go down when we had a depression. And we had six depressions in that period, and so those depressions wiped out the price level. And that's why at the end, if you take those two endpoints, you just happen to find that the price level is the same. If you were taking different endpoints, you wouldn't have found that. Okay. So anyway, now I would agree with part of the statement you started with. Gold is a real asset. The key word there is real. It's not a monetary asset; it's a real asset. And gold has some nice uses, you know, your finger, your nose, your teeth. But it has industrial uses too. And it's shiny, and people like it. And so it's a real asset. It has a real value, and I doubt the price will ever go to zero. It's probably always going to be positive. And on top of that, we have the speculators who are speculating that it will go up, that other people will buy it because they think it's going to go up, including the gold bugs who say it's a good inflation hedge. We just had some inflation. The price of gold goes up because some people will buy gold, thinking that's a good hedge. And so, you know, we can jump on that bandwagon, and we can help push it -- 2 of 15 -- up. And if governments start buying it, which they used to do under gold standards, that will help to push it up. You know, the reality is if governments around the world release their gold stock, the value of gold would collapse because they're holding a lot of gold. So it's a real asset, but it's not a monetary asset. That's the key point. #M2 Can you explain the difference? So, a monetary asset, what is that? #M3 It doesn't have a real form. It's not a real asset. It's a monetary asset. So there are several characteristics of them. The first one is that we have a money of account, and the money assets are denominated in that money of account. So in the United States, our money of account is the dollar. In Britain, the money of account is the pound, and so on. OK, every country has a money of account. And this is interesting because when a new country is formed, they almost always choose their own money of account. And we typically find every nation has its own individual money of account. Now, the Euro area today, they all abandoned their own monies of account and agreed to all adopt the Euro. We can come back to that later if you want. Very unusual. That almost never happens. OK, so there's a link between the state and its money of account. And then the second thing is that monetary debts are denominated in that money of account. So in the United States, you know, all of my debts are denominated in U.S. dollars. I could get into debt in euros if I wanted to. There are opportunities for me to do that. I don't do it. Most people don't do it. So our debts are denominated in the national money of account, typically. OK? Those are two very important characteristics. Now, a lot of mainstream economists and just average everyday people will say, oh, money is also a medium of exchange. I can use it to buy stuff. So we make exchanges using money. And I can also hold funds. Financial wealth in money form. I can hold money as a store of value. Okay. So it also has that characteristic typically. Now, when we get down to the brass tacks, what are we willing to call an asset that has at least some of those characteristics to a greater or lesser degree? Okay, so I think everyone would say cash qualifies for all of those things: medium of exchange, store of value—not a great store of value because you earn no interest on it, but you can hold it. And clearly, as a medium of exchange, it qualifies for all of those. How about a demand deposit? You know, your checking account at the bank. Well, yeah, it pretty much qualifies for all of those things. What about a savings account? Well, there's a little bit of a problem. In the old days in the United States, you couldn't write checks against your savings account. Now, typically you can, up to some number per month. But it's a little bit less convenient as a medium of exchange. You probably use it much less than that. You can go -- 3 of 15 -- to Certificates of Deposit, but there's a penalty if you try to get your money out of the CD before the 90 days is up. So what I'm getting to is things have different liquidities. That is, how quickly can you get the value out of that financial asset and use it as a medium of exchange. #M2 And may I just interject here? It's really important to realize that we need to differentiate between these different ways of holding some form of value, right? Because when you talk about cash, you literally only mean bills and coins, right? Currency in circulation. When you say cash, you don't mean what's in your deposit in your account, right? And these have different functions. They work differently in the economy. And even, I think, bills and coins are actually under different regulations in the United States, right, regarding who mints them. And all of that matters when it comes to the way the system interacts. #M3 You know, we can get into the details of all those things. And also, people who work in financial markets will often broaden that definition of cash to liquid assets, right? Including treasury bills. I'm not talking about the paper notes. I mean bills, 30-day bills. They'll say, oh, well, that's cash. It's as good as cash, right? I got to wait 30 days, but we can do that. So anyway, the terms are used sort of loosely. But what I'm getting at is what I think are the two key characteristics for our discussion: it is always denominated in a money account, and they are always a debt. Always a debt. Now, this won't be obvious to all listeners, but the little silver is not really made of silver. The silver coin is, in the United States, the debt of the treasury. So our treasury issues coins, and those coins are the treasury's debt. Our central bank issues the paper notes. Our treasury used to, but they stopped, and I think I've seen some, but they're very rare. All of our paper money now is issued by the Fed, so that is a debt of the Fed. Okay. And so for me to consider something as being money, it has to have those two characteristics: it has to be someone's debt, and it has to be denominated in a money of account. So what about your bank deposits? Well, that's the debt of the bank. It's the liability of the bank. Your home mortgage loan is your debt denominated in the money of account, and it's the bank's asset. So every financial debt is somebody's financial asset. If I'm holding a coin, that's my asset; it's the Treasury's debt. If I'm holding a bank deposit, that's my asset; it's the bank's debt. So then, you know, we can look at gold. Whose debt is that? Nobody's debt. And you denominate it in dollars. Well, yes, I could say gold is worth $32 an ounce, which it was for a very long time. But it's denominated in a money of account, yet it's nobody's debt. #M2 -- 4 of 15 -- This is where a lot of people then argue that gold has intrinsic value. And that's what makes it, well, not only a real asset, but that's what makes it so much better than government debts and bills. Ever since the gold standard, since this hard connection between a dollar and an ounce of gold was severed, the government is basically just playing with money as a control mechanism. But this fundamentally misunderstands the issue that money itself, in order to be considered money, is always basically just a way to name a unit in which you count, which is inherently fictional. #M3 Well, yeah, it has to be. It's a measuring unit. It's the same thing. I know the Europeans don't use inches, but this distance is an inch. Okay? It's a measuring unit. Can you hold an inch? No. You use it to measure. Can you hold a dolla