The new (old) relevance of gold.
NIKA DUBROVSKY
Hello, everyone. I’m very happy to welcome Kathleen Tyson and Michael Hudson back to the David Graeber Institute . And today we are going to talk about gold — which is very fascinating, given all of the developments that happened last week. David Graeber connected gold with different social orders: in his view, gold was associated with times of war, while credit — which requires trust — was more connected to peace. We don’t know how it will unfold, but it’s very fascinating. I’ll first ask Michael Hudson to give a historical background on what gold is and how it has unfolded.
MICHAEL HUDSON
Most of us here at the David Graeber Institute talk about debt, and how most money is government debt. That was the basis of the whole post–World War II monetary system, with the US dollar being the way in which many countries kept their international reserves — but that was because the dollar was as good as gold. So today we’re going to talk about something else: the one form of money that is not debt — gold and silver bullion.
That usually is a sign of two things. Either it was the ending of wars — starting with the Franco-Prussian War in 1871, when Prussia joined Britain’s gold standard and denominated France’s reparations debt to Prussia and Germany in gold. The same thing happened after World War One: all of the reparations and the inter-Allied debts to the United States were denominated in gold. And after World War Two, once again the result of a war was hard money. Instead of reparations, the United States imposed a monetary order centred on the US dollar, meaning the kind of assets foreign central banks would hold — US government debt. But the dollar was convertible into gold until the balance-of-payments deficit resulting from military spending forced the dollar off gold.
So this was the first time a major war — from the Korean War in 1950 through to 1971 — during that twenty-one-year period, all of the United States’ balance-of-payments deficit was military; that military spending abroad is what stopped the ability of the United States to pay in gold. Because of the paper currency in your pocket here in America, twenty-five percent of every dollar bill or hundred-dollar bill issued by the Federal Reserve or Treasury had to be backed by gold, and the United States ran out of it.
So at that point, needless to say, having run out of gold, the United States suddenly dropped its whole support of gold. Herman Kahn and I were invited to the White House and Treasury in 1973 to talk about gold. Herman produced a wonderful map of the world: countries with the Protestant, democratic ethic — the United States, Britain, Scandinavia, Western Europe — and then countries that didn’t have much faith in their government, which was the rest of the world. He said the countries willing to move away from gold toward government debt were the United States and Europe, because they believed government control of the financial system was a safe, workable way. The rest of the world had no such faith. India was known as the sink of gold; much of Asia had long been on the silver-bullion standard. For these countries, there was a breakdown in faith in government.
Well, today, with the new American wars — first against Russia, then against Iran — you have a breakdown in faith in the dollar once again. And that means that if foreign countries are not going to hold their international savings and monetary reserves in the form of government debt, what can they hold them in? There’s only one commodity that, over four thousand years, countries have agreed upon: monetary bullion — gold, or for most of that period, silver. That is coming back into favour now, because there’s a loss of faith in the ability of governments to pay their foreign debts. And indeed, you’re having governments like the United States seize the gold reserves of other countries — Venezuela’s gold reserves, held at the Bank of England; Iraq’s gold reserves; Libya’s gold reserves. You can see that the United States itself expects that we’re in a new world system now, and that the means of settling international debts, credits, and savings is going to be gold, and to some extent probably silver again as well.
It’s a peaceful metal. The reason I was in favour of gold, specifically in the 1970s, is that if countries have to pay their international balance-of-payments deficits in gold, then they cannot afford to go to war — at least the United States couldn’t. If it had to pay its balance-of-payments deficits in gold, it would not be able to go to war for very long without having to replace it with a paper currency that other countries would not accept. Obviously other countries have other reasons for running balance-of-payments deficits, but gold would be a constraint on the United States. That’s another reason why Asia and other countries are all moving toward gold — they want to reimpose that constraint on the United States. And that’s why the United States is trying to grab the gold supply of other countries, and why European and Asian countries are all saying: that gold we have on deposit at the New York Federal Reserve and the Bank of England — we want it in our own central banks. Give it back to us. So that’s the geopolitics of gold in today’s world.
KATHLEEN TYSON
That was a great summary. I’ve come a long way in my thinking on gold. When I started at the Federal Reserve Bank of New York, like everybody else raised in my generation, I thought of gold as the barbarous relic — useless, doesn’t do anything, just sits there, doesn’t earn interest. It seemed much more interesting to have bond markets with interest rates that pay you for lodging your money with the government. Well, I’m beginning to see the case for gold. And I think the change that’s happening now is happening so quickly that a lot of people still aren’t aware of the mechanics of it.
I think it really got legs if you look at a chart of gold ownership, or gold purchases by central banks. They were actually selling for most of the beginning of the century, up until 2008, when the financial crisis hit and the Fed, the ECB, and the Bank of England all said ‘whatever it takes’ and hit the button on the printer for quantitative easing — making trillions out of nothing and expanding the money supply rapidly. Since 2008, central banks have increased their purchases of gold, and it’s possible it’s even accelerating now. The figures for China just came through this morning: they bought over fourteen tons of gold in May 2026, having bought nine tons in April and eight tons in March. They’re accelerating the pace at which they’re buying gold, because the price has fallen, making it a bargain, and because they’ve clearly decided the direction is toward gold.
There’s a dynamic there that’s undeniable. Half of humanity lives in East Asia — four billion people. As you said earlier, that culture has always leaned toward gold ownership, even private gold ownership, but certainly at the official level they like their gold reserves too. And now that wealth — and productivity — is moving east, and wages are rising throughout Asia, people have more money to save in gold. There’s just no way the math works toward any other outcome.
Take China, because the figures are easy to get your head around. They raise wages by an average of five percent a year — seven percent for the lowest-paid workers. That’s how they eliminated poverty. So every fifteen years, a Chinese worker expects their wages to double. We’ve had thirty years of stagnant wages in the West, with no real wage growth at all. In China, they expect their wages to double every fifteen years, and they do — the state makes sure of it. Fifteen years ago, the average Chinese family was saving thirty-five percent of its income, and a chunk of that went into real estate. But now that they’ve hit ninety-five percent home ownership, they’re not buying much more real estate. So from 2011, when China decided to pop the real-estate bubble, it did something else: it started gold accumulation accounts at every bank, so that any company or individual depositor could save part of their income in one-hundred-percent-reserved gold. That hundred-percent reserve is a very important point — a strict regulation — and it means gold savings in a bank are actually safer than cash deposits, where you could lose most of your money. So the Chinese started saving in gold, and even if it’s only maybe ten percent of their income on a thirty-five-percent savings rate, that’s a large amount of money, doubling every fifteen years. That’s a dynamic we’re going to see throughout Asia to one extent or another. Southeast Asian wages are rising, and they are also gold savers — I still have the gold gifts my sons were given by their grandparents when they were born; it’s a gold-saving culture. India, as you’ve said, has always saved in gold and silver. The government tried to encourage Indians to surrender their gold, and only got thirty-nine tons out of an estimated eight thousand tons in the country. Indians are holding onto their gold. And it’s a dynamic where, if half of humanity decides gold is what it values and saves in, gold is going to appreciate relative to Western fiat currencies. There’s mathematically no other possible outcome.
Now — you said you liked gold because you think it deters wars. I take the other view: that gold can actually be an incentive to war, under certain conditions, where a country is weak, has a corrupt or small, concentrated political elite, has massive gold reserves (because, of course, it reports them to the IMF, so you know about them), and has a landmass that makes it easy to destabilise or infiltrate. You mentioned Libya, you mentioned Venezuela. We also stole the gold from Iraq. We stole the gold from Yugoslavia in 1999. That was a lot of gold, by the way. We tried to get the gold out of Kazakhstan in 2020, through to January of 2022 — a month before the special military operation in Ukraine. Kazakhstan has a free-trade agreement with Russia; if we had succeeded in destabilising Kazakhstan, overthrowing the government and stealing the gold, that would have given Russia a war on two fronts. Russia managed to stabilise the situation, restore the government, and leave within a week — but that wasn’t the outcome we would have preferred, I think. Not me personally, obviously.
So under circumstances where might makes right, gold can be a great temptation to war. It doesn’t always have to be war — it can be elections or coups. The first thing that happened when Milei took power in Argentina was that all the gold left the country; it’s still not disclosed where it went, and it’s not in Argentina anymore. Very likely the same thing is intended for Bolivia, where there’s just been an election. Wherever our preferred candidate wins, or is imposed, the gold tends to disappear shortly afterward. So I think gold can be a stabiliser, because everyone agrees on it and it limits the printing of money — but it can also be a great temptation.
And this goes back thousands of years. When you mentioned feasts and thousands of years — I have a degree in medieval history, and let me tell you: when there was a lot of gold in England, that was when we started getting Viking attacks. We paid them Danegeld not to attack us, until they ended up with all the gold anyway, and attacked and took over England regardless — with King Cnut in 1016 and William the Conqueror in 1066. So places with gold tend to be a target, in any era, in any system.
What’s happening in current events is very interesting. For several hundred years, London has been the centre of gold trading — at the national level for gold settlements, which is why the Bank of England holds so much gold, and also at the commercial level among banks. In London, gold is traded through the London Bullion Market Association, which runs a cooperative, bank-owned clearing system. Custody of the gold sits with, I’ll say, four banks — HSBC, ICBC Standard Bank, JPMorgan, and possibly Barclays, though I’m not certain on that one — plus a bit at the Bank of England itself. So it’s a distributed custody system with a cooperatively owned clearing system.
Now, a new gold trading platform opened this week in Hong Kong, and it’s really interesting. The clearing house is owned by the Hong Kong government, and the vault is owned by the clearing house; banks can then rent space in it. The vault they’ve built at the airport in Hong Kong is designed to hold up to two thousand tons of gold, which is a lot — HSBC alone has rented two hundred tons of space, and the other banks haven’t disclosed their figures. The idea is that they’ll eat the LBMA’s lunch by being a more reputable, better regulated, and more reliable place to do business in physical gold. And it really is physical — a hundred percent vaulted gold; you can’t trade paper there. A lot of the trading on the LBMA — probably fifty or sixty times the physical trade — is paper trades that never settle. Trading on COMEX in the United States is pretty much all paper that never settles in gold. But in Hong Kong it’s a hundred percent physically settled. You can offset, of course, but because it’s one-day or same-day settlement, you’re dissuaded from being too speculative — that’s another difference. In London it’s two-day settlement. So the whole structure is much more tightly managed, with much more state authority behind it, even though it’s the Hong Kong government rather than the People’s Republic of China directly — and of course it’s connected to the Chinese gold corridor in Shanghai.
The really interesting thing about Hong Kong — which I had to double-check, because I knew it was true but needed it confirmed — is that you can pay in any of the currencies that clear through Hong Kong Interbank Clearing Limited. So you can pay for your gold in US dollars, because US dollars clear in Hong Kong; you can pay in euros, because euros clear there too; you can pay in Hong Kong dollars, which are effectively a dollar substitute since they’re pegged to the US dollar; or you can pay in Chinese renminbi, which also settles through Hong Kong Interbank Clearing. So you can choose your currency, and you get a hundred percent physical delivery of gold — vaulted, audited, assayed, and held in a secure warehouse at the airport within a security and customs perimeter. You can have a lot more confidence in that system. So it will be interesting to see how quickly, or to what extent, they steal London’s lunch.
Now — are they stealing London’s lunch? Absolutely. And I can tell you this because of one choice they made: instead of the one-kilogram bars that trade in Shanghai — everything on the Shanghai Gold Exchange is one-kilogram gold — they’re trading four-hundred-troy-ounce bars, the same standard ingot as London. That’s a signal. There’s a lot going on in the world; it’s really hard to keep track. But I think gold is going to be a big part of where we’re going in future, if only because four billion people say so.
MICHAEL HUDSON
Well, I think one reason they say so is because they see how much the United States is fighting against countries that want to have their own gold, and how much it’s fighting to have gold for itself. So they figure that if that’s what the United States itself is realising — that the era of dollarisation, of the dollar’s financial system being the key, is over — then gold is filling the gap.
Now, we’re talking about gold as a means of saving against risk, of preserving savings. We’re not talking about what the gold bugs talk about — that our currency should be gold for trade, the gold standard, the way it was used in the United States until President Roosevelt ended it in 1933. You couldn’t have gold as the basis for domestic money creation, because there simply isn’t enough gold in the world to finance it all. I think this was already realised in the seventeenth century, when you had the major foreign debts of France, Austria, Spain, and other countries — all of them war debts. The kings of these countries went to war again and again and defaulted again and again. As the costs of war increased — navies are very expensive, so is military equipment, cannons, all the capital investment wars required — there wasn’t enough gold and silver bullion to finance it all. Bankers realised there had to be some form of money in circulation beyond the limits of bullion, because you needed bullion as the basis for a banker’s loan. So paper money came into being — catalysed first by the Bank of Amsterdam issuing paper money, one hundred percent backed by silver coinage, so people knew there was something there. But then, at the end of that century, in 1694, the Bank of England was created, essentially by monetising government debt. So the government debts that had led to defaults on bankers were replaced by government debt itself becoming the safest form of money, because government debt was the founding capital of the Bank of England and the other central banks that followed.
So when we’re talking about the role of gold, it’s not what the gold bugs say — that all this paper credit has to be ended by government, that we want to end the ability of governments to run deficits, that we want hard money. What Kathleen and I are talking about is not gold as a hard-money standard. Of course governments should create their own money and debt system as a public utility, just as the People’s Bank of China does. But the need for gold is as a means of international settlement and payments, to avoid having to use government debt — because we’re now seeing the instability of the largest government debtors, the United States and the European Union, as being unable and unwilling to pay their debts. There’s no way the dollar debts owed to Europe’s central banks, to China, to Japan — the largest holder of US government debt — can be repaid, either by running a trade surplus or by selling companies and resources to raise the money to pay foreign governments. So people realise that the debt-money system — which is essentially war debts being monetised, war debts resulting from domestic government budget deficits monetised into international money — that whole system is over. That’s the dollarisation system. And so gold is really the key to the de-dollarisation we’re seeing, which is a progressive movement throughout the global majority.
KATHLEEN TYSON
Yeah, I think that’s right. The whole reason banks shifted to sovereign debt as reserves, and moved to fractional-reserve banking and now essentially no-reserve banking, was because they needed to expand the money supply faster than they could with gold. If you can expand the money supply, you can expand the amount of debt in the system, and in theory the amount of growth. We are seeing the limits of that — the way interest rates are spiking in Japan over the last few weeks is quite startling. There’s also a redistribution of the debt happening, because the United States is making its closest vassal states hold more of it. I think the United Kingdom now actually holds more US Treasury debt than Japan does this year, because the UK is in the invidious position of being pressured to acquire more and more of the debt to keep the market stable. And it’s not just one way — I’m sure the Fed has been buying gilts to keep gilts stable too. It’s what I call a daisy chain. It started in October; I knew it immediately when it first happened. It was agreed at the IMF meeting in Washington, because the bond markets were very unstable going into that meeting and then stabilised instantly coming out of it. So I knew they had agreed the daisy chain. It took six months for it to show up in the data, but it does show that they started acquiring more of each other’s debt, in a circular pattern of reinforcing each other’s borrowing by increasing their own reserves.
The daisy chain is as old as banking itself — we saw it with the thrift crisis, we saw it with Continental Illinois, we see it whenever the Bank of England does what it calls a ‘lifeboat,’ a form of daisy chain where it leans on the biggest banks to bail out the weaker ones. It’s an old way of stabilising an unstable system. But it’s certainly been happening again since October of last year, and it’s not a good sign. Yes, it stabilises debt markets in the near term, but it’s a sign the system itself is losing support, is weakening, and is no longer self-sustaining. I’m one of those sad people who, for more than two decades, have read the Treasury’s monthly TIC data, which shows foreign holdings of Treasury securities. And yes, the rest of the world is moving away from US Treasuries as reserves and toward gold, which has now surpassed Treasuries in reserve value. Treasuries are still big — fifty-nine percent of exchange reserves — but they’re no longer bigger than gold. And certainly you see countries like the BRICS, who’ve committed to trading with each other in their own currencies — so-called local currency trade — holding less and less US Treasuries within that TIC data, because they simply don’t need dollars as much anymore.
We’re seeing some countries make a similar choice with panda bonds — foreign bonds issued in Shanghai or Hong Kong, in Chinese renminbi — which are doing great business now, because you can borrow at half the interest rate of US dollar debt, and you’re borrowing against your most predictable source of revenue if you’re exporting to China, so you’re fairly confident you’ll be able to repay. That market has exploded all of a sudden, having been fairly small until a year or two ago. Eight countries have now refinanced from US dollar debt into renminbi debt for similar reasons — they’ve gotten China to pay off their dollar debt so they now owe it in renminbi instead, or they’ve negotiated with Chinese creditors to switch existing dollar loans into renminbi. It’s a very sensible thing to do when the interest rate is half the US dollar rate, and it’s a much more stable trade relationship for a country that depends on trade and has little access to finance. So gold is coming into a system that already has a great deal of turbulence, and I guess we’ll see whether it’s a stabiliser or a destabiliser.
I think Trump probably thought he could get Iran’s gold if he could take Iran — there’s a lot of gold in Iran, because they’ve been self-sufficient for forty-nine years — but it looks like he’s lost that bet. It’s a time when the United States clearly wants might to make right, but you now have China, Russia, and Iran solidifying, if not a partnership, then at least good relations and mutual support. That signals to the rest of the world: we have a choice between two systems. We can choose the system that has always caused us pain — debt defaults, inflation — or we can choose a system that could potentially be more stable.
MICHAEL HUDSON
That’s one reason the United States has been waging a huge public-relations campaign against gold. I remember back in the late 1960s, when the CIA finally published a public report — the first one it ever issued was on Russia’s gold supply. This was when Russia was beginning to save its money in Eurodollar deposits held in Europe, because it was afraid to hold them in the United States in case the US grabbed them. The United States tried to downplay Russia’s ability to support its currency, and put out the view that Russia didn’t have much gold at all. I had been working at Chase Manhattan as their balance-of-payments analyst, and Chase’s main copper-company client was Anaconda. Anaconda bought some gold bars Russia was selling, and found they weren’t exactly what the CIA was describing — gold panned from a river, like Sutter’s Mill in California during the gold rush. A large part of the Russian gold was actually a byproduct of refining copper: when you refine copper on big anodes, the gold and silver fall to the bottom. That’s how Russia obtained a large part of its gold — and how Chile obtained a large part of its gold too, because both the government-owned and US-owned copper companies there reported how much copper they produced, and gold came out as a byproduct of those Chilean mining operations. So the United States was trying to discourage other countries from having faith — first of all in Russia backing its ruble with gold.
And after the United States went off gold, especially by the late twentieth century, it wanted to discourage other people from buying gold too. So what did it do? Why did it take gold prices so long to rise to last year’s four-thousand-dollar-an-ounce level — almost a thousand dollars less now? The Federal Reserve and Treasury would do something called selling gold forward: go into the market and promise to deliver gold at the current low price in three months. Nobody was going to buy gold thinking it would rise in price as long as the Fed and Treasury kept promising to sell more gold at a low price. That kept the price from rising, because you couldn’t make a profit speculating in gold — buying at one price and selling higher — and if you couldn’t speculate in gold, that removed the whole motivation for holding it as something with capital-gain potential. So the United States not only sold gold short, but — as Kathleen pointed out — on these exchanges, real physical gold rarely changed hands; it was all betting on the price, paper bets rather than settlement in gold.
The Federal Reserve — mainly the Fed, as I understand it, more than the Treasury — also made money leasing its gold to foreign gold dealers, who would pay to borrow the gold and deal with their own clients, paying interest in return. That was a significant source of income for the US government. Eventually people began asking how much gold the Fed had actually lent out to these dealers in exchange for interest, and that’s when they began asking for their gold back. The United States balked at returning it. Germany asked for its gold reserves held at the Federal Reserve to be returned, and essentially asked: is there really any gold still there? We want it ourselves. The United States said, well, it takes a long time to load it onto an airplane and send it over — and stalled as much as possible. There’s been no real discussion since about how much of its own gold Germany actually ever got back from the Federal Reserve’s basement. We don’t know — or at least I don’t know, and other people I talk to don’t know either. So the United States is doing everything it can to fight against gold, which I think is the biggest indication that gold is exactly what you want for stability, to protect yourself against the United States’ financial system and the risk of its breakdown.
KATHLEEN TYSON
Yeah, I think that’s absolutely true. There’s a lot that’s undisclosed from the New York Fed — it operates on its own book, doesn’t always report to Washington, and has its own policies. Probably the most secret part of what it does is the gold swaps, which it has never disclosed. And, of course, all the primary dealers — well, not all of them, but most of the big ones — are deeply involved. A lot of people don’t know that when Drexel Burnham failed, it wasn’t because of junk bonds. Drexel held over fifty percent of the junk-bond market — it couldn’t have failed because of junk bonds; it was the only real dealer. It failed because of gold swaps — it got margin-called on gold swaps to the point of failure. Michael Milken, the junk-bond king, took all the headlines, but that’s precisely because, as you say, the Fed doesn’t want people looking at gold. Don’t look at the shiny stuff — look at these boring junk bonds. So the story became that Drexel failed because of junk bonds, when in fact it was the gold swaps that took it down.
I was quite junior at the time, but for whatever reason I was given the specialist job of futures, options, and swaps in the legal department, and I was actually the one detailed to break the news to a European central bank that all the gold reserves it had swapped to Drexel were gone, and would never come back. That meeting made a big impression on me. The central banker had flown to New York, came straight from the airport to the Fed, and he was white and shaking. I remember staring at his white knuckles as I told him it was a bankruptcy — a Chapter proceeding — Drexel’s gone, your gold is gone, you will never get it back. That’s a very secret part of what central banks do: the gold ledger, gold swaps, gold credit. They don’t like talking about it. I think that’s what makes this market so hard to understand — the paper trading is a huge part of it, and it’s controlled, and it’s collective, whereas the physical side is now gaining ground on the paper side.
The Hong Kong market is very interesting here, because in parallel with the launch of the Hong Kong gold exchange, the big Chinese banks have banned retail investors from trading gold futures. They’re driving them toward one hundred percent physical. As you say, the whole appeal of trading futures and options is the volatility, the chance of a quick capital gain — China is taking that off the table, at least for retail investors, forcing them into the safety of one-hundred-percent-reserved physical gold ownership. That’s happening in parallel with Hong Kong, and it sends a signal about where China is heading and what rules it’s laying down. China has much stricter regulation than we currently have in the West — we used to have quite strict securities and futures regulation, but it’s gotten a lot laxer over the last ten or fifteen years. I read last year that the Commodity Futures Trading Commission, which regulates the Chicago futures and options exchanges, didn’t have a single enforcement attorney left in Chicago — not even one. That unit used to be twenty-five strong. So it’s not just the market that’s changing; the supervision of it is changing and weakening too, in ways that leave open at least the potential for abuse. China is closing that door. There’s a lot going on — two different systems, and it’s going to come down to a choice.
MICHAEL HUDSON
I’m not sure what to say — you’ve filled us in on the arcane background of all this, which most investors rarely take into account, to put it mildly.
KATHLEEN TYSON
No — the gold swaps market is very opaque. It’s entirely bilateral, and the gold swaps booked through the New York Fed go through the Treasury’s secret, off-books programme — the ‘black book,’ or grey-book account. The gold swaps go through the Exchange Stabilization Fund — that’s where a lot of these opaque things get booked.
MICHAEL HUDSON
So is the United States a net creditor or debtor in these swaps?
KATHLEEN TYSON
Nobody knows. The swaps date back to the 1960s, when, as you say, the country began running out of gold. Nobody knows where the swaps are, what they are, or what the balance is — it’s very, very hard to know. The useful thing about London was that you could actually see physical movements; they get reported. To a certain extent that’s still possible by looking at trade data. Weirdly, gold is now the number-one export of the United States — in five of the last six months, gold has topped US exports. It’s a similar position in London, where we both import and export gold; it comes and goes. It’s interesting that as the real economy shrinks relative to the financialised economy and government debt — which is expanding at an astonishing rate, at least two trillion dollars a year in the US — you’re seeing gold hitting the top of the import-export tables.
MICHAEL HUDSON
It sounds like the end of empire.
KATHLEEN TYSON
Whose empire?
It was losing gold that lost London its empire, I think — and France, and the Netherlands, and Spain before it.
MICHAEL HUDSON
It’s interesting what Trump is doing to try to provide an alternative. He just came out in the last few days with a proposal for a hundred-year Treasury bond — not ten years, not thirty, the longest currently issued, but a hundred years. And instead of the four-point-six percent currently paid on long-term Treasuries, it would pay ten percent a year — but only simple interest, not compound. So yes, you’d get ten percent for a hundred years, more than savings bonds paid during World War Two. But what will the principal be worth in another hundred years, paid in US dollars, compared to the principal in some currency other than the dollar? Where will the dollar be in a hundred years? What does it mean to earn ten percent interest on a currency that may keep falling relative to other currencies, and even relative to the price of gold? Trump is hoping people will focus on the current return — ten percent, living in the short run — rather than the longer-term picture of what happens as the empire winds down and dollarisation runs out of steam.
KATHLEEN TYSON
Yeah — I think the century bonds, the hundred-year bonds, were actually proposed in Stephen Miran’s paper back in November 2024. That was one of his proposals. Anyone planning a hundred years out is taking a big chance right now. One of the things that’s interesting about China pushing, as a matter of public policy — the central bank and the Ministry of Finance working together — to steer Chinese savings into gold, is that the renminbi is still pegged to the dollar, albeit a soft peg. That means that as the dollar loses value relative to oil, relative to gold, relative to everything, the renminbi loses value along with it, because it stays pegged. That’s great for short-term stability for trading partners who price and sell in dollars but settle in renminbi — they get more stability from the peg. But it also means that if you’re saving in renminbi, you’re losing value as the dollar destabilises. That’s why it was so interesting that, in 2011, the government introduced the first gold accumulation accounts, and within two years declared it national policy: every bank should offer gold for savings, and anyone saving for the long term should save in gold. You can earn renminbi and spend renminbi on current expenses, on the things you need, but if you’re saving, you’re better off saving in gold, because renminbi will destabilise along with the dollar.
MICHAEL HUDSON
Yes, that’s right. This is China’s way of minimising its risk — which, for China, isn’t really a risk, because it can effectively decide which way the wind is blowing on foreign exchange.
KATHLEEN TYSON
Well — they can make the wind, and the gold. They’re the number-one producer of gold in the world, and the number-one buyer of gold in the world. So they’re really making their own weather there.
MICHAEL HUDSON
Yeah. Yeah.
KATHLEEN TYSON
It’s a time of rapid change. If you put the gold move together with some of the other decisions China has taken — like the ban on exports of rare-earth elements for military use — you could see it almost as a pincer movement to curtail future warmongering. The rare-earth ban means the United States can’t build the radars it needs for F-35s, so it’s been building F-35s and putting ballast weights into the nose cones because it can’t make the radars. That ban has only been in place for two years, but it’s already having a noticeable effect on military supply lines. In the same way, the gold policy is still emerging — the Hong Kong exchange only opened three days ago — so it will take a year or two to see the effects on global monetary policy and geopolitics. But hopefully it’s a move toward further peace.
NIKA DUBROVKSY
Okay, I think that was a fascinating conversation — maybe I’ll give each of you the last word and then we’ll wrap up. What I understood from that conversation is that it’s not so much about gold versus the dollar; it’s very much about peace versus war, and hopefully a new social order emerging — one that would mean not only the end of empire but also the end of international military expansion, forever, and some other way of relating to each other internationally. So that will be my question to both of you: how do you think gold could play this peaceful role, hopefully, in the future world arrangement? Maybe I’ll ask Michael first.
MICHAEL HUDSON
Well, I don’t want to be an advisor on how people should save their money — I try to avoid that. But as I said, the world is moving toward gold because there’s no alternative in the form of US dollars. As savings grow, what are people going to save them in? Gold has practical uses too, which is one of the reasons to hold it. For instance, I believe it was the Toronto-Dominion Bank, or one of the Canadian banks, that had its windows plated with gold — not just to show how rich it was, but because gold is an excellent heat and temperature seal. Gold has many genuine practical uses. But one of the reasons it’s such a good store of savings is precisely that it isn’t taking something away from practical applications. Silver has far more practical applications than gold — if you look at the origins of metallic money in Mesopotamia, silver was the basis of it all, alongside the tin trade used to make bronze. When you find gold in burials, it’s usually gold acquired by nomadic tribes through raiding — gold as a smaller, more portable object than silver. So gold actually came later than silver as money. Gold and silver together also had a symbolic, religious meaning — if you wanted prestige as a philanthropist, giving to the temples, you’d give gold and silver ornaments. Athens kept its public savings in the form of gold — not gold bars, but the golden robes worn by the statue of Athena, along with the other gold in the temples — and that was melted down to fund wars whenever Athens actually had to fight. So there was always a religious sanctification of gold and silver behind all this: gold was the metal of the sun, silver the metal of the moon, part of a whole ideology and mythology that tied it together. That ideology no longer exists, but the residue has lasted, because you could keep your savings in gold and silver without interfering with something the economy actually needs — unlike, say, rare-earth magnets. You wouldn’t want people saving in rare earths, because then there’d be none left for the weapons used to bomb enemies and grab their gold reserves.
KATHLEEN TYSON
Going back to medieval history — when King Cnut conquered England in 1016 (his father had conquered it a few years earlier, in 1013), he established the Huscarls as the king’s household warriors in London. The requirement to be a Huscarl was that you had to have armour and weapons made of gold and silver, which was wonderful for the city of London — it did a booming trade in goldsmiths and silversmiths, and it still has quite a few. By owning that much wealth, and being able to display it ostentatiously, you showed what a fabulous warrior you were, and that you had as much to protect as the king did, because you had the wealth to protect as well. So that’s an interesting bit of history there — war, gold, and silver really do tie together. But hopefully, hopefully we’re moving toward a more peaceful monetary standard. I’d like to think so.
NIKA DUBROVSKY
Okay — thank you so much, and I hope to see you both here again in a month. Maybe we can discuss later what our next theme will be, because the world is changing so quickly that it’s fascinating to watch.
KATHLEEN TYSON
It is. Always good talking with you, Michael.
MICHAEL HUDSON
Good, I’m glad. I loved your history, Kathleen.
KATHLEEN TYSON
Ah, well — that comes from a mad period of my life, when I retranslated the earliest account of the Norman Conquest from the Latin.
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