Unchained Podcast – Episode 935

Ex-Citi Chief Economist on Gold, Bitcoin and the Debasement of the US Dollar

Host: Laura Shin (guest hosting: Steve Ehrlich)
Guest: Willem Buiter, former Chief Economist, Citi
Date: October 30, 2025

Episode Overview

In this episode, executive editor Steve Ehrlich (filling in for Laura Shin) interviews Willem Buiter, renowned economist and former member of the UK’s Monetary Policy Committee and Citi’s chief economist. The conversation revolves around Buiter’s provocative assertion that gold is caught in a “6,000-year bubble,” why central banks should avoid gold and Bitcoin, the risks of US dollar debasement, and how blockchain-based assets—particularly stablecoins and central bank digital currencies (CBDCs)—might reshape global finance.

Key Discussion Points & Insights

1. Gold as a "6,000-Year Bubble"

• Buiter’s Thesis: Gold's value is largely psychological—a belief-driven, self-fulfilling prophecy rather than one based on intrinsic utility.
  • "Gold is valued mostly for the belief that it is a good store of value. It has very few intrinsic services..." (Buiter, 00:54)
  • Central banks, particularly the US, should abandon gold holdings in favor of diversified portfolios of real and financial assets.
• Buiter advocates selling central bank gold reserves, stating it’s “completely insane” for the US government to hold so much—over $1 trillion at current prices.
  • “You invest the trillion in a diversified portfolio of financial [and] real assets. This protects the taxpayer.” (Buiter, 02:40)
• Fragility of Store-of-Value Assets: Both gold and Bitcoin rely on belief; neither, in his view, has substantial intrinsic value, making them fragile and risky.

2. Gold vs. Bitcoin: Bubble Logic & Intrinsic Value

• Host’s Pushback: Ehrlich notes bubbles don’t historically last 6,000 years and questions Buiter’s framework.
• Buiter’s Counter:
  • “Bubbles can last forever. They have ups and they have downs... the willingness of people to hold [gold] simply because they believe many other people... view it as a valuable investment instrument... makes no sense.” (Buiter, 04:58)
• On Bitcoin’s “Intrinsic Value”: Buiter contends Bitcoin no longer functions as money due to high volatility and lack of backing, even though it’s sometimes used for payments.

3. What Should Central Banks Hold?

• Diversification over “Crazy Exposures”:
  • Buiter argues for exchange-traded funds, broad-based stocks, commodities—not gold, not Bitcoin.
  • “Central banks can afford the loss if the price of bitcoin were to go to zero... [But] this is not something that I think should be part of a well-structured portfolio.” (Buiter, 06:24)
• Gold and Bitcoin are characterized as speculative, not fundamentals-driven.

4. Dollar Debasement, Currency Risk, and Gold’s Contemporary Appeal

• Context: The US dollar has fallen significantly, fueling the “debasement trade” and a renewed rush to gold.
• Buiter sees a flight from fiat as a generalized phenomenon across all major currencies.
• Potential for inflation is real in the US, UK, Europe, Japan, and China; however, gold is not the answer.
  • “Even if you are convinced that the dollar will shrink in significance... the alternative investment will be a diversified portfolio of real assets, not a single highly risky commodity.” (Buiter, 10:20)

5. Bitcoin’s Monetary Mechanics & Use Case Evolution

• Bitcoin: Payment Dreams vs. “Hold” Reality
  • Ehrlich notes Bitcoin was designed for payments but is now mostly marketed as a “hold at any cost” asset.
  • Buiter sees no reason for Bitcoin’s value retention since it is unbacked and highly volatile.
• Limited Supply?
  • “[T]here is no reason why we could not simply introduce Bitcoin 2 or Bitcoin 3, 4, 5, 6 and 7.” (Buiter, 13:33)
  • Ehrlich counters: Other “clones” lack Bitcoin’s network and community, making them irrelevant in practice.
• Key Insight: Bitcoin’s value is purely “mindset-driven”; nothing prevents it from being supplanted if the narrative shifts.

6. Blockchain Payments: Stablecoins, Tokenized Deposits, and CBDC

• Buiter’s Preference: Blockchain-based stablecoins, fully backed by central bank reserves or short-term Treasuries, offer genuine innovation, unlike Bitcoin.
  • “I'm a great believer in the future of blockchain-based payment instruments, stablecoins—but they have to be fully backed…” (Buiter, 12:58)
• Pros/Cons of Models:
  • Tokenized Deposits: Partially backed; still exposed to bank runs; require deposit insurance and central bank support.
  • Fully-backed Stablecoins (non-bank): Preferable, as they remove risk of runs and reduce need for deposit insurance or strict regulation.
  • CBDCs: Even better, provided there is ease of use, interest paid, and robust privacy protections.
    • “If we had full retail CBDC, we could abolish physical currency—eliminating the lower bound on rates and allowing for negative policy rates in a crisis.” (Buiter, 22:05)
    • On privacy: “You couldn't have full privacy with CBDCs, but you could have the pseudonymity…” (Buiter, 23:57)

7. Stablecoin Competition & the Future of Digital Money

• On Market Structure:
  • Multiple stablecoin issuers (banks, tech companies, neutral parties) will emerge, as long as assets are fully backed and operational overhead isn't prohibitive.
  • “We could see quite a lot of stablecoins. Depends on the magnitude of the fixed costs…” (Buiter, 28:46)
• Public vs. Private Stablecoins: Customer choice will hinge on interest paid, efficiency, and interoperability.
• CBDC Access: Supports the idea of allowing everyone—not just commercial banks—direct access to central bank accounts.

8. Federal Reserve Policy, Rate Cutting, and Independence

• Monetary Outlook:
  • Inflation remains above target (~3%); Buiter opposes further rate cuts absent clear signs of weakness.
  • “To me, the sensible course of action would be to wait—even to raise the policy rate…” (Buiter, 32:34)
• On Political Pressure: Buiter voices concern over political encroachment on Fed independence, though he does not see it as decisively compromised yet.

9. Podcast Wrap-Up: Decentralized Finance and Democratization of Markets

• Final Thought: Buiter is optimistic about the democratizing potential of tokenized assets, smart contract-based finance, and distributed ledgers—provided institutional support and proper regulation.
  • “We’re going to have many more participants potentially in financial markets... but that creates new risks as well.” (Buiter, 37:44)
  • “[D]istributed ledgers can really help to democratize finance.” (Buiter, 38:42)

Notable Quotes

• On Gold’s Enduring Bubble:
  "Gold is in a 6,000-year bubble... Its value is what people think it will be." – Willem Buiter (00:54, 04:58)

• On Investor Folly:
  “No central bank should... be a slave of history.” – Willem Buiter (02:17)

• On Bitcoin’s Lack of Uniqueness:
  “There is nothing intrinsic in Bitcoin that makes it unique or irreproducible.” – Willem Buiter (15:40)

• On Stablecoin Disruption:
  “There is no doubt that well-designed stablecoins, fully backed ones paying interest, would be competitive with bank deposits.” – Willem Buiter (17:18)

• On the Democratizing Future of Finance:
  “Distributed ledgers can really help to democratize finance.” – Willem Buiter (38:42)

Important Timestamps

• 00:54: Gold as a fragile, belief-driven asset
• 04:58: Discussion on whether gold is really a 6,000-year bubble
• 06:05: What a post-gold central bank portfolio should include
• 08:00: Dollar debasement and cross-currency inflation fears
• 12:58: Bitcoin’s prospects as payment v. store of value, critique of hard-cap thesis
• 17:18: Stablecoins versus bank deposits, implications for banking system stability
• 20:27: Comparative analysis of stablecoins, tokenized deposits, and CBDCs
• 22:05: The case for interest-paying, retail CBDCs and their impact on monetary policy
• 28:46: Market structure and competition in the stablecoin ecosystem
• 32:34: FOMC policy debate—rate cuts, inflation, and central bank independence
• 37:44: The prospects and risks of democratized, blockchain-based finance

Recap & Takeaways

• Buiter argues for pragmatism and diversification versus historical or belief-driven attachments to assets like gold and Bitcoin.
• He sees greater promise in regulated, fully backed stablecoins and CBDCs—especially ones that can pay interest to holders—as financial democratizers and disruptors.
• Political challenges and systemic adaptation are key hurdles, but the shift toward decentralized and tokenized finance markets is, in Buiter’s view, both inevitable and generally positive for society.

Listeners interested in the intersection of traditional finance and the rapidly evolving crypto sector will find this episode particularly rich in perspective and debate on the future direction of money and trust in the digital age.