I have tried sorting this out on my machine, but there IS a way.
Go into the recording volume control and UNMUTE 'Stereo Mix'. Again, inside Recording Control lower the 'Recording' input to say the first bar.
Go into playback, lower the channel labelled 'Wave' a couple of notches down.
Play some music and go to record in Audacity to check if it sounds OK as you may need to lower the Wave or Main 'Recording' to reduce distortion.
Hope this helps.