Episode 83: A Brief History of Money

Segment 1:

HELLO Lower Alabama! Hello Gulf Coast! Welcome in. Welcome to Coasting in Retirement! Thanks for joining us today, Josh Null here, alongside co-host Michelle Lee Melton-Null, the whiskey in a tea cup, Michelle how are you doing? We are back in Coastal College’s recording studio, beautiful downtown Fairhope, ready to put together another great show for those of you tuning in!

Listeners: Michelle and I are here today to discuss financial topics relevant to those of you in or near retirement, living your best life along our part of the Gulf Coast. Here’s what we’ve got in store for you: First segment – deep dive on our topic of the day. 2nd segment - at about 30 minutes past the hour - “Headlines of the Week”. Then at roughly 50 minutes past the hour, stick around for our 3rd segment, we call it” Josh’s Crystal Ball and Big Mouth”. So buckle up, we’ve got a lot to get to!

Quick background on me for those new to the show. Again, my name is Josh Null, I am a fee-based financial advisor, I hold my FINRA Series 65 securities license, and I am the owner of Gulf Coast Financial Advisors, that is a 100% locally owned, 100% independent investment management and financial planning firm with offices in Fairhope, Orange Beach, and Mobile! You can find more information on me and the team at Gulf Coast Financial Advisors by visiting our website gulfcoastfa.com, or feel free to give us a call at 251-327-2124. If you missed that contact info, get a pen and pad ready because we will repeat our contact info several times throughout the show!

A couple of questions to you Michelle to set the table for our topic today: what is money? How is money produced? (Michelle). Today we are going to talk about the history of money, particularly the history of the US dollar, and more importantly, why money and monetary policy matters so much to investors.

If you go back to ancient Mesopotamia, they weren't always swapping physical gold. They used clay tablets to record debts. Money started as a ledger system. Fast forward a few thousand years, and we moved to "commodity money"—things like gold and silver that had intrinsic value. But the big shift for our listeners' portfolios happened in 1971. That’s when we came off the gold standard and officially broke the link between the U.S. Dollar and gold. We moved from "Representative Money" to "Fiat Money"—money that has value simply because the government says it does and we all agree to use it. Let me melt our listeners brains a little: money isn't an object; it’s a social contract. It’s a ledger of who owes what to whom. This is one of the reasons that crypto has had it’s ups and downs – there hasn’t been consensus around the crypto social contract like there is with money. At least not yet.

Understanding how money is created is like pulling back the curtain on a stage play. Most people think the government prints every dollar at a physical press, but in our modern 2026 economy, the "printing press" is actually a digital ledger shared between two main players: Central Banks and Commercial Banks.

1. The Central Bank (The "Base" Factory)

The Federal Reserve doesn't just print paper; it creates Bank Reserves. When the Fed wants to increase the money supply, it engages in "Open Market Operations" (or Quantitative Easing).

The Process: The Fed buys government bonds from big banks.
The "Magic": To pay for these bonds, the Fed simply types a new balance into the selling bank’s digital reserve account. No physical money moves; a digital entry is created out of thin air. This is the Base Money that supports the rest of the system.

2. Commercial Banks (The "Credit" Factory)

This is where 90% of the money you actually spend is created. Contrary to popular belief, banks don't just "lend out" the money other people deposited. Instead, they create new money every time they issue a loan.

The Fountain Pen Effect: When you take out a $500,000 mortgage, the bank doesn't take $500,000 from a vault. They credit your account with $500,000 and record a $500,000 debt on their books.
New Deposits: At that exact moment, the money supply has increased by half a million dollars. That "new" money is then spent on a house, deposited into a seller's bank, and the cycle continues.

3. The "Debt" Reality

In this system, money is essentially a ledger of debt.

Creation: When a loan is born, money is born.
Destruction: When you pay off a loan, that money is actually "destroyed"—it disappears from the bank’s ledger, and the total money supply shrinks.

Why It Matters for Your 2026 Portfolio

Because most money is created through lending, the "cost" of money (interest rates) is the most important lever in the world.

Low Rates: Encourage more borrowing, which "prints" more money into the economy, often leading to higher asset prices (stocks/real estate).
High Rates: Slow down borrowing, which effectively puts the "money factory" on a break, leading to less liquidity and potential cooling of the markets.

Fun note: if everyone in the world paid off their debts tomorrow, there would be almost no money left in circulation. We live in a debt-based monetary system, which is why understanding the "ledger" is the first step to becoming a truly sophisticated investor.

In the simplest terms, inflation occurs when the growth of the money supply outpaces the growth of the economy’s ability to produce goods and services. If you double the number of "ledger entries" (dollars) in the world but don't double the number of houses, cars, or gallons of milk, each individual dollar represents a smaller "slice" of the total economic pie. This is why, following the massive money supply (M2) expansion of 2020–2021, we saw the highest inflation rates in 40 years by 2022.

But it’s not just the Covid years that are an issue. Since 1975, the U.S. monetary supply (M2) hasn't just grown; it has undergone a vertical transformation. In January 1975, the M2 money supply was approximately $1.01 trillion. As of April 2026, it has reached a staggering $22.8 trillion!

The Breakdown of the "Money Explosion"

Total Numerical Increase: About $22 trillion of money has been added to the system in the last 51 years.
Percentage Increase: Approximately 2,146%.
The Velocity Shift: It took roughly 31 years (1975 to 2006) for the money supply to grow by its first $6 trillion. In contrast, during the 2020 pandemic era alone, the supply jumped by nearly $6 trillion in just two years

Why Did It Accelerate So Fast?

There are three distinct "chapters" to this growth that every investor should understand:

1. 1975–2008 (The Steady Climb): Growth was largely driven by commercial bank lending. As the economy expanded and people took out more mortgages and business loans, the "ledger" grew at a relatively predictable pace.

2. 2008–2019 (The Quantitative Easing Era): After the Great Financial Crisis, the Federal Reserve began buying bonds directly, injecting "Base Money" into the system to keep the gears turning. This created a new, steeper floor for the money supply.

3. 2020–2026 (The "Vertical" Move): The combination of massive fiscal stimulus (government spending) and aggressive monetary policy (Fed buying) led to the largest percentage increase in the money supply in U.S. history. While there was a slight contraction in 2023, the supply has since stabilized and resumed a more traditional growth path of about 4.6% year-over-year as of early 2026.

Takeaway for Your Portfolio

This 2,146% increase is the reason why a "buy and hold" strategy in cash is effectively a guaranteed loss of purchasing power. It’s why JD Gardner of Aptus Capital Advisors and I agree when we say that people need to reconsider what they consider a “safe” investment. When the supply of "ledger entries" increases by twenty-fold, if you don’t have a corresponding twenty fold increase of goods and services bought, the price of those goods and services increases, sometimes exponentially, as we’ve seen with the stock market, and to a lesser degree, the housing market.

This is why we focus on Real Assets. Whether it's stocks of companies with pricing power or real estate on the Gulf Coast, you want to own the things that the "money factory" can't print.

Since 1975, the stock market has significantly outpaced the growth of the money supply, illustrating why being an owner of "productive assets" is so critical for long-term wealth.

Stocks vs. Money Supply

When you put these numbers next to the 2,146% increase in the M2 money supply we just discussed, the picture becomes very clear:

Beating the Printing Press: While the money supply grew by about 21x, the S&P 500 grew by over 104x. This means the "social contract" of the stock market—owning a piece of American corporate ingenuity—was a far better store of value than just holding the currency itself.
The Power of Compounding: These returns represent a massive "wealth gap" between those who saved cash and those who invested in the ledger of productivity. The S&P 500, in particular, shows the power of diversification across the 500 largest companies in the world
The 2026 Reality: Even with the "hot inflation" data we've seen recently in April 2026 (headline CPI at 3.8%), the historical record shows that over the long arc, the stock market has been the ultimate hedge against the expansion of the money supply.

I’ll ask Michelle this question first, then repeat for our listeners to consider as we close this segment: Does seeing that 10,000% jump in the S&P 500 change how you think about the "risks" of the market versus the "risks" of staying in cash?

Whew. Alright listeners, if you want to set up a follow-up conversation with the team at Gulf Coast Financial Advisors, it’s easy. You can catch us at 251-327-2124, or find us on our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. There are flexible meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, a 30-minute zoom, or my preference, an in-person meeting at any of our 3 office locations: Downtown Fairhope, Orange Beach just down the road from the Wharf, or in Mobile near the intersection of Dauphin St and I-65. Reach out to us - we would love to meet you!

Alright folks, coming up next - There’s always a lot going on in the world! Particularly the world of finance, investments and money. Every week we scour the internet for financial articles relevant to those of you in or near retirement, then give you our honest opinion about these headlines. So join us after the break to hear Michelle and I discuss this week’s relevant headlines in our “Headlines of the Week” segment. Stay tuned!

Segment 2 - News of the Week:

Josh: “Welcome back to Coasting in Retirement, your host Josh Null here, alongside co-host Michelle Lee Melton-Null. As we discussed before the break, every week we scour the internet for financial articles that pertain to those of you in or near retirement. Our job, or at least we tell ourselves it is, is to help you all understand how these headlines impact you, especially when it comes to your money! Note – if you want to read our referenced articles yourself, we also include the links in our show transcript, which you can find on our website gulfcoastfa.com under the podcast tab. Now without further adieu, here’s Michelle with the Headlines of the Week!

1. Michelle: Alright Josh, as of right now the entire financial world has its eyes on the sky. A massive headline just hit the desk from CNBC regarding the biggest initial public offering in history. It’s titled, "Morningstar values SpaceX at $780 billion, less than half of its IPO target." As the article details, SpaceX has locked in its upcoming Nasdaq debut at a fixed $135 a share, aiming for a staggering $1.75 trillion valuation to raise a record-breaking $75 billion on the sale of its IPO. The enthusiasm among retail investors is absolutely through the roof. But independent analysts at Morningstar just dropped a massive bucket of ice water on the hype machine. They put out a rare, contrarian "sum-of-the-parts" valuation pegging the firm's fair value at just $780 billion. While they acknowledge that Starlink is a phenomenal, high-moat profit machine, they warn that the public market is heavily overvaluing the company's recent artificial intelligence expansion and untested orbital data center tech. Morningstar's blunt takeaway for everyday people is simple: the stock is being priced for absolute perfection, and long-term investors should wait for the opening "pop" to fade before chasing it.

Josh, from a wealth management perspective, we talk all the time about the danger of buying a great company at the absolute wrong price. When you see a massive discrepancy like this between Wall Street's hype machine and institutional fair-value math, how should a retail investor dissect this headline, and what are the structural risks of buying into a "mega-IPO" on day one?

https://www.cnbc.com/2026/06/03/morningstar-spacex-ipo-target-price-nasdaq.html

2. Michelle: For our next headline, we’re shifting from the stars back down to the earth—literally. We’ve got a piece from Schwab titled, "Gold vs. Stocks: Which Is the Better Inflation Hedge?". With all the talk about the "AI economy," there’s a quiet but persistent movement back into hard assets. The article tackles the age-old debate: when the cost-of-living climbs, where should you park your capital? It notes that while gold has the historical reputation of being the ultimate "crisis commodity" and a store of value when the dollar weakens, the data over the last several decades shows a different story for long-term growth. Stocks, specifically those in companies with high pricing power, have historically outperformed gold as an inflation hedge because businesses can raise prices to match rising costs, whereas gold just sits in a vault. However, the article emphasizes that in 2026, gold’s role isn't necessarily about beating the S&P 500; it’s about its low correlation to other assets—providing a "volatility dampener" when the market gets shaky.

Josh, we see this all the time—clients get nervous about inflation and want to dump their "paper assets" for gold bars. Looking at the Schwab data, how do you help a client distinguish between a productive asset and a defensive one, and where does gold actually fit into a modern, diversified 2026 portfolio?

https://www.schwab.com/learn/story/gold-vs-stocks-as-inflation-hedge

3. Michelle: Our final headline comes from our friend that likes to shop for clothes at Walmart like Josh does, Stan The Annuity Man. It’s an article titled, "The Truth About Inflation and Annuities.". With inflation being the ultimate "silent thief" of a retiree's purchasing power, a lot of insurance agents use it as a fear tactic to sell products. The article tackles the common sales pitch where agents claim they have the "perfect annuity" that automatically tracks or outsmarts inflation using indexed upside or income riders. According to Stan, a commercial annuity that perfectly tracks inflation in real-time doesn’t exist. You add a Cost-of-Living Adjustment (COLA) rider for a fixed annual increase, but the insurance company will simply ratchet down your initial payout by 20% to 30% to make the actuarial math work. It can take 6 to 9 years just to break even. The article concludes with a fascinating point: the only true inflation-adjusted lifetime income stream you already own is Social Security. Instead of overpaying for complex, hypothetical contract features, retirees are often better off pairing Social Security with simple, contractual guarantees and tackling income gaps dynamically as they actually appear.

Josh, when a client is terrified of inflation eroding their lifestyle, how do you help them see through the "illusion" of these inflation-friendly product pitches, and what is the mathematically sound way to build an inflation hedge without sacrificing their initial income floor?

https://www.stantheannuityman.com/learn/the-truth-about-inflation-and-annuities

Listeners, if you want to set up a follow up conversation with the team at Gulf Coast Financial Advisors, it’s easy. You can call us at 251-327-2124, or find us on our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. There are flexible meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, a 30-minute zoom, or my preference, an in-person meeting at any of our 3 office locations: Downtown Fairhope, Orange Beach just down the road from the Wharf, or in Mobile near the intersection of Dauphin St and I-65. Reach out to us - we would love to meet you!

Alright folks, coming up next: Josh’s Crystal Ball and Big Mouth. What have been some of my predictions? Have I been right? Was I ever wrong? How wrong? What do I think is going to affect investors in the near future, or maybe the distant future? We talk about all of these things and poke a little fun at my big mouth. Stay tuned!

Segment 3 – Josh’s Crystal Ball and Big Mouth:

Welcome back! Your host Josh Null here, joined by co-host Michelle Lee Melton-Null . So, I am opinionated, I have strong opinions at times, I would say a radio show host that isn’t probably wouldn’t be very interesting to listen to. And I am paid in my profession to offer professional guidance and opinions to my clients, so if I don’t have anything intelligent to say, just replace me with AI. I like making predictions, sometimes I hit the bullseye, sometimes I swing and I miss. Is there any crow to eat? Let’s get at with Josh’s Crystal Ball and Big Mouth and find out.

Michelle: Josh, regular listeners might remember that back when Dogecoin and the Department of Government Efficiency, or "Doge", were going full force, you took a lot of heat for calling it a complete waste of time. Your point wasn't about the technology; it was about math. You stated that the only way an "efficiency commission" would work was to tackle the actual components of the parts of the federal budget that actually mattered, such as social security, Medicare and defense, but that no politician was going to have the guts to touch was is referred to as the third rail of American politics. While DOGE initially claimed it saved taxpayers hundreds of billions of dollars, nonpartisan fact-checkers and budget analysts estimate the true, verifiable savings are much closer to $1.4 billion to $2.3 billion. So all appearances are that you got this prediction right, but if so, why do you think it’s so hard for Doge, or any group for that matter, to cut federal spending?

Josh: If you want to understand why Doge failed, you have to look at how Uncle Sam actually spends our money. In a given fiscal year, the federal government spends roughly $7 trillion. But the public has this illusion that we are spending all our money on corporate welfare, foreign aid, or bureaucratic waste. The hard reality is that our budget is overwhelmingly dominated by just three things: entitlements, defense, and the interest on our national debt.

Let's look at the actual ledger entries:

Social Security: This is the single largest line item, absorbing roughly 22% of the entire federal budget.
Healthcare (Medicare & Medicaid): Together, Medicare and federal healthcare programs take up another 28% of total spending.
National Defense: Keeping the country safe accounts for about 13% of the budget.
Net Interest on the Debt: This is the scariest one. Just paying the interest on the money we’ve already borrowed eats up roughly 14% of every single dollar the government spends.

If you do the quick math, those four categories alone consume over 75% of the entire federal budget. The rest of the government—everything from roads, bridges, and education to national parks, NASA, and the actual salaries of federal employees—is crammed into that last tiny sliver.

And that brings us to why we run a permanent federal deficit. It’s a structural math trap. Right now, the Congressional Budget Office projects our annual deficit to hit $1.9 trillion. We run a deficit simply because the government collects about $5.5 trillion in tax revenue but has legally committed itself to spending over $7 trillion.

Here is the kicker that applies directly to our listeners' retirement plans: combined, our mandatory entitlement spending and the interest on our national debt are now roughly equal to the total tax revenue the United States brings in. That means before Congress even opens up a single debate about funding the military or running the government, every single dollar of tax revenue is already spent. Every single thing after that is funded by purely printing money and borrowing. Which leads up back to the theme of this episode.

Well, listeners, I hope you enjoyed a little peek into how we form our opinions and make predictions. We invite you one last time, if you would like to have a no-pressure, no-obligation conversation about your investing goals and retirement dreams, you can call us at 251-327-2124, or find us through our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. We have several meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, all the way to an in-person meeting at any of our 3 office locations. You can find GCFA offices in downtown Fairhope, or Orange Beach off Canal Road, or in Mobile near the intersection of Dauphin St and I-65. Reach out to us - we would love to meet you!

That’s our show for this week! I want to give a huge thank you to my co-host Michelle, thank you to the producer of the show, Payton Null, thank you to our show sponsor, Providence Partners and Jay Stubbs, thank you to our awesome radio station, FM Talk 106.5 out of Mobile, many thanks to the provider of our show music, local band Sloth Racer, and as always my sincere appreciation for all of your out there that have been listening and joining us on this journey. We would love to be a part of your journey as well! Until we talk again, have a wonderful and productive week. This has been Coasting in Retirement with Josh Null!

GCFA Disclosure:

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The Coasting in Retirement radio program serves mainly to disseminate general information including those pertaining to GCFA’s advisory services, together with access to additional investment-related information, publications, materials and links. The publication of this radio show should not be construed by any client and/or prospective client as GCFA’s solicitation to effect, or attempt to effect transactions in securities, nor should it be interpreted as GCFA providing personalized investment advice, or any type of professional advice, for compensation, wherever this program is broadcast. Any subsequent, direct communication by GCFA with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

Certain information, news stories, headlines, data, charts, graphs, figures or statistics presented on this radio program may have been obtained from third-party sources that are believed to be generally reliable but which GCFA may not have independently verified. GCFA does not and cannot guarantee the timeliness, accuracy, or reliability of any such third-party information and undertakes no obligation to update or correct any information that may become obsolete, unreliable, or inaccurate. The radio program also contains the opinions, views, and perspectives expressed by Josh Null and any other GCFA representatives which are solely their own, and do not necessarily reflect the opinions, views, or perspectives of GCFA as a firm. Such personal views and opinions should not be construed as endorsements or professional advice from GCFA. GCFA makes no representation or warranty regarding the accuracy, completeness, or reliability of any information on this radio program, and disclaims any liability for any direct or indirect loss or damage incurred from using or relying on such information.

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