Money For the Rest of Us

Host: J. David Stein
Episode: 539 – Resilient Wealth in an Era of Infinite Money
Date: September 17, 2025

Episode Overview

This episode explores how wealth and financial resilience can be managed in a world where central banks can create “infinite” money. J. David Stein dissects the implications of rapid money supply growth on inflation, asset prices, and wealth inequality, drawing on historical context and current economic realities. Listeners are also offered strategies to withstand and thrive in this evolving monetary landscape.

Key Discussion Points & Insights

What is the "Money Supply"?

• Defining Money Supply: Includes physical currency, checking and savings balances, and retail money market mutual funds (M2).
• Growth Trend: U.S. M2 reached over $22 trillion, up from $16 trillion in 2020 and much less a decade ago.
• Complex Measurement: U.S. dollars overseas aren't counted; official measures aren't perfect.
  “That's one of the challenges. When we say, well, what if the money supply is fixed? What's included in the money supply?” (01:08–01:19)

Fixed vs. Expanding Money Supply

• Negative Money Shocks: Occur when the money supply doesn’t grow with the economy → fewer transactions and lower prices (deflation).
  • Example: Late 19th century U.S. under gold standard had price deflation due to limited gold discoveries.
• Gold Standard Era: Gold discoveries (e.g., California Gold Rush) once expanded supply, but slowdowns led to less money and falling prices.
• Optimal Growth Rate: Ideally, money supply should grow in line with population and economic activity to lubricate commerce.

Inflation: Causes & Effects

• Three Ingredients for Inflation:
  1. Excess money
  2. Willingness to spend
  3. Supply of goods/services
• Recent Example (Post-2020): Quantitative easing (QE) increased money supply by 40%, fueling both goods inflation and asset price inflation, especially in housing and stocks.
  “That money that flowed into the economy didn’t just go into goods and services. It went into stocks, real estate, houses. … It led to asset inflation.” (07:16–07:29)

Wealth Inequality and the Money Supply

• Listener Al's Question: Did rapid money supply growth exacerbate wealth inequality?
• Research Evidence:
  • QE inflates asset prices, benefiting those who already own assets.
  • Some positive effects (employment, mortgage refinancing), but asset price appreciation “overwhelmingly swamped” these, increasing inequality even further.
    “Asset price appreciation overwhelmingly swamped those two areas, and so we saw greater wealth inequality.” (10:01–10:10)
• Federal Reserve Data:
  • In 1989, top 1% held 25% of wealth, bottom 50% held 3.4%.
  • Today, top 1% hold 30%+, bottom 50% hold just 2.5%.

Beyond Money: Positive Skewness and Power Laws

• “Taylor Swift Effect”: The internet and network effects mean “winners” (artists, athletes, entrepreneurs) can claim outsized rewards—a natural economic trend amplified by asset inflation but not created by it.
• Wealth Distribution: Asset price inflation (from money supply growth) exacerbates, but doesn't cause, the power-law wealth distribution.
  “It's a power law. We see it in wealth distribution, partly due to asset price inflation, but just how the economy works in terms of the ability for a message to be amplified.” (12:59–13:11)

How Money is Created & Central Bank Influence

• Loan Creation: Most money is created when banks make loans; borrowers expend "life energy" repaying, tying money creation to the real economy.
• Central Banks' QE: Less tied to real economy—no cost, can create money at will (“infinite money”).
• Gold Standard: Was tied to real economy via extraction effort, but had limitations.

Trust, Currency Experiments, and Cryptocurrencies

• Demurrage Currencies: Experiment where money “expires” (like gift cards), encouraging spending, not hoarding—low popularity, implementation challenges. “The whole idea of a demurrage currency is to encourage spending, more transactions, higher velocity of transactions, rather than hoarding of the money.” (16:01–16:12)
• Money = Trust: Quoting David Graeber:
  “The value of a unit of currency is not the measure of the value of an object, but the measure of one's trust in other human beings.” (16:58–17:04)
• Bitcoin and Stablecoins: Crypto’s trust dynamics not fundamentally more ‘absurd’ than fiat; Bitcoin has “perfect money” features (scarcity, divisibility) but high volatility.
  “We only trust that money because the government provides insurance to protect us. ... I don’t necessarily see cryptocurrency as a rule any more absurd than fiat money because it comes down to trust.” (17:35–18:09)

Historical Context: The End of the Gold Standard

• Leaving Gold (1971): Nixon closed the “gold window,” ending dollar convertibility to gold and imposing tariffs and price freezes to prevent dollar outflow and inflation.
  • Short-term: Lower inflation, dollar weakened gradually.
  • Medium-term: By mid-70s, inflation spiked as markets adjusted to new money regime. “That’s the magic of a dynamic, diverse economy… Ultimately prices adjust to increases in money supply, asset prices do, goods prices do.” (22:58–23:11)

Why QE Doesn't Always Cause Inflation

• Post-2008 vs. Post-2020:
  • After the 2008 crisis, QE didn’t spark inflation due to low demand/supply slack.
  • 2020-2022 QE caused inflation: Supply constraints + money surge fueled both consumer price hikes and asset bubbles.

Building Resilient Wealth in the Current Era

• Stein’s Core Advice:
  1. Own Real Assets (stocks, real estate, gold, crypto)—assets with pricing power or scarcity benefit from money creation.
  2. Grow & Diversify Income—Focus on developing new skills (particularly in the AI era), leveraging authenticity and authority.
  3. Stay Nimble: Be adaptable to technological shifts and economic volatility.
  4. Buffer Against Risk: Maintain emergency savings or insurance against downside scenarios.
  5. Redefine Wealth: Seek abundance and freedom, not just money.
     “How do we want to expand that life energy? … We want to definitely quickly convert that the money we earn into real assets to protect us against the debasement of currency.” (26:44–26:57)

Notable Quotes & Memorable Moments

• On Money Supply Definitions:
  “What if the money supply is fixed? What's included in the money supply?” (01:08)
• Asset Inflation from QE:
  “That money that flowed into the economy didn’t just go into goods and services. It went into stocks, real estate, houses. … It led to asset inflation.” (07:16–07:29)
• Money as Trust:
  “The value of a unit of currency is not the measure of the value of an object, but the measure of one's trust in other human beings.” (16:58–17:04)
• Historical quote – Nixon’s Gold Window closure:
  “He ended the convertibility of the US dollar to gold. … It was temporary, but it was permanent.” (20:28–20:35)
• Practical takeaway:
  “Own assets that can protect us. That can be real estate, it can be stocks, it can be monetary assets like gold and cryptocurrency … can either have the pricing power … or the supply is scarce relative to unlimited dollars.” (25:10–25:31)

Timestamps for Important Segments

• 00:00 – Main theme introduction and listener’s question about fixed money supply
• 01:40 – Explaining M2 and money supply measurement issues
• 02:45 – Money shocks, deflation, late 19th-century gold standard
• 05:25 – Ingredients of inflation and QE after the pandemic
• 07:16 – Asset price inflation in real estate and stocks
• 09:29 – Wealth inequality and quantitative easing research findings
• 11:55 – Breakdowns of wealth across income levels, changes since 1989
• 13:27 – Positive skewness and the “Taylor Swift effect”
• 14:46 – Money creation: loans versus QE versus gold standard
• 16:01 – Demurrage currency experiment
• 16:58 – Money as trust, Graeber quote, trust in crypto and fiat
• 19:26 – The end of dollar convertibility to gold (Nixon’s actions 1971)
• 22:58 – Economic consequences of severing the gold-dollar link
• 23:54 – Why QE only recently led to inflation; historical comparison
• 25:10 – How to build resilient wealth: assets, income, risk buffers, redefining wealth

Key Takeaways for Listeners

• Money is not just numbers; it is fundamentally about trust—and its abundance is governed by complex human and policy dynamics.
• Rapid money supply growth benefits asset holders most, exacerbating wealth inequality.
• In an era where central banks can create “infinite” money, resilience means:
  • Prioritizing ownership of real, scarce, or cash-flow-generating assets.
  • Remaining adaptive to technological and economic transformation.
  • Building true wealth—encompassing time, freedom, and abundance, not merely monetary assets.

Final thought from J. David Stein:
"There are no easy answers other than at least if we recognize that money is trust, there's an infinite amount that trust can dissipate. So we need to own real things, cash flow generating things. We need to build our resourcefulness … protect against the downside with buffers and don't focus on wealth in terms of just money. Focus on abundance, our freedom, our time.” (26:39–27:10)