Understand Your Money
Explore the history of money and how inflation shapes your financial future, with clear insights to help you stay informed.
The History of Money
Primitive Money
Early civilizations used shells and stones as money, valued for scarcity and durability. The Rai stones of Yap showed that trust in record-keeping could matter more than physical possession.
Precious Metals Era
Gold became the standard due to its rarity and durability, fueling progress from the Renaissance to the Industrial Revolution with a stable “hard money” system.
The Paper Era
Paper money, initially backed by gold, offered convenience but allowed governments to increase money supply, leading to inflation that affects savers’ purchasing power.
What Is Inflation?
Inflation is the rate at which prices for goods and services rise, reducing your money’s buying power. For example, $120 in 2025 might buy only what $100 bought in 2015.
Key Drivers
- Money Supply: More money in circulation can raise prices.
- Demand-Pull: High demand for limited goods increases costs.
- Cost-Push: Rising production costs (e.g., fuel) drive prices up.
The Money Supply
Since 1971, the U.S. dollar has been fiat currency, untied to gold, enabling central banks to expand the money supply. From 2020–2025, the amount of money in circulation grew by about 38%, contributing to inflation spikes like 9.1% in 2022.