What is Cantillon effect? How printing Money Helps the Rich

What is Cantillon effect? How printing Money Helps the Rich

Cantillon effect comes from an Irish French economist called Richard Cantillon. Who published an essay on the nature of trade in 1730.

In general and in that essay he describes the Mechanics of money, money creation and how it affects the economy Cantillon states that when the money is created it doesn’t distribute in the economy in equal way in every area of the economy.

It first gets to the Financial class to the people who are close to the money and when they spend the money depending on their preferences it gets into these branches in these industries where they spend the money and then it somehow goes or flows through the economy.

As in waves step by step and of course money creation causes inflation but when the money is spent the first time the people who spend the money that got the money from the printer so to say they buy the goods at low prices at the old prices.

But then the money gets to more and more people and the further away you are from the money from the money creation the higher the prices that you encounter.

So the people at the end of that chain have to buy the same goods at higher prices so they get the least advantage of that money and there are people in the system that the money don’t get to and these people don’t get any advantage of that newly created money.

On the other hand the old money that is in the system that is owned by the people in the economy this money gets inflated by the newly created money.

What is Cantillon effect? How printing Money Helps the Rich

Cantillon effect that says that the farther from the printer the less advantage you get and actually you are more and more in disadvantage as the old money that you possess gets inflated and you get only a small percentage of the newly created money.

How printing Money Helps the Rich

People who are close to the printer are banks and then financial institutions of other kinds then we have the the State itself.
Issuing bonds and getting freshly created money from the purchases of the bonds or from the central banks more or less directly or more or less indirectly.

Then we have of course State and all the companies that somehow enjoy the support of the state by subsidies or sometimes political support or financial support of the state for generating employment or helping with debt.

So these are the profiteers of uh this money creation and of county loan effect and who are the losers of the Cantillon effect.

So to say of the food chain or the people who the new money doesn’t reach but they have to pay higher prices.


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