Yes —
the Cantillon Effect is
the hidden engine behind modern monetary inequality and asset bubbles.
It explains
who actually benefits when new money is created.
What the Cantillon Effect is
Named after economist
Richard Cantillon (1730s):
Money is not neutral.
Whoever receives new money first gains purchasing power before prices rise.
When new money is created, it enters the economy
at specific points, not evenly.
Those closest to the money spigot win.
Those farthest away lose.
How modern money is created
New money does
not appear in everyone’s bank account.
It is created when:
• Central banks buy government bonds
• Central banks bail out banks
• Banks create loans
• Governments run deficits
The new money flows first to:
- Large banks
- Financial institutions
- Governments
- Large corporations
- Asset markets (stocks, real estate, bonds)
Only later does it reach:
• Salaries
• Wages
• Pensions
• Fixed income
• Small savers
By the time it gets there,
prices have already risen.
What it does in practice
When new money enters:
Early receivers Buy Prices rise Banks & funds Stocks, bonds, real estate
Asset inflation Corporations Mergers, buybacks Market concentration Government Spending CPI inflation
later Workers Groceries, rent Real wages fall
This is why:
• Stocks hit record highs
• Housing becomes unaffordable
• Wages lag inflation
• Wealth inequality explodes
All
without any conspiracy — it is mechanical.
Why inflation feels “unfair”
Because:
You are paid last.
If your income is:
• Wages
• Salary
• Pension
• Savings
You are on the
wrong end of the Cantillon chain.
By the time money reaches you:
• Rent is higher
• Food costs more
• Houses are gone
• Assets already repriced
Your purchasing power shrinks.
Why gold, bitcoin & hard assets exist
They are
Cantillon shelters.
They cannot be printed.
They cannot be selectively distributed.
So when money is debased, capital flows into:
• Gold
• Land
• Energy
• Bitcoin
• Commodities
This is exactly what you were hinting at earlier with
central banks dumping Treasuries and hoarding gold — it’s not superstition, it’s Cantillon math.
The brutal truth
The system rewards:
• Borrowers
• Banks
• Governments
• Asset owners
It punishes:
• Savers
• Workers
• Pensioners
• Cash holders
Not by accident.
By design.
Because
money creation is power allocation.