Understanding the Cantillon Effect

The Cantillon Effect refers to an economic phenomenon in which changes in the money supply do not impact all individuals equally. This effect is named after the 18th-century Irish economist Richard Cantillon, who observed that when new money is introduced into an economy, it first reaches certain individuals or sectors before others, causing uneven effects on prices and wealth distribution.

In other words:

Under the current global fiat monetary system governed by central banks, when these banks create more money out of thin air — essentially just a digital entry into a computer in the form of financial instruments (bonds, mortgages, and other interest-bearing transactions) — and pump it into the economy, it is not distributed evenly. Instead, the new money flows into specific sectors, often financial markets or industries selected by governments, the Federal Reserve, or major banks. The individuals who benefit first are those who are closely connected to these institutions.

Here’s the issue: when these groups receive the new money, they can use it before prices across the economy rise. They buy assets or invest while everything is still cheap. But by the time the money trickles down to regular people like you, prices have already risen, and the purchasing power of your money has decreased due to the central banks increasing the money supply. As a result, we are left facing higher costs without receiving any of the initial benefits.

This is what inflation does: it redistributes wealth. It takes from the majority of people and gives to those who receive the money first. It’s a hidden transfer of wealth, and most people don’t even realize it’s happening because they don’t study these mechanisms.

What’s frustrating is that some people defend inflation, claiming it’s good for the economy or helps reduce wealth inequality. But those defending it are usually the ones closest to the money printer — politicians, academics, and others who benefit directly. Naturally, they want to maintain the system.

At its core, this system is a massive con. By expanding the money supply, they are stealing your time, effort, and energy. You’ve used your time, effort, and energy to earn your money, but when they increase the fiat money supply, you have to exert even more time, effort, and energy to buy the same basic goods and services, because the money in your pocket is now worth less. It’s a form of slavery and theft. It’s a way of taking wealth from everyone else and concentrating it among a select few, all while pretending it’s just how the economy works.