The “Cantillon Effect” refers to the unequal distribution of money in the current fiat currency system, which benefits those closest to the government and harms those farthest away. Banks are the main creators of money, which gives them great power to determine who gets new money via loans and what they do with it, ultimately impacting the economy. The effect means that new money is not equally distributed across the economy, sectors, asset classes or people and businesses, meaning bankers, bureaucrats, and politicians reap the benefits first, allowing them to buy goods and assets at reduced prices, giving them an arbitrage advantage over everyone else. This creates inflation that taxes the purchasing power of common citizens.
Cash is King: Exploring the Cantillon Effect and its Impact on the Economy
We have all heard the phrase, “Cash is King,” but do we really know what that means? Cash becomes more powerful the closer we are to those in power and becomes harmful as we move away from them. This article will explore the Cantillon Effect, a phenomenon where the unequal distribution of money in our current systems benefits those closest to the government and harms those farthest from it.
Understanding the Banking System
To understand the Cantillon Effect, we must first look at how banks work. There are three prevalent theories on where money comes from, with the most accurate being that banks are the main creators of money. When new money enters the economy, it is not equally distributed, impacting individual wealth and causing various injustices in our modern society.
The Cantillon Effect
The Cantillon Effect is a concept coined by Irish French economist and banker, Richard Cantillon, in his literature called “Essay on the Nature of Trade in General.” It is all about how new money enters an economy and how people and entities that create money decide when, where, and for what purposes the money is spent. New money first goes to bankers, bureaucrats, and politicians, who reap the benefits of it. This unequal distribution of money impacts individual wealth and is the key cause and driver of injustices in our modern society.
Impact on the Economy and Crypto Markets
The impact of the Cantillon Effect is felt throughout the economy, causing inflation and asset bubbles that can lead to crises. In the crypto markets, the Cantillon Effect can play out in various ways, and it’s crucial to protect ourselves from it by understanding how it works and taking measures to guard against it.
Protecting Ourselves From the Cantillon Effect
One way to protect ourselves from the Cantillon Effect is to seek financial education, diversify our assets, and invest wisely. Additionally, using a mobile phone security service like Efani can help protect against sim swapping attacks, which can lead to significant financial losses.
The Cantillon Effect is a complex concept that impacts our daily lives in various ways. Understanding how it works and taking measures to protect ourselves from it is crucial to securing our financial futures and creating a society that is more equitable for everyone.