Monday, April 3, 2023

The Cantillon Effect, Great for the Wealthy and maybe the rest of us


The Cantillon effect refers to the impact of money supply changes on different economic sectors. In general, those who receive the new money first (such as banks and the wealthy) benefit from increased purchasing power, while those who receive the new money later (such as wage earners) experience higher prices and a decline in purchasing power.

Several factors are at play in the United States economy and lifestyle, and the Cantillon effect is just one of them. The decline in the manufacturing sector in the United States has been a long-standing trend, leading to increased dependence on foreign manufacturing. This has created a trade deficit for the United States, meaning that it imports more goods than it exports, leading to a drain on the economy.

Additionally, the printing of money by the Federal Reserve has led to concerns about inflation, which can erode the value of the dollar and lead to higher prices for goods and services. This can also exacerbate the Cantillon effect, as those who receive the new money can use it to purchase assets they appreciate. In contrast, those who receive the new money later may need help to keep up with rising prices.

Overall, these trends could be better for the United States, as they can lead to a decline in economic competitiveness and a lower standard of living for many Americans. However, many other factors are at play, such as technological innovation and changes in global trade patterns, that can influence the economy's overall health and the well-being of its citizens.



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