Posts tagged #Cantillon effect
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Where new money comes in
What the Cantillon effect is, and why it explains inflation better than a single number does. New money does not rain evenly on the economy: it comes in through one particular door and spreads from there, and those who receive it first spend at old prices while those who receive it last pay new prices with old incomes. Richard Cantillon saw it as a banker, from inside John Law's bubble; an island with a vein of gold shows it step by step; today's channels (central bank purchases, bank credit, even the 2020 stimulus checks) repeat it. Seen up close, inflation is a process that moves through the economy in an order, not a level that rises everywhere at once: knowing which door the money comes in through changes the questions worth asking.