How the Cantillon Effect Drives Wealth Inequality
The Cantillon Effect explains how newly created money enters the financial system unevenly. Early recipients benefit from rising asset prices while wage earners face higher costs last.
Inflation operates as a wave that hits the United States economy unevenly, enriching asset owners while wage earners absorb higher living costs first. The mechanism behind this divergence is the Cantillon Effect, which dictates that money created by the Federal Reserve enters the financial system through specific institutions rather than arriving everywhere simultaneously. Understanding this distribution reveals why monetary expansion frequently widens wealth inequality.
