What Is the Cantillon Effect?
In the 1700s, Richard Cantillon observed something about money that most people still don’t understand. When new money enters an economy, it doesn’t reach everyone at the same time. The people who get it first benefit the most. The people who get it last are hurt the most.
This is the Cantillon Effect — and it explains more about wealth inequality than any other single concept.
How Money Printing Transfers Wealth From Workers to Banks
When the Federal Reserve creates new money, it enters the economy through the banking system. Banks get it first. They lend it to large corporations and wealthy borrowers at low rates. These borrowers buy assets — stocks, real estate, bonds — before prices adjust.
By the time this new money works its way through the economy and reaches ordinary workers through wages, prices have already risen. The worker’s paycheck buys less than it did before the money was printed.
The System Works as Designed -- Just Not for You
The system isn’t broken. It’s working exactly as designed — just not for you. Those closest to the money printer benefit. Those furthest from it pay the cost through higher prices and diminished purchasing power. See our inflation calculator to measure your own loss.
How Bitcoin Eliminates the Cantillon Effect
Bitcoin eliminates the Cantillon Effect because no one can print more of it. New Bitcoin enters circulation through mining at a fixed, predictable rate that halves every four years and will stop entirely at 21 million. Nobody gets early access. Nobody gets special treatment. The rules are the same for everyone.