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MENTAL MODEL · M1968

Cantillon Effect

Cantillon Effect
BusinessHigh supportMonetary Economics
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

An increase in the money supply (printing money) does not affect all prices simultaneously and equally. Money is sticky, like honey, and as it flows, it reaches some people first. Those closest to the printing press (banks, government contractors, large enterprises) receive the new money first and purchase assets before prices rise; those farthest from the printing press (ordinary people on fixed wages) receive the money last but must bear the already-inflated prices. - Scaffolding role: a monetary perspective on the wealth gap. It reveals that inflation is not a universal natural disaster but a redistribution mechanism. If you do not understand the "flow" and "time lag" of money, you cannot understand why economic easing makes the rich richer and the poor poorer.

SCAFFOLDING EFFECT

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A monetary perspective on the wealth gap. It reveals that inflation is not a universal natural disaster but a redistribution mechanism. If you do not understand the "flow" and "time lag" of money, you cannot understand why economic easing makes the rich richer and the poor poorer.

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New money is first obtained by sectors close to the printing press (finance, government contractors, asset holders), who buy assets before prices are pushed up; those farther away receive the money last but bear the already-inflated prices. Monetary expansion is not neutral but redistributive, widening inequality. The mechanism is "money is sticky like honey, transmitting sequentially."

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Richard_CantillonZH · Explicit
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