The negative financial side of the cantillon effect: unequal distribution and growing inequality

The cantillon effect describes a fundamental inequality in the distribution of newly created money supply in an economy. Not all benefit equally; Rather, it is primarily banks, politically favored groups and large investors who gain access to fresh money at an early stage and are the first to benefit from an increase in purchasing power. This gives you theOpportunity to acquire assets at low prices before the money increase generally leads to price increases. The broad mass of the population, especially low-income earners, is far from this development and only receives the share of the increasing money supply that would be necessary to compensate for the loss of purchasing power much later or not at all.

accelerated Inflation hits the weakest first

The initial increase in value due to the early money distribution triggers increased demand, which leads to price increases throughout the economic cycle. However, adjusting wages and salaries accordingly often takes a long time, which means that people with low incomes in particular lose purchasing power in real terms. The cost of living increases more than incomes and permanent employeesPeople with rigid wage agreements find it difficult to compensate for inflation. The consequences are noticeable: The savings are shrinking as the value of basic needs is increasing and reserves devalue in a short time.

Unequal access to credit and the growing asset gap

Low-earning households have largely no direct access to freshly made loans on favorable terms. Such capital first ends up with financial institutions, companies and well-connected investors who can buy assets with the fresh money and invest in lucrative investments. As a result, the prices for real estate and other assets in particular are increasing, whatOwner and investor favored. The result is a significant expansion of asset shears: mainly asset holders benefit from the expansion of money, while low earners remain excluded from the price boom and lose prosperity in real terms.

burden for small businesses and the informal sector

Small businesses and those who are informally employed feel the negative sides of the cantillon effect particularly strongly. While prices for raw materials, energy and necessary resources are rising, they hardly benefit from the liquidity provided. This has a direct impact on your competitiveness, employment opportunities and income situation. inAs a result, low-wage sectors are increasing risks for jobs and income, which further opens the social gap and intensifies the economic challenges for these groups.

Social impact: More poverty through rising prices

In view of the constantly increasing costs for food, transport and energy, budget-conscious households have little opportunity to optimize their expenses. You have to weigh up the basic needs, which leads to a worsening of social inequality. The risk of poverty increases because the additional inflation-related costs put a lot of strain on disposable income and no correspondingcompensation takes place. The economic burdens manifest themselves in an ever deeper social division that has a lasting effect.

The cantillon effect as a motor of growing inequality

The core effect of the cantillon effect is the deepened economic inequality. Early recipients of money are benefiting from rising prices and wealth growth, while the masses of low incomes ultimately bear the burden of inflation alone. This unequal distribution is hardly corrected by itself without targeted policy measures. insteadthe gap between wealthy and low-income populations continues to grow, jeopardizing social peace and economic stability.

Necessity of political countermeasures to correct

Without any decisive political intervention, the money creation process remains unfair. The burden of inflation falls unilaterally on the weaker ones, while financially potent actors account for most of the increase. To restore a balanced ratio, measures are required to improve access to small household capital, wealth accumulationsupport for broad shifts and mitigate the negative consequences of the expansion of money by means of targeted balancing mechanisms. A balanced economic cycle needs more justice in the distribution of freshly made money.

The Cantillon Effect as an Unsolved Challenge

The cantillon effect shows how monetary policy is not neutral and has an impact on large parts of the population. The politically privileged groups will allow early access to new resources, the masses will have to pay rising living costs without receiving adequate compensation. As long as this inequality is not addressed, theDistribution imbalances, poverty risks are growing, and the social gap is growing significantly. The path to more social justice leads only through the recognition and targeted combating of this dynamic.