If We Ride the Cantillon Wave, We Should Remember That We'll Crash with It Too
"The Federal Reserve has created a tsunami of new money, but a tsunami ultimately must crash, and so will the Fed's inflation scheme."
“Irish banker Richard Cantillon is known for the observation that the first recipients of new money benefit at the expense of later ones. This is due to the first recipients being able to use the new money to purchase goods, assets, services, etc., while prices remain relatively low—these are the winners. By the time that money circulates into subsequent hands, prices have risen, offsetting any benefit. And, finally, when that money passes into later hands, prices have exceeded the nominal value of inflated wallets—these folks are the losers.
So when inflation—the increase in the money supply—occurs, you want to be riding the crest of the wave, letting others crash as it breaks over them.
The Cantillon effect is not just theoretical, it's real. For almost two years, I rode a small Cantillon wave. And now, a colossal one is crashing all around me.”