A friend who works in a bank had the opportunity to borrow cash from his bank at the rate of 0.9% for 20 years during QE. He borrowed $1m that he now happily invests in 5% yielding bonds.
Not sure this qualifies as Cantillon effect, but it's one of those things that make capitalism deeply unfair. QE was free money for the already wealthy so they could "invest" and keep the general economy running. Not all of these investments made money, obviously, but still, it's a way to fuel the economy from the top.
I always thought fueling the economy from the bottom was a much smarter idea... Giving out unemployment benefits so that the unemployed still consumes, and hence do craete activity from their consumption, rather than engaging in stupid ass 432-Park ave-like projects.
Agree, although I don't think it was only that. But I have a dislike for it for some reason I can't quite articulate.
> Giving out unemployment benefits so that the unemployed still consumes, and hence do craete activity from their consumption
I'm not saying this is wrong, but I don't understand how this works. My best non-educated guess is economies should create mutual value, not just activity.
> As a result of the Cantillon Effect, inflation can be seen as a non-legislative and regressive tax on the purchasing power of citizens by the government.
I'm not an economist, but, I was under the impression that "the economy" is more complex than this, and that inflation is not really the fault of "the government", even if you could come up with a theoretical way for "the government" to "fix" inflation at its own whim
From Wikipedia:
Changes in inflation are widely attributed to fluctuations in real demand for goods and services (also known as demand shocks, including changes in fiscal or monetary policy), changes in available supplies such as during energy crises (also known as supply shocks), or changes in inflation expectations, which may be self-fulfilling.
Doesn't sound like "the government" is applying this "tax". It sounds like there is a systemic event happening re: supply/demand, combined with the system responding to human emotions
There's an entire economic school of thought that believes that inflation is essentially entirely a monetary phenomenon. Dollars are tokens, and governments dispense those tokens whenever they need to finance themselves, every empire eventually succumbs to the temptation to pump out tokens instead of being productive and disciplined in their expenditures and delaying consumption (in other words, saving). This precedes every downfall.
It seems useless to me to call inflation a matter of the changing price of a good that will change due to demand or supply. Rather, intuitively what really matters is if someone is switching up the measuring stick that forms the basis of the entire price signaling system of the economy.
The government can quite easily cause inflation by creating money, something that others have trouble doing. The people that get the money then typically buy more stuff. Rich people buy artwork and yachts, poor people buy bread and eggs. Not surprisingly prices rise where people buy.
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[ 4.4 ms ] story [ 33.2 ms ] threadNot sure this qualifies as Cantillon effect, but it's one of those things that make capitalism deeply unfair. QE was free money for the already wealthy so they could "invest" and keep the general economy running. Not all of these investments made money, obviously, but still, it's a way to fuel the economy from the top.
I always thought fueling the economy from the bottom was a much smarter idea... Giving out unemployment benefits so that the unemployed still consumes, and hence do craete activity from their consumption, rather than engaging in stupid ass 432-Park ave-like projects.
Agree, although I don't think it was only that. But I have a dislike for it for some reason I can't quite articulate.
> Giving out unemployment benefits so that the unemployed still consumes, and hence do craete activity from their consumption
I'm not saying this is wrong, but I don't understand how this works. My best non-educated guess is economies should create mutual value, not just activity.
isn't QE precisely an example of a part of a planned economy and the same sort of heavy-handed government in line with socialism & marxism?
Echoes of Milton Friedman in this statement. Can't disagree.
I'm not an economist, but, I was under the impression that "the economy" is more complex than this, and that inflation is not really the fault of "the government", even if you could come up with a theoretical way for "the government" to "fix" inflation at its own whim
From Wikipedia:
Doesn't sound like "the government" is applying this "tax". It sounds like there is a systemic event happening re: supply/demand, combined with the system responding to human emotionsIt seems useless to me to call inflation a matter of the changing price of a good that will change due to demand or supply. Rather, intuitively what really matters is if someone is switching up the measuring stick that forms the basis of the entire price signaling system of the economy.