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Inflation concentrates wealth in those with the power to inflate. This is usually strictly worse for the economy because the power to inflate is rarely vested i
by jandrewrogers 2y ago
Inflation concentrates wealth in those with the power to inflate. This is usually strictly worse for the economy because the power to inflate is rarely vested in people capable of effectively deploying that captured wealth as capital. If this destruction of capital exceeds the rate of capital formation then the necessary decline in investment will reliably erode the economy for everyone, except perhaps for those proximal to those with the power to inflate (see also: the Cantillon effect).
- imtringued 2y agoThe cantillon effect is mostly a meme. If it was such a powerful explanatory device then how come nobody is talking about the inverse cantillon effect which is much stronger and caused the great depression? You know, the idea that price falls propagate through the economy. It would appear to be much more dangerous, since it can be conducted by anyone who is holding onto money and every successful attempt spurs on more imitators. Since the imitators are betting on the productivity of doing absolutely nothing, capital formation will cease until there is a shortage of capital and ... surprise, a forward cantillon effect occurs through "unhoarding". We somehow end up with a business cycle theory that actually makes sense compared to the Austrian economist one. A lot of them seem to think that the business cycle is some nefarious plot by central banks instead of a disruption in economic communication induced by market participants following their own interests.