ABSTRACT
The Cantillon effect is based on (re)distribution of income and wealth within a society (and the resulting changes in the structure of prices and production) that is the result of introducing money into the economy only through specific channels. In this process, some people receive newly created money earlier than others, before the general price increase, which causes their real income to go up and their wealth to grow. This chapter examines the relationship between the Cantillon effect and inequalities in income and wealth. It claims that the effect of the first round related to credit expansion causes such redistribution, which increases these inequalities. The chapter concludes that the Cantillon effect was one of the factors responsible for the inequality dynamic observed in the United States since the 1970s. It means that not only fiscal policy but also monetary policy lead to the redistribution of income and wealth of citizens, which strengthens the argument against monetary policy that’s too loose.
