Your bank balance looks the same. The news says inflation is easing. So why does everything keep feeling more expensive?
The answer is something called the Cantillon Effect — named after 18th-century economist Richard Cantillon. When central banks create new money through quantitative easing, bailouts, or stimulus programs, that money doesn’t reach everyone at once. It flows first to banks and financial institutions, who spend it while prices are still low. By the time it reaches ordinary wages and savings, the cost of everything has already adjusted upward.
The result is a quiet, invisible wealth transfer. Asset owners — stocks, real estate — see their holdings rise. Everyone else finds that their savings buy a little less than they did last year. No single moment to point to. Just a slow, steady erosion.
This short video breaks down exactly how the Cantillon Effect works — and it’s worth understanding before the next “stimulus package” gets announced.