Asset Price Inflation
The 3rd Law of Motion
"For every Action there is an Equal and
Opposite Reaction" Sir. Issac Newton
The Action
The Federal Reserve (FED) liquidity action causes the Cantillon Effect that describes how asset price inflation affects different parts of the economy unequally. When new fiat money is added to the economy, it does not spread evenly everywhere at once. This causes goods and financial assets price to go up at different times and by different amounts. Some people and businesses will benefit more than others. The first people to get this new money can buy before prices go up at a discount.
This happens because new money is mostly given to banks by the FED almost for free. These banks can then use this money to buy things at lower prices before everyone else. As this new money spreads from banks to investors and then to regular people, prices start rising. By the time regular people feel the extra money, they have to pay more for the same things because their purchasing power has declined.
The Reaction
The reaction to the FED liquidity action has been limited because asset owners has not had the means to turn their illiquid asset into capital without incurring additional costs and debt. However, now with the passing of the Genius Act, things might change. This law allows the creating an issuing of digital stablecoins within the U.S. Dollar system.
Now, the people who own equity in their own real-world assets can use the blockchain distributed ledger to benefit from rising asset price inflation. The creation of regulatory digital money at the grassroot level is new to the US dollar system but it does give creators and issuers the opportunity to rearrange the beneficiaries position of the Cantillon effect and gain access to asset equity value. The Stablecoin gives the issuer the power to equalize the free liquidity action effect of the FED and debt-free liquidity reaction effect of the asset owners, according to Newton's third law of motion.


