How the Economic Machine Works
In the video How the Economic Machine Works by Ray Dialio states it is simple consumer transactions consisting of goods, services and financial assets that is purchased with credit and settled with the US Dollar that creates the building blocks of the global economic machine. The financial linkage between these three types of inflation will curb the economic machinery ability to maintain the US Dollar currency store of value and purchasing power.
How the Cantillon Effect Happens
- The Fed prints money to boost the economy.
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That money goes from the printing press to the ultra wealthy first then to the entrepreneurial class and lastly to everyone else.
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Insiders early in that chain get to spend the money first, before the three types of inflation takes hold, and thus get to acquire financial assets, services and goods at a discounted rate.
The Cantillon Effect describes how the three types of inflation impacts money holders unequally and helps insiders get a leg up on ordinary folks. Here is a summary of how it works:
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New US Dollars are injected into the economy.
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Banks, Investment Firms and Corporations get access to this money first.
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These financial entities gain an arbitrage opportunity and they able to spend money before market prices increase across the economy from the effects of inflation over time.
