Por que RICOS enriquecem e POBRES empobrecem, o Efeito Cantillon

Fernando Ulrich

5 Mar 202412:29

Summary

TLDRThis video delves into the profound impact of modern money on social inequality, tracing its roots back to the 18th century economist Richard Cantillon. His groundbreaking analysis revealed how an increase in money supply creates an uneven rise in prices, redistributing wealth in favor of those closest to the money's source. Drawing parallels to contemporary central bank policies, the video illustrates how the wealthiest 1% have disproportionately benefited from quantitative easing measures, further exacerbating inequality, especially in the United States. By sharing Cantillon's insightful theory and its relevance today, the video sheds light on the intricate dynamics between money creation and wealth concentration.

Takeaways

👨‍🔬 Richard Cantillon, an Irishman living in Paris in the early 18th century, was one of the first economists to theorize about the effects of money supply on wealth redistribution and inequality.
💰 Cantillon's seminal work, 'Essay on the Nature of Trade in General,' analyzed how an increase in money supply causes an uneven rise in prices, benefiting those who receive the new money first and hurting those who receive it last.
🌊 This phenomenon, known as the 'Cantillon effect,' explains why the rich get richer and the poor get poorer during periods of monetary expansion, as it leads to a redistribution of wealth.
🛡️ Cantillon witnessed and profited from the Mississippi Bubble, a financial crisis caused by the Scottish financier John Law's experiment with paper money and credit expansion in early 18th century France.
📈 Cantillon's analysis showed that the point of entry of new money into the economy and the sectors it impacts first are crucial in determining the winners and losers of the wealth redistribution process.
🏛️ Central banks' massive monetary injections, especially after the 2008 financial crisis and during the COVID-19 pandemic, have exacerbated wealth inequality, with the richest 1% in the United States accumulating a growing share of total assets and financial assets.
🔄 The Cantillon effect explains why the modern monetary system, with its ability to create unlimited amounts of money, leads to a widening wealth gap, as the rich are closer to the source of new money creation.
📊 Monitoring monetary aggregates like the monetary base, M1, and M2, as well as data on wealth distribution from sources like the Federal Reserve, can help track and analyze the Cantillon effect in action.
🌍 While detailed wealth inequality data is lacking in some countries like Brazil, the Cantillon effect is a global phenomenon, as central banks worldwide engage in similar monetary policy practices.
💡 Cantillon's insights from the early 18th century remain highly relevant today, providing a framework for understanding the complex interplay between money supply, price levels, and wealth distribution in modern economies.

Q & A

Who was Richard Cantillon, and what was his contribution to economics?
-Richard Cantillon was an Irish economist who lived in Paris in the early 18th century. He wrote the seminal work 'Essay on the Nature of Trade in General' around 1730, where he analyzed the effects of monetary expansion on prices and wealth redistribution, laying the foundations for the Austrian theory of economic cycles.
What is the 'Cantillon effect' and how does it relate to wealth inequality?
-The Cantillon effect refers to the concept that an increase in the money supply causes an uneven rise in prices, benefiting those who receive the new money first and harming those who receive it last. This process leads to a redistribution of wealth, as those closest to the source of new money creation can purchase goods and services before prices rise.
How did Cantillon's experience in Paris during the Mississippi Bubble influence his economic theories?
-Cantillon witnessed firsthand the financial innovations and speculative bubble created by John Law's Mississippi Company in Paris. This allowed him to analyze the effects of money supply expansion, credit expansion, and financial innovations on asset prices, price levels, and wealth redistribution, which formed the basis of his theories.
What is the connection between modern central bank policies and the Cantillon effect?
-The video suggests that the massive liquidity injections by central banks, especially after the 2008 financial crisis and during the COVID-19 pandemic, have exacerbated wealth inequality in line with the Cantillon effect. Those closest to the source of new money creation (the financial sector) have benefited the most, while others have seen their purchasing power diminished.
How can one analyze the effects of money supply changes and wealth inequality using publicly available data?
-The video recommends analyzing monetary aggregates like the monetary base, M1, and M2, provided by central banks, to track changes in the money supply. Additionally, data on the distribution of assets and wealth, such as the share held by the top 1% wealthiest individuals, can be found on websites like the Federal Reserve.
What was Cantillon's analysis of the effects of monetary expansion beyond just wealth redistribution?
-Cantillon went beyond analyzing wealth redistribution and identified that the increase in money supply impacts relative prices unevenly, leading to real effects on the entire productive structure of the economy. This process rearranges relative prices and affects different sectors disproportionately, causing winners and losers.
Why is Cantillon's analysis still relevant today, according to the video?
-The video argues that Cantillon's analysis is even more relevant today because central banks can now create money without technical limits, leading to massive liquidity injections that exacerbate the very effects Cantillon described in the 18th century.
How did Cantillon personally benefit from his understanding of the Mississippi Bubble?
-Cantillon not only analyzed the Mississippi Bubble theoretically but also profited from it practically. He rode the initial bubble, selling his positions before the peak, and later made a fortune by lending money to foreign speculators who believed the bubble would continue.
What is the broader significance of Cantillon's work in the context of economic theory?
-Cantillon's work laid the foundations for the Austrian theory of economic cycles, which analyzes how changes in the money supply and credit impact the structure of production and lead to boom-bust cycles. His insights were seminal in shaping this school of economic thought.
How does the video connect Cantillon's historical analysis to modern wealth inequality trends in countries like the United States?
-The video presents data showing that the share of total assets and financial assets held by the top 1% wealthiest individuals in the United States has increased sharply, especially after the 2008 crisis and the COVID-19 pandemic. This trend is attributed to the Cantillon effect, where those closest to the source of new money creation benefited the most from central bank interventions.

Outlines

00:00

📚 Richard Cantillon's Insights on Money and Wealth Distribution

This paragraph introduces Richard Cantillon, an Irish economist from the 17th century, who lived in Paris and witnessed the Mississippi Bubble, a financial scheme orchestrated by John Law. Cantillon recognized the effects of money supply expansion and credit creation on asset prices, inflation, and wealth redistribution. He not only theorized these phenomena but also profited from the bubble by strategically entering and exiting positions. Cantillon's seminal work, 'Essay on the Nature of Trade in General,' analyzed how an increase in money supply causes uneven price rises, benefiting those closest to the money source while disadvantaging others, leading to wealth redistribution.

05:01

💰 The Cantillon Effect and Modern Wealth Inequality

This paragraph expands on Cantillon's analysis of wealth redistribution caused by uneven price changes due to money supply expansion. It explains how those who receive the new money first have increased purchasing power, while those at the end of the line experience diminished purchasing power as prices have already risen. This process, known as the Cantillon Effect, leads to wealth redistribution. The paragraph then connects this effect to modern times, especially after the abandonment of the gold standard in 1971 and the financial crisis of 2008, when central banks injected massive liquidity into the system. It presents data showing the increasing share of total assets held by the top 1% wealthiest individuals in the United States, particularly in financial assets, as a result of central bank policies benefiting those closest to the money source.

10:03

📈 The Enduring Relevance of Cantillon's Insights

This paragraph reinforces the continued relevance of Cantillon's analysis in today's monetary system. It highlights how the creation of new money by central banks, especially in the aftermath of the 2008 financial crisis and the COVID-19 pandemic, has exacerbated wealth inequality, with the rich becoming richer and the poor becoming poorer. The paragraph encourages viewers to analyze central bank data on money supply and wealth distribution to observe the Cantillon Effect in action. It concludes by inviting viewers to participate in the next season of a documentary series exploring these topics further.

Mindmap

Keywords

💡Money

Money is a medium of exchange, unit of account, and store of value that facilitates economic transactions. In the video, money is presented as a modern phenomenon that has led to social inequality, as the rich get richer and the poor get poorer. The script discusses how the creation of new money and credit expansion by central banks can cause uneven price increases, benefiting those closest to the source of new money at the expense of those further away.

💡Inequality

Inequality refers to the unequal distribution of wealth, income, or resources among individuals or groups within a society. The video highlights how the modern monetary system contributes to increasing wealth inequality, particularly in developed countries like the United States. It shows how the top 1% of the population has been accumulating a growing share of total assets and financial assets since the 2008 financial crisis and the COVID-19 pandemic, when central banks injected massive amounts of liquidity into the system.

💡Cantillon Effect

The Cantillon Effect, named after the Irish economist Richard Cantillon, describes how an increase in the money supply causes uneven changes in prices, resulting in a redistribution of wealth. The script explains that those who receive the new money first experience an increase in purchasing power before prices fully adjust, while those who receive the new money last are disadvantaged by higher prices. This effect was observed by Cantillon during the Mississippi Bubble in early 18th century Paris.

💡Central Banks

Central banks, such as the Federal Reserve in the United States, are responsible for controlling the money supply and implementing monetary policies. The video focuses on how central banks' actions, particularly after the 2008 financial crisis and during the COVID-19 pandemic, led to massive injections of liquidity (new money creation) into the financial system. This liquidity injection is argued to be a modern manifestation of the Cantillon Effect, contributing to increased wealth inequality.

💡Mississippi Bubble

The Mississippi Bubble, also known as the Mississippi Company Bubble or the South Sea Bubble, was an economic crisis that occurred in 18th century France, stemming from the speculative frenzy surrounding the Mississippi Company. This historical event is significant in the video as it provided the context for Richard Cantillon's observations and formulation of his theories on the uneven effects of money supply increases and wealth redistribution.

💡Relative Prices

Relative prices refer to the prices of goods and services relative to one another, rather than their absolute values. The script explains that an increase in the money supply does not cause all prices to rise uniformly or at the same rate. Instead, it distorts relative prices, causing some prices to rise faster than others. This distortion of relative prices has real effects on the overall economy and can lead to misallocations of resources.

💡Wealth Redistribution

Wealth redistribution is the transfer of wealth or income from one group or individual to another. The video highlights how the modern monetary system, with its expansion of money and credit, leads to a redistribution of wealth from the poor to the rich. Those closest to the source of new money creation benefit from increased purchasing power before prices fully adjust, while those further away experience a decrease in purchasing power as prices rise.

💡Austrian School

The Austrian School is a school of economic thought that emphasizes methodological individualism, the subjective theory of value, and the importance of entrepreneurship and market processes. The script mentions that the concept of the Cantillon Effect is widely used by Austrian School economists in their analysis of economic cycles and the effects of monetary policy. Richard Cantillon's work is considered a seminal contribution to the Austrian School's theories.

💡Monetary Aggregates

Monetary aggregates, such as M1 and M2, are measures of the money supply used by central banks and economists. The script suggests that individuals can analyze the creation of money by central banks by examining these monetary aggregates, which are typically published on the central banks' websites. Monitoring these aggregates can provide insights into the expansion of the money supply and its potential effects on wealth inequality.

💡Purchasing Power

Purchasing power refers to the ability of a currency or income to buy goods and services. The video discusses how an increase in the money supply can lead to a temporary increase in purchasing power for those who receive the new money first, before prices fully adjust. However, this advantage is short-lived, as prices eventually rise, eroding the purchasing power of those who received the new money later.

Highlights

Money, especially modern money, is one of the main causes of social inequality, explaining why the rich get richer and the poor get poorer, even in a developed country like the United States.

The first economist to theorize about these effects on wealth redistribution was an Irishman named Richard Cantillon, who lived in Paris in the early 18th century.

Cantillon not only wrote the first major work on political economy but also surfed the first major financial bubble in the world and made a fortune in the process.

Cantillon lived in Paris during the famous Mississippi Bubble, an experiment by the Scottish financier John Law, which had significant impacts on France, the world, and the money we use today.

Cantillon understood that Law's manipulations of the money supply, creating banknotes without gold backing, and credit expansion would lead to a rise in stock prices of the Mississippi Company and an unsustainable bubble.

Cantillon not only theorized and analyzed these phenomena but also profited from them by surfing the bubble and making a fortune.

Cantillon's great legacy is his brilliant work, 'Essay on the Nature of Trade in General,' written around 1730, where he provided a precise analysis of monetary effects on not only price levels but also wealth redistribution.

Cantillon identified that an increase in the money supply causes an unequal rise in prices, as those who receive the new money first have higher purchasing power before prices adjust, while those who receive it last have diminished purchasing power after prices rise.

This process generates a redistribution of wealth, known as the 'Cantillon Effect,' which became a fundamental concept in Austrian economic theory.

Cantillon went beyond analyzing wealth redistribution by understanding the importance of identifying the exact point and sector where the new money enters circulation, as this determines which prices are impacted first and the subsequent effects on relative prices and the overall production structure.

Cantillon's analysis, originally conducted in the 17th century, remains valid today, especially after the end of the Bretton Woods system in 1971, when central banks could create money without limits, leading to increased liquidity and wealth inequality.

The proportion of total assets held by the top 1% wealthiest in the United States has increased significantly, especially after the 2008 financial crisis and the COVID-19 pandemic, when central banks injected massive liquidity into the system.

The increase in the share of financial assets held by the top 1% is even more pronounced, as central bank liquidity directly impacts financial assets like government debt, corporate debt, and mortgages.

Those closest to the source of newly created money benefit the most, leading to a deeper income inequality, especially in the United States, where extraordinary liquidity injection measures have been implemented, reflecting the same phenomenon described by Cantillon in 1730.

To analyze the creation of money by central banks, one can refer to monetary indicators or monetary aggregates, such as the monetary base, M1, and M2, on central bank websites, as well as data on the increasing share of assets held by the top 1% on the Federal Reserve's website.