THE CANTILLON EFFECT

Post # 59

The Fed has plundered the future by lowering its reserve requirement to near zero! The reserve requirement stipulates how much money banks must keep in their vaults as a cushion against withdrawals. When the Fed decreases the reserve requirement, it allows banks to lend more money while keeping less cash. This ratio was north of 20 percent through most of the Fed’s first fifty years, including the Great Depression—but now it is close to zero, nada, nothing! We have entered an age of consequences where the Fed’s kicking the can down the road has slammed into a dead-end, which is COVID-19. All empires end with massive debt and income inequality.

Richard Cantillon was a French Irish economist in the 18th century who wrote about money. The Cantillon Effect recognizes that the people who own the most assets benefit first from low-interest rates, and indebted people benefit the least. Whereas the wealthy invest the money, the low interest encourages the poor to borrow. Persons who profit the most from money creation can access the cash at the beginning, such as the federal government, wealthy individuals, corporations, and big banks. The Cantillon Effect causes a redistribution of income from the middle class to the rich, enabling a class of cantillonairs. The ghouls of financialization have made us victims of low interest leading to economic vandalism, causing a fraud cycle. We have become workers on a multinational plantation living in a two-tier economy. America is one nation with two systems.

As the inequality of income increases, a vicious cycle takes hold with the elite favoring their own. The rich and powerful look at us differently than they do one another. The elite believes that we are to serve them because they are a higher form of humanity. The super-rich are invisible to the rest of us; they can travel anywhere in the world, stay at expensive hotels, eat at exclusive restaurants, and always associate with the same people.

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Published by Kenneth E. Long

Author, college professor of economics, swimming and tennis enthusiast

2 thoughts on “THE CANTILLON EFFECT

  1. These happenings are so close to what my grandfather predicted would happen (he grew up during the great depression). I always wrote him off as being paranoid due to his history, but now I see the he was right and am worried about what the state of things will be for my daughter’s future. If things aren’t turned around and soon, I fear we are going to go down so disastrously that it will put the fall of the Roman Empire to shame.

    Liked by 1 person

    1. Hello Crystal,
      Sorry for the late reply, I am new at this and still learning. Yes, we are in a Marxist revolution and the economy is in for a big fall. But if enough people can see the truth and refuse to cooperate we can turn this thing around. It does not take a majority to make a difference, only a committed minority. I started this blog and wrote my book in hopes of making a difference. Please write back.
      God bless,
      Ken

      Like

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