The Cantillon Effect Part 2
Why Saving Alone Is No Longer Enough
The Cantillon Effect, Inflation, and the Cost of Standing Still
Hello friends,
In my last letter, we explored the Cantillon Effect — the idea first documented by Richard Cantillon — which explains why money creation benefits some participants earlier than others.
Today, I want to focus on the practical takeaway.
Because once you understand how money flows, an uncomfortable truth becomes clear:
Saving alone is no longer enough.
The Old Advice Still Sounds Right — But Falls Short
For generations, people were taught:
Work hard
Save your money
Avoid risk
Keep cash “safe”
That advice made sense in a world where:
Money was sound
Inflation was modest
Asset prices moved slowly
But that world has changed.
Inflation Is Not the Enemy — Cash Drag Is
Most people think inflation is the problem.
It’s not.
The real issue is holding too much idle cash while prices rise around you.
When money expands:
Asset prices adjust upward
Goods and services cost more
Cash quietly buys less each year
Even modest inflation compounds against savers over time.
No crash.
No headline.
Just erosion.
Why Savers Feel Like They’re Falling Behind
This is where frustration sets in.
People do everything “right”:
They save diligently
They avoid speculation
They delay gratification
Yet they feel poorer.
That’s not failure — it’s math.
When money is created faster than wages grow, savings lose purchasing power unless they are positioned in productive assets.
The ConsistentSam Adjustment
This is where consistency replaces fear.
I don’t abandon saving — I repurpose it.
Savings are no longer the destination.
They are the launch point.
Cash becomes:
A tool
A buffer
A transition asset
Not a long-term store of value.
Ownership Is the Divider
The line separating outcomes is simple:
Savers preserve dollars
Owners preserve purchasing power
Ownership can take many forms:
Businesses
Equities
Real assets
Income-producing investments
You don’t need to be wealthy to start —
but you do need to participate.
How the 50 / 35 / 15 Plan Fits This Reality
This framework was built for this environment.
50% Income
Creates cash flow that can be reinvested as prices rise.
35% Growth
Provides exposure to long-term economic expansion and productivity.
15% Speculative
Allows controlled risk without threatening the core.
It’s not aggressive.
It’s not defensive.
It’s adaptive.
This Is Not About Getting Rich Quick
Let me be clear:
This is not about chasing returns.
This is not about timing markets.
This is not about beating anyone else.
It’s about not falling behind quietly.
Consistency, ownership, and patience remain the edge.
Final Thought
The Cantillon Effect explains why the system behaves the way it does.
The 50 / 35 / 15 Plan explains how to respond calmly.
You don’t need to fight the system.
You don’t need to fear it.
You need to understand it — and position yourself accordingly.
Stay consistent,
Samuel F. Lilly
The Consistent Investor
Disclaimer
This newsletter is for educational purposes only and does not constitute financial advice. Examples are illustrative and not personalized recommendations.