The Cantillon Effect - Part 5
What It Means for Investors
Positioning in a World Where Money Flows Unevenly
By Samuel F. Lilly
MoveOn LLC
Consistency. Cash Flow. Growth.
Hello friends,
In our recent letters, we explored the Cantillon Effect — the idea that new money does not enter the economy evenly.
It enters somewhere first.
And where it enters first matters.
Today, we tie it together.
Not with frustration.
Not with politics.
With positioning.
The Core Reality
When new money is created, it does not fall evenly across society.
It typically flows through:
Central banks
Commercial banks
Government spending
Financial markets
Those closest to the source benefit first.
Asset prices often rise before consumer prices.
This is why markets can surge while everyday expenses are still “stable.”
Liquidity moves through assets before it shows up at the grocery store.
That is not an opinion.
It is structural.
Asset Inflation vs Consumer Inflation
Most people focus on consumer inflation.
Food.
Gas.
Rent.
But asset inflation often happens earlier and more aggressively.
Stocks rise.
Real estate appreciates.
Financial assets expand.
By the time consumer prices increase, asset holders have already benefited from earlier liquidity waves.
Understanding this changes how you view investing.
The Strategic Response
If money flows unevenly, then positioning matters.
You cannot control monetary policy.
You cannot control liquidity expansion.
But you can control allocation.
This is why ownership matters.
Owning productive assets places you closer to where liquidity flows first.
Not perfectly.
Not instantly.
But structurally.
This Is Not Cynicism
This is not about blaming the system.
It is about understanding it.
Complaining about money creation does nothing.
Positioning within it does everything.
If liquidity expands, ask:
Where is it likely to flow?
If assets inflate first, ask:
Do I own assets?
If purchasing power erodes slowly over time, ask:
Am I holding too much idle cash?
These are calm questions.
Strategic questions.
The Bridge Forward
The Cantillon Effect explains distribution.
But it does not fully explain structure.
In our next series, we will step back even further and examine something foundational:
Is money itself structurally designed to expand?
And what does that mean for long-term purchasing power?
Before we discuss Bitcoin.
Before we discuss gold.
Before we discuss alternative systems.
We must understand the dollar itself.
Stay consistent.
Samuel F. Lilly
The Consistent Investor
MoveOn LLC
Disclaimer:
This newsletter is for educational and informational purposes only and reflects the personal opinions of Samuel F. Lilly. It is not intended as financial, investment, tax, or legal advice. Investing involves risk, including the potential loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.