🔍
The Cantillon Effect!! ⚠️ What Is It? How Can You Protect Yourself? 😮 Must-Know Concept for 2022! 💸 - YouTube
Channel: Crypto Casey
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"Cash is King" 👑 We've all heard that one before,
but the reality is: the closer we are to the King,
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the more powerful cash becomes for us
💰 and the farther we are from the King,
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the more harmful cash becomes to our livelihoods.
Hello, I'm Crypto Casey 👋 and in this video we are
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going to explore how the unequal distribution
of money in our current fiat systems 💵 benefits
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those closest to the government and harms those
farthest from the government in a phenomenon
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known as the Cantillon Effect. Cantillon is
a French word that is sometimes pronounced
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in English as Cantillon. We will also discuss
how this could be playing out in the crypto
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markets ₿ in ways we can protect ourselves
from it going forward. This video is brought
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to you by Efani 📲 a mobile phone security
service that guarantees 100% protection from
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sim swapping attacks. More on them in a bit.
Awesome, let's explore the Cantillon Effect
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Let's start out with exploring how banks work
by breaking down three theories about where
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money comes from one the mainstream theory is
that banks are just financial intermediaries
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that lend out their deposits which involves banks
making loans to borrowers from deposits made by
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customers at a certain interest rate customers
savings accounts accrue interest to incentivize
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them to keep money there and the bank charges
interest on the loans they issue to borrowers
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to pay interest to the depositors as well as
themselves and the regulatory framework that
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has been used to manage this type of money
creation is reserve requirements where bank
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is required to keep a certain amount of capital
which dictates the amount of loans they can make
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the idea was to place restrictions on banks
to avoid banking crises and though this type
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of regulation was imposed back in the 1980s
tons of banking crises around the world have
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occurred since in fact between 1970 and 2010 the
international monetary fund reported over 425
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systemic banking monetary and debt crises which
worked out to about an average of 10 per year
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which brings us to the second banking theory on
how money is created called the fractional reserve
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theory when a bank lends money it needs to have
excess reserves to use for lending this method
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was dominant from the 1930s to the 1960s and what
ended up happening is banks became interconnected
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shifting different reserves between each other
on a nightly and weekly basis essentially
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leveraging against each other creating a money
multiplier effect which piqued a lot of people's
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interest the creation of leveraged money in the
global financial system was very experimental
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and ultimately this theory was replaced on purpose
in the 70s with the mainstream theory that banks
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are just financial intermediaries that aren't
particularly special the ultimate goal being oh
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there's nothing to see here when in reality there
is a very big important thing happening that harms
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pretty much all of us except the top one percent
of people around the world so the third theory of
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banking is the most true accurately depicting
how the global financial system actually works
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which was the most dominant in the 1920s and
1930s according to this theory banks are not
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just financial intermediaries banks are the
main creators of money so when you get a loan
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new money is created out of thin air and thereby
increases the supply of money in circulation
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in this theory that banks create money out of
nothing is suppressed and largely unknown by
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the masses by design but it is the most accurate
because it's the only banking theory that has been
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proven with empirical evidence so let's explore
why this theory is suppressed and how it benefits
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a few people while harming the rest of us the fact
that banks create money from nothing makes them
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extremely powerful because at the end of the day
they get to determine who gets the new money via
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loans who gets the new money and what they end up
doing with it whoever gets the money and what they
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decide to do with it has a huge serious impact on
the economy if banks create money for a person or
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company to buy real estate they are essentially
pumping money into the real estate market which
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causes prices to rise if banks create money for
a person or company to use to consume goods or
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services they are essentially causing inflation
when banks lend money to people or companies for
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assets it creates asset bubbles that burst which
causes banking crises this is what caused the
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2008 recession banks created money a thin air
for everyone to pump into the housing market
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and when everyone couldn't afford to pay the
loans the housing bubble burst and took down a
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lot of banks with it there are actually positive
cases for creating money out of thin air but
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it's better to think of this process as monetary
expansion that is actually necessary for economic
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growth so when banks create money for a person or
company to grow a business a business that creates
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and performs valuable goods and services this
creates growth in the economy without inflation
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those types of loans create jobs foster innovation
as technology gets better things become cheaper
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over time and generally gives us everything
we want for society without all the negatives
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but clearly that's not happening so let's talk
about what is happening which is the Cantillon
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Effect. The Cantillon Effect was coined by Richard
Cantillon an Irish French economist and a banker
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in a piece of literature he wrote called essay on
the nature of trade in general which was published
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in 1755. in this essay he stresses the importance
of entrepreneurs as drivers of economic activity
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who are traders innovators and merchants that take
on risk and ultimately earn profit from taking on
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risks keep this in mind as we explore another
key element of this essay where he explores the
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non-neutrality of money which is more popularly
known as the canteen effects this phenomenon
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is all about how new money enters an economy the
people or entities that create money are deciding
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when new money enters the economy where it enters
the economy as in which sector or industry enters
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the economy for what purposes whether it be for
asset purchases consumerism or business growth
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and ultimately which people or entities get
the money so what's important to note is when
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new money enters the economy it is not equally
distributed across the economy it's not equally
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distributed across sectors across asset classes
and most importantly not equally distributed
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among people and businesses when new money enters
the economy it first goes to bankers bureaucrats
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and politicians they are the first to reap the
benefits of new money this unequal distribution
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of money impacts individual wealth and is the
key cause and driver of injustices in our modern
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society because when banks give their friends
money they get to spend it on whatever they want
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which is usually commodities and other valuable
assets and they are also afforded the opportunity
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to take advantage of arbitrage since they get the
new money first they get first dibs on using it to
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buy real estate for example and when they are all
buying up real estate the new money pumped into
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the real estate sector causes prices to increase
and by the time the money trickles down to regular
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people like you and i we are unfortunately priced
out sometimes we have been seeing this since the
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money printer was fired up to prop up the economy
during the pandemic what else went up stocks and
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all the bankers bureaucrats and politicians got
their money first bought stocks and by the time
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we got our money stocks of course were already
climbing so yes according to the canteen effect
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whoever gets new money first has an arbitrage
opportunity to use the money on goods services
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or assets before prices rise banks bureaucrats
and politicians are able to buy things at reduced
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prices therefore have massive financial advantages
over everyone else so basically inflation that
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happens from the canteen effect is pretty
much a government-imposed non-legislative and
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regressive tax on our purchasing power as common
citizens this is how banks and governments enrich
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the wealthy further impoverish the poor and why
the middle class continues to crumble over time
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lovely next let's explore how the canteen effect
is potentially playing out in the crypto market
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as well as what we can do to hedge against
it in our journey towards financial freedom
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first a quick note about Efani people have been
losing tons of money from sim-swapping attacks
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so as a crypto investor it's especially important
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Efani is a secure mobile phone service that
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as well as fake towers eavesdropping location
tracking spam calls spam texts and malware they
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sim swap isn't amazing enough if by some crazy
chance you do become a victim of a sim swap
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to protect you from any financial losses you
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to give them a go so if you want to check out
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cool so if you're a long-term viewer of this
channel thanks for your continued support
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and you've also checked out my trilogy breaking
down how the traditional financial system is
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structured as well as the crypto markets if you
haven't yet after this video check out this video
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by clicking on the link above to get up to speed
basically if we understand and think about how
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tether stable coins are created and distributed
we absolutely have had Cantillon Effect here in
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our very own crypto economy tether the largest
stable coin by market cap for several years
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has never been backed dollar for a dollar in
reserves so they've basically been printing
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tether the same way central banks print money and
distributing it largely among themselves and their
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own band of crypto friends did this give them
the opportunity to buy crypto at lower prices
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due to arbitrage at some point and cause crypto
prices to rise likely yes and it will make much
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more sense once you watch my dedicated video
on the matter and on top of that the canteen
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effect in our traditional financial system
also affected crypto from wall street using
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their first to market free money to gamble and
cryptocurrency lame so now the golden question
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how could we protect ourselves from the Cantillon
Effect well one way like we've been recently
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discussing together is by increasing our income
streams and by ultimately becoming entrepreneurs
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who take on risk create value for the world
and get rewarded for it through earning profit
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why is it so well when working for someone else
you're usually at the mercy of a fixed income or
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relatively fixed income if commission or similar
is a factor and as the canteen effect wreaks its
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havoc on society you are a victim of inflating
cost of living which means your fixed income
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is becoming less and less valuable over time and
if you've only got one job working for someone
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you only have one source of income which can be
pretty risky in addition to your income already
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being fixed as an entrepreneur you can ideally
transition to a non-fixed income situation
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entrepreneurs find gaps in the market find
opportunities to solve problems in the world and
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affect real positive change in the world all while
producing cash flow for ourselves in this video i
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posted recently we explore how digital assets
on blockchain technology is going to make it
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easier than ever to monetize ourselves in the not
so distant future and steps we can take now to get
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ourselves into powerful positions that will put us
light years ahead of everyone else so make sure to
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check it out by clicking on the link above another
way we can protect ourselves is actually by
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participating in the new networks and ecosystems
being built on the blockchain we are experimenting
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with new ways to more equitably distribute money
and capital via layer 1 and 2 blockchain networks
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and defi or decentralized financial applications
digital assets like nfts will also create new ways
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for us to build and distribute wealth which we
explore in the video i just mentioned blockchain
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and cryptocurrencies are creating new ways
we can transact directly with each other in a
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peer-to-peer ecosystem without intermediaries and
third parties like banks in fact this technology
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depending on how we utilize it for our
own projects companies and future entities
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will allow us to become the central bank of sorts
of our own unique economies which we explore
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together in another video so there is a silver
lining though the global financial situation has
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been quite dire for the vast majority of us for
at least the last 250 years when Richard Cantillon
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first pointed out the canteen effect phenomenon
awesome thank you so much for taking the time
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to watch this video if you enjoyed it please
make sure to like the video subscribe to the
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channel and click the bell notification to stay
up to date on all the latest videos so had you
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heard of the Cantillon Effect before this video
what do you think about this phenomenon what are
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you going to do to protect yourself from it let
me know in the comments below be safe out there
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