![]() ![]() Cantillon observed that the institutional set-up of how money flows matters, and it can and does distort prices and power in a society.įirst, let’s briefly go over what happened last week. The Cantillon Effect is an observation by 18th century French economist Richard Cantillon on why money from bailouts reaches Wall Street before it reaches normal people (in his day it was gold from mines reaching aristocrats, but it’s the same thing). Just how has money, often borrowed, gone into GameStop shares via millions of retail investors? This flow is connected it to a basic problem in finance, something I’ve written about before, what is known as the Cantillon Effect. I’m most interested in the institutional story, of financial plumbing of our markets, and fundamentally, how money flows through those pipes, from the Federal Reserve into the financial system, and the real economy. ![]() There’s a political story, of populists fighting Wall Street insiders, an economic story of speculation and the casino-like nature of Wall Street, and a financial story of middlemen and con artists manipulating both sides. ![]() This controversy has drawn comments from dozens of high-profile politicians, billionaires, and even the richest man in the world.Īs with any complex event, there are multiple narratives at work. It’s hard not to be enthralled by the hilarious and slow motion train wreck that is the GameStop fight, a Wall Street battle over the share price of a small and unimportant in-store retailer of video games. ![]()
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