The rich get richer because they can hide and use money better than most people.
Imagine you have a piggy bank full of coins, and your friend has a big treasure chest with gold bars inside. When the king says, “I’m giving everyone a new coin,” you get one more coin, but your friend gets gold bars, which are worth way more. That’s the Cantillon Effect: when money is created or given out, it doesn’t all reach people at the same time or in the same way.
How It Works Like a Playground
Think of the school lunch line. The kids who get to go first get the best food, like pizza and ice cream, while the ones at the end get left with soggy sandwiches. Similarly, when new money is added into the economy (like when banks print more cash), the people closest to the source, usually rich people or big businesses, get it first.
This new money isn’t magic, it’s just extra cash that can be used to buy things before prices go up. So they can buy stuff cheaper, and then sell it later for more, making them even richer.
Meanwhile, you’re still counting your coins in the piggy bank, waiting for your turn in line.
Examples
- The richest people get money early, giving them an edge in the economy.
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