Fiat Judgment Open Editions by Lucho Poletti

Money is not neutral. The Cantillon Effect describes the uneven effect inflation has on the prices of goods and assets. Since new fiat money is injected into an economy at specific points, it causes a distortion in relative prices - benefiting certain parties while hurting others. The first recipients of the new money (banks and large corporations) are given the arbitrage opportunity of being able to spend this new money before prices increase. Since new fiat money is created at essentially zero cost, these banks and corporations have an opportunity to spend the newly printed money on goods and assets that havent yet reflected the increase in money supply; allowing them to buy goods at a discounted rate. As the new money flows from central banks to private banks and investors to ordinary citizens, prices begin to reflect the increase in the money supply. By the time ordinary citizens experience the increased money supply, its usually because they are buying goods at higher prices already. Thus, those who are closest to the creation of new money benefit most from an increase in the money supply.