Collect Money, Inflation And Business Cycles: The Cantillon Effect And The Economy Imagined By Arkadiusz Sieroń Disseminated As Script

book helped me clarify my thoughts on the impact of bankcreated money and the channels through which it happens, The firstround effects of money creation and distribution on price and production structures was first referred to by Cantillon, hence the name 'Cantillon Effect', I had never heard of Cantillon before reading the author's appendix chapter on him,

Richard Cantillon was an Irish banker/investor during the earlyth century who has an understanding of economics and money that is rare even today.
He only ever wrote one public document which describes a number of economic phenomena better than most of what came after him, It was one of the few sources cited by Adam Smith,

The extremes of monetary dynamics over the course of COVID have highlighted the significance of understanding the true nature of the monetary system, in particular the Cantillon Effect.


The author provides a categorization and description of the ways money supply can change, and how the changes in money supply in different parts of the economy lead to different effects.
Too much of academic economics focuses on handwavy descriptions of cause and effect, Understanding the Cantillon effect is about understanding how uneven changes in cash balances of different groups changes their purchasing power, impacting only the prices of goods they are consuming or investing into.


The last few chapters of the book were my favourite, He describes the likely impact of the Cantillon effect on asset bubbles and as the origin of the business cycle, I agree with him that a closer study of the changes in composition of bank balance sheet could help us understand the processes behind the different type of business cycles.


I also appreciated that the author related the cantillon effect to the real function of the banking system through the perspective of credit creation theory rather than intermediary or other descriptions of banking.
It could have been made better by

relating the Cantillon effect to changes in bank regulation which channels credit into certain parts of the economy, For example and from my current understanding, the change in risk weighting of Basil regulation funneled more credit into the mortgage market starting in the lates.


Generally I think the book could be have a wider readership by skipping a lot of the history of economic thought and bad theories and by trying to relate the Cantillon effect to periods and events in history and to our everyday experience.

As I am particularly interested in asset price bubbles, which happened to be the topic of chapter, I compiled a nonalphabetized list of the articles he cited.
And here it is:

Scherbina A,, “Asset Price Bubbles: A Selective Survey”, IMF Working Paper, WP,,
Borio C. , Kennedy N. , Prowse S. D. ,, “Exploring Aggregate Asset Price Fluctuations Across Countries, Measurement, Determinants and Monetary Policy Implications”, BIS Economic Papers,, April,,
Borio C. , Lowe P. ,, “Asset Prices, Financial and Monetary Stability: Exploring the Nexus”, BIS Working Papers,,,
Taylor J. B. ,, “Housing and Monetary Policy”, NBER Working Paper Series,,,
Bordo M. D. , LandonLane J. ,, “Does Expansionary Monetary Policy Cause Asset Price Booms Some Historical and Empirical Evidence”, NBER Working Paper Series,,
Adalid R. , Detken C. ,, “Liquidity Shocks and Asset Price Boom/Bust Cycles”, European Central Bank Working Paper Series,, February,
Friedman M,f, “Money and Business Cycle”, in The Optimum Quantity of Money, Chicago: Aldine Publishing Company,
Belke A. , Orth W. , Setzer R. ,, “Liquidity and the Dynamic Pattern of Price Adjustment: A Global View”, Discussion Paper Series: Economic Studies, Deutsche Bundesbank,/,,
Thornton M. ,, “The Economics of Housing Bubbles”, in B, Powell, R. Holcombe eds. , Americas Housing Crisis: A Case of Government Failure, Oakland, CA: Independent Institute,
White L. ,, “Federal Reserve Policy and the Housing Bubble”, Cato Journal,,, Winter,
Bowdler Ch, Radia A. ,, “Unconventional Monetary Policy: The Assessment”, Oxford Economic Policy,,,,
Mishkin F. ,, “The Transmission Mechanism and the Role of Asset Prices in Monetary Policy”, NBER Working Paper Series,, December,
Kaufman G, G. ,, “Central Banks, Asset Bubbles, and Financial Stability”, Federal Reserve Bank of Chicago Working Paper Series, WP,,
Hutchison M. M. , Ito T. , Westermann F. ,, “The Great Japanese Stagnation: Lessons for Industrial Countries”, EPRU Working Paper Series,, December,, Ireland P. N. ,, “The Monetary Transmission Mechanism”, Boston College Working Papers in Economics,,
Cecchetti S. G. , Genburg H. , Lipski J. , Wadhwani S. ,, Asset Prices and Central Bank Policy, Geneva Reports on the World Economy, London: International Center for Monetary and Banking Studies and Centre for Economic Policy Research.
Who would disagree that money matters Economists have yet to sufficiently explore issues related to monetary inflation in relation to the Cantillon effect, i, e. distribution and price effects resulting from uneven changes in the money supply and their impact on the economy,

This book fills this important gap in the existing literature, The author classifies the various channels through which new money can be injected into the economy and demonstrates that it is not only the increase in money supply that is important, but also the way in which it occurs.
Since the increase in money supply does not affect the cash balance of all economic entities in the same proportion and at the same time new money is introduced into the economy through specific channels a distribution of income and changes in the structure of relative prices and production occur.


The study of money supply growth, carried out in the spirit of Richard Cantillon, offers an important analytical framework that facilitates the development of a number of subdisciplines within economics and provides a better understanding of many economic processes.
It significantly explores the theory of money and inflation, the business cycle and price bubbles, but also the theory of banking and central banking, income distribution, income and wealth inequalities, and the theory of public choice.




This book is therefore an important voice in the fundamental debate on the role of monetary factors in the economy, as well as on the effects and legitimacy of a loose monetary policy.
In, the doctoral dissertation on which the book is based was awarded the Polish Prime Minister's prize, In these times of nonstandard monetary policy and rising income inequalities in OECD countries, the focus on the distribution effect of monetary inflation makes this a must read for researchers and policymakers and for anyone working in monetary economics.


This title was translated from Polish by Martin Turnau, .