Below is a chart and brief excerpt from today's Early Look written by Financials analyst Josh Steiner.
This dynamic has the effect of creating greater wealth disparity between those who own assets and those who do not. For those who are not already asset owners, owning assets becomes even further out of reach. Moreover, for those who do own assets, they can use low-cost debt to purchase more assets early in the money printing process.
This is not just some theory from over 200 years ago. It is evident in the net worth differential seen among the top 1% and bottom 50% of US Households. From July 1989 to January 2021, the bottom 50% of Households saw their collective net worth rise 243% from $761 Billion to $2.62 Trillion (an increase of $1.86 Trillion). Meanwhile, the top 1% of Households saw their collective net worth rise 769% from $4.78 Trillion to $41.5 Trillion (an increase of $36.7 Trillion). In other words, in comparing the delta change in net worth between the Top 1% and Bottom 50% from 1989 to present, 95% of the $38.5 Trillion nominal increase has accrued to the Top 1% of households, while 5% has accrued to the bottom 50% of households.
This is the Cantillon Effect of modern-day monetary policy.