Part 7/13:
The Impact of Monetary Policy on Asset Prices and Wealth Distribution
The reliance on low interest rates creates a compounding effect: asset prices rise, making the wealthy wealthier while costs for necessities continue to climb for everyone else. This occurs because of mechanisms such as the Canalon Effect, named after an economist from the 18th century, who observed that new money enters the economy unevenly. Those who receive the fresh money first — primarily financial institutions and asset-rich individuals — can spend it before prices have adjusted, gaining an advantage over those later in the queue. Essentially, the wealthy and insiders benefit from this "first-mover" advantage, exacerbating income and wealth inequality.