Monetary systems degrade as trust layers increase
In 1730, economist Richard Cantillon observed something critical: when new money enters the economy, it doesn't affect everyone equally. Those who receive it first can spend it before prices rise. Those who receive it last, or never, pay higher prices without increased income.
This isn't a side effect of money printing. It's wealth transfer disguised as monetary policy. The closer you are to the money printer, the more you benefit. The farther away, the more you lose.
Inflation isn't just rising prices; it's systematic theft from the poor and middle class to benefit those with first access to new money. Banks, governments, and financial elites spend newly created currency before prices adjust. By the time it reaches workers and savers, purchasing power has already eroded.
Imagine the central bank prints $1 trillion. This money flows through the economy in layers:
Layer 1 - Banks & Governments: Receive the money first at 0% interest. Prices haven't risen yet.
They buy assets (stocks, real estate) at pre-inflation prices. Massive gain.
Layer 2 - Corporations & Wealthy: Borrow cheaply from banks. Buy appreciating assets before
prices fully adjust. Moderate gain.
Layer 3 - Workers & Savers: Receive salary increases last, if at all. By now, prices have risen.
Their wages buy less. Savings lose value. Net loss.
Inflation is sold as "economic stimulus" or "quantitative easing." In reality, it's a transfer of wealth from those who hold currency (workers, retirees, savers) to those who receive new money first (banks, governments, asset holders). The corruption curve ensures the wealthy get wealthier while the middle class erodes.
Print new money and watch how it flows through the economy. See who benefits and who loses based on their distance from the money printer.
Receive new money first, spend before prices rise
Borrow cheap money, buy assets before full price adjustment
Wages rise slowly, prices already inflated, savings eroded
The wealthy gain purchasing power because they receive new money before prices adjust. Workers and savers lose purchasing power because prices rise before their wages. This isn't accidental. It's how fiat monetary systems extract wealth from the many to benefit the few.
A fixed supply enforced by code would eliminate the Cantillon Effect entirely. No one could print new currency. No central bank could inflate supply. No government could debase the currency to benefit insiders.
If new currency entered circulation through a transparent, competitive process, anyone could participate. The schedule would be predictable and decreasing. Eventually, no new currency would ever be created.
This would mean purchasing power isn't systematically stolen from late receivers. If you held this currency, your share of the total supply would never decrease. This contrasts with fiat, where your share shrinks every time the money printer runs.
Such a system would replace discretionary money printing with algorithmic scarcity. There would be no "first receiver" because supply would increase predictably for everyone. Network participants would earn new currency by providing useful work, not by political privilege. The corruption curve would be flattened to zero: no one could game the system through proximity to power.
Continue this path to see how cryptographic proof systems make this enforceable.
Test your understanding with interactive reflections.
Select the early receivers: