Whatever the monetary system, any production of money leads to a redistribution of income in favour of the producers and the first users of the new units. The Long-Run Tendency: Forced Socialisation of Money Indeed, these can exchange the new units as long as the price level is still at its initial level while those who use the new units last have to pay higher purchase prices already before they can increase their spending. This redistribution of income takes place in particular for the benefit of the first owners of the new units produced. Winners are those who sell at prices that increase faster or more sharply than the prices at which they buy and losers those who suffer the reverse. The uneven impact of money production on individual prices creates winners and losers. This effect is called the “Cantillon Effect” after Richard Cantillon who described it at the beginning of the 18 th century in his book Essai sur la nature du commerce en général ( An Essay on Economic Theory). However, it must be taken into account that, following an expansion of the money stock, individual prices do not increase at the same time and in the same proportion, but at different points of time and in different proportions. Therefore, in this light, it seems that increasing the money stock is in vain, because it cannot create any real income for anyone. Everyone’s money income would have increased by 10%, but costs would have kept pace. At the end of this process, all market participants would therefore be in the exact same real situation as at the beginning. For example, suppose that an increase in the money stock of 10 percent eventually leads to an increase in all money prices, also by 10 percent. One might object that this would not hold true if money were strictly neutral with respect to the real economy. Banks produce money because this production is a source of income for them, just as miners remove silver and gold from the ground because this extraction is a source of income for them. Today the most important producers of money are central banks (which create base money) and commercial banks (which create money substitutes). Its production is therefore a source of income. It represents a very liquid and desired purchasing power. Money is an economic good that is generally used as a medium of exchange.
We must therefore first and foremost consider the economic mechanisms that are at work here. Always and everywhere, political power seeks to stimulate the production of money for its own benefit. It is this phenomenon that is at the heart of world monetary history. But its etymological root refers to an artificial expansion of the money supply which results most notably from state interventions (see Hülsmann, The Ethics of Money Production, chaps 5 and 7). The word inflation is today commonly defined as a sustained increase in the level of money prices (price-inflation). In conclusion, we will contrast two interpretations of this evolution: the classical vision, anchored in the conviction that the production of money is not a cause of the wealth of nations, and the mercantilist-Keynesian vision, based on the opposite conviction. Part two will be devoted to analysing the current situation and shorter-term trends. In the first part, we will study the main forces at work in the production of money, as well as the resulting trends. This is what we propose to do in this article. It is therefore interesting to identify them, to imagine their extension into the future and to assess them in the light of economic analysis. These forces are at work today as at the dawn of time, and they will not disappear tomorrow.
Monetary history has been forged under the impact of certain forces that tirelessly push for an inflation of the money supply. But this matter of fact needs to be put into perspective. Where there are choices, the future is in principle uncertain. The future is the result of the previous choices. The monetary system and the economy of tomorrow will be profoundly different from those of today. One thing seems to be clear: the monetary policy of tomorrow will still be very different from that of today. There are already plans to equip monetary policy with new tools, such as the elimination of cash and “helicopter money” in order to face the challenges of the moment and the near future. Their activism has failed to extinguish the fires. Ever since the financial crisis erupted eight years ago, * major central banks have fundamentally reformed the way they create and absorb money.
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