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Richard Cantillon was an economist from the 1790s who saw today’s economic dilemma.
He found that as the money stock increased, the value of each unit of that money would be less.
That is why $1 from 1930 is worth less than a penny now and you’re stuck with no savings.
He found that as the money stock increased, the value of each unit of that money would be less.
That is why $1 from 1930 is worth less than a penny now and you’re stuck with no savings.
In cities we’ve experienced a Cantillon effect as well. We have increased the stock of buildings and urbanized land with high time preference, valuing depreciation and efficiency. In that process cities see their labor markets diluted and the entire region loses value.
Looking at what could be good Storage of Value in this context we must turn to smaller downtowns with connected networks of streets and services, that were built with low time preference and retain a scale small enough for startup folks to purchase a building and set up shop.
To the question of what to do with so much that has already been built as part of the excess building stock, we should think of investing first in the good Store of Value to develop that as a strong labor market and then maintain the parts of the network that still make sense.
Will this cause a tremendous shuffle of wealth? Yes. Most likely. As with any mistakes that are compounded, such as switching to “fiat” money, the can can only be kicked for so long and the weakest links will give up soon.
What are the weakest links? Not the little guy who can hustle and get by by single handedly fixing a run down building to set up a tavern, but the multi million developer who owns millions of square feet in the suburbs, whose cash flow requires high turnovers and short memories.
Look for the strong, low-time-preference storage of value: your downtown. Start there. Lower your time preference, buy a building and renovate for the long run. This advice I’m giving myself, but applies to most places that struggle right now and applies to most who read this.
1700s, not 1790s. My mistake.
