With sharp increases to the price of goods and services, where’s all this extra money I’m spending going?

Question

Don’t try to tell me my wages are sharply increasing either, because they’re not! Nor are my friends, family, or neighbors.

In: 113

Answer 1

Prices are going up, because there has been a huge amount of money printing over the past two years, and decreased production of goods due to people being in lockdown. More currency chasing fewer goods means prices go up. Supply vs demand. As for where the money is going… it goes to anyone who has seen their income or capital gains increase more than inflation. This tends to be people who were already very wealthy.

There’s an effect called the Cantillon Effect, which means the people who get their hands on the newly-printed currency first tend to increase their real wealth, while the people who get their hands on it last tend to see their real wealth decrease. That’s because it takes a while for the economy to price in the fact that there’s more currency in it.