What Is Asset Inflation?


Jake Morr


August 25, 2023

Asset inflation refers to rising asset prices like houses, stocks, art, etc. As these items' values surge, it signals the onset of asset inflation caused by an increase to the money supply. Central to this phenomenon is the Cantillon Effect, which delineates the uneven influence of inflation on various goods and assets based on one's proximity to the origin of new money. Specifically, when fresh fiat money circulates in the economy, entities like banks, who receive it first, gain the advantage of buying assets before their prices adjust to this influx. By the time this capital trickles down to ordinary citizens, they grapple with heightened asset prices, illustrating the financial disparities stemming from one's distance from the central bank.

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