Cantillon Effect describes changes in relative prices, purchasing power and resource allocation connected with who receives new money, on what terms and how it is used. It is not merely another name for a rise in the general price level.
In the Essai, Richard Cantillon describes new gold or silver from mines and spending by owners, entrepreneurs and workers spreading through subsequent trades. He follows money’s path through the economy. The mechanism is not restricted to printing notes, but applying it today requires establishing the specific creation and transmission of money. [Richard Cantillon — Essai, II.VI]
Cantillon stresses that doubling money need not double every price. Illustratively, when food rises from 10 to 12 while wages remain 100, less of that food can be purchased. This is not yet a calculation of overall inflation or proof of its cause; other prices, wages and supply can behave differently. [Richard Cantillon — Essai, II.VII]
The Bank of England explains that lending normally creates a matching deposit. For an illustrative loan of 100, the borrower has a new deposit of 100 and debt of 100, not a gift of net wealth. Interest, collateral, use and repayment matter. Transferring an existing deposit between people is different from creating it. [Bank of England — Money creation in the modern economy]
Under QE a nonbank seller may exchange a bond for a new deposit, while its bank gains reserves and a matching liability. The seller also surrendered an asset; the transaction alone is not a gift equal to the whole payment. Asset prices, yields and later decisions can nevertheless change and have distributional effects. [Bank of England — Money creation in the modern economy]
Households differ in assets, loans, interest terms and labour income. ECB Working Paper 2190 estimates reduced income inequality for the QE studied, mainly through employment. This is a particular model-and-data result, not a universal conclusion; asset-price gains and labour income can work in different directions. [ECB Working Paper 2190 — Monetary policy and household inequality]
Expectations can enter prices before an actual payment. An early recipient may also obtain an unfavourable loan or buy an overpriced asset. Assessment needs contracts, balance sheets, timing and real purchasing power, not merely the label “close to new money”. [Bank of England — Money creation in the modern economy] [ECB Working Paper 2190 — Monetary policy and household inequality]
Bitcoin issues new units under protocol rules as part of mining rewards; miners expend work and incur costs to obtain them. Predictable issuance limits a particular form of discretionary allocation but guarantees neither equal wealth, prices nor credit access. Loans and claims denominated in BTC are also not new native bitcoins. [Bitcoin.org — Issuance and value FAQ]
Identify the monetary or policy change, initial recipients, spending channel and period. Compare a realistic scenario without the intervention and separate goods supply, taxes, credit risk and other changes. Rising house prices or bank profit alone do not demonstrate Cantillon Effect; it is a framework for investigating channels, not a substitute for measurement. [Richard Cantillon — Essai, II.VII] [ECB Working Paper 2190 — Monetary policy and household inequality]
For the clearest picture, read this entry together with Fiat money, Monetary Premium, Credit Expansion, Sound money. The reverse links also lead from Forced Saving.