Cantillon Effect: Consequences of Inflation

I have touched upon what inflation is in the past and where it derives from, however, for the purpose of this video I have decided to explain further on request relative to the consequences of inflation. I've mentioned in the past how the devaluation of the currency doesn't affect the rich and that as a result of the distortion of the interest rates wrong signals were sent out to investors and this certainly proved the case with inflation.

In this video I explain briefly on profits and losses, the importance price signals play, why inflation benefits the rich, as well as the malinvestment problem created through the Catillon effect.

If you have trouble understanding, market-driven prices would only drive up the price of whatever the consumer is in demand of in a free market, whereas inflation drives up the price of more or less everything which includes such goods the market wasn't initially in demand of, therefore, it distorts the signals and the higher price makes it appear that such goods are in demand, when in real fact it is the illusion inflation created.

It is a direct consequence of this for why malinvestment takes place, not only from those getting a hold of the newly created money first spending to compete to take what is currently out to reallocate resources, capital and labour, but the distortion inflation caused in of itself, which explains why the economic calculation problem doesn't just occur via government price controls and is natural to this mixed economy.

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