1.

> [C]onsider the fact that commercial banks create commercial bank money and that there's thousands of them competing with each other [...]. [I]f the cantillon effect exists, it would be caused by inequality, not the other way around.

This seems like an interesting point. Let me try to think it through. It seems that, in an unequal society, richer people have more credit, so lending/money-creation gives money disproportionately to them. Thus lending magnifies inequality of access to money. Say everyone can borrow at 1:1, and you have $1. Then you can transform your situation into one in which you instead have $2 and $1 liability. Whereas the guy with $10 can transform his holdings into $20 plus $10 liability. Now if that "1:1" is actually a variable that goes up as interest rates go down, then lowering the rate disproportionately gives dollars (and liability, but that is inflated away) to those who already have them. In the extreme disproportion, one guy has all the money and can buy all the houses (or other real assets).

This then locks in increased consolidation or monopoly power, which can be used to extract rents that pay off the liability.

So I can see how a "distributed Cantillon effect" could both be caused by inequality, and exacerbate it.

This model does depend though on "the interest rate" being a consensus thing, maybe centrally-dictated.

I suppose collusion/rehypothication is another issue. Liability chains are supposed to be acyclic, but if we can somehow cause "forgetting" across one edge of a cycle between ourselves, then we can make "infinite money" and buy up assets before anyone catches on. And then maybe "remember" things later and make the mutual debts all cancel. Maybe this scam is sort of happening in a distributed way...

2.

> The Austrian Economists, who love the Cantillon Effect, always appear to demand higher interest rates which increases banking profitability, which immediately exposes their hypocrisy.

It's weird actually. There's a kind of cranky libertarian strain. On the one hand it blames ZIRP and presumably wants higher interest rates. And on the other there are lots of goldbugs in that school who like... gold... which has a zero interest rate. So that would seem to be a contradiction...

Maybe it's not though. They also don't like fractional reserve banking and want narrow banks. So if gold is a way to put a hard constraint on how much money there is in circulation, then high interest rates are a soft/elastic version of same, within a fractional reserve system.

(Islamic banking seems to have similar principles. More "tracking chains of exchange", less creation of money/banking-liability.)

3.

The one thing we can be sure of is that a regime of falling interest rates continually drives up the prices of earlier bonds, so the people who win are the ones who got in earliest. It has a pyramid flavor but somehow worse, because although ever-increasing exponentials are at least a mathematical object that exists (even if there are real limits), a monotonically-decreasing curve with a lower bound of zero can at most asymptote to zero -- and if you put any bound on the rate of decrease, then you find that you reach zero in finite time. After that, then what?

Just thinking aloud, really.