Zohran Mamdani is the mayor-elect for New York City.

I had my doubts that he was going to win. It was unfathomable to me that a financial centre so focused on the idea of winning (in the capitalist sense) was capable of entertaining a democratic socialist. I stand happily corrected, and extremely proud that he has won the election. His win and agenda here are a paradigm shift of the priorities of the electorate. So, I think the first question to as is: What changed?

The answer lies in who benefits from economic growth. When asset prices rise faster than wages - when homeownership becomes a lottery ticket rather than a milestone, when stock portfolios outpace paychecks - voters notice. They feel it in their rent, their grocery bills, their inability to save. Mamdani’s victory signals that electorates are rejecting an economy that rewards proximity to capital over contribution to productivity.

At least, in the advanced, industrialized nations, it’s a start to moving away from asset-price boosterism, and towards broadened economic security. Across advanced democracies, elections have swung on cost-of-living and economic security, not just culture-war abstractions. In 2024-25 alone, the cost-of-living crisis dominated voter concern in Canada, UK, Netherlands, etc. ^{1 2} America (and by extension, New York City) are no different; when people feel priced out of basic stablity and ownership, they will always choose candidates who will promise to reroute these gains. This is why populists win! But, I digress.

This ‘vibe’ of feeling like you’re priced out of your own economy - it has a name.

The Cantillon Effect

When new money is created, it doesn’t fan out to everyone at once. It enters through the financial system first. Central banks buy government bonds and other assets from trading counterparties-big words for “big financial institutions.” Not because governments need their cash, but because central banks are required to operate through authorized market‑making counterparties in these markets; that legal and operational design makes large financial institutions the first recipients when new money enters the system. Think of it like opening a faucet at the top of a building: the penthouse gets the water pressure before the lower floors. The first splash lifts the price of what’s being bought (safe bonds), which pushes their yields down; then the sellers and other investors, now earning less on safe assets, reach for alternatives with higher returns - corporate bonds, stocks, real estate, even private credit. In plain terms: the central bank’s buy pushes the bond’s price up and leaves the seller holding cash instead of that bond; with safe returns now lower, that cash goes looking for a new home. In Gary Stevenson’s frame: when extra cash chases things you can’t quickly make more of - houses, prime land, established equities-their supply is slow and demand relatively inelastic, so the new money mostly bids up prices rather than output. ³⁴ That “portfolio rebalancing” bids up asset prices now, while wages adjust slowly, if at all. ^{5 6 7}

Why them, and not us?

• Central banks implement policy by buying securities from primary dealiers and large isntitions - their operational counterparties - not from household 401ks, pensions, etc.
• The “rebalancing of the portfolio” channel pushes investors out of safe bonds and into risk assets, lifting stock and real-estate prices before wages catch up.
• Asset managers’ first touch shows up as higher asset values and cheaper corporate funding (thanks to lowered interest rates), not instantly as higher wages for you.

Where the money does (and doesn’t) go: assets outrun incomes

When assets beat earnings, wealth concentrates at the top (those who own more assets), and younger households get stuck with this ’negative capital’ - student debt, housing debt, costs of groceries, etc. - which runs away from their purchasing power. ^{8 4 3} The middle class is squeezed by shelter and essential services.

This isn’t some bullshit abstract. Surveys show young adults naming the cost of living as their top issue, and trust falling when they feel the economy works for someone else first. ^{3 9}. Even some of capitalism’s biggest boosters have noticed: when a generation carries debt while being locked out of ownership, they will turn against a system that they have no stake in.

Why does this make people sour on “capitalism”?

• The curent financial system’s plumbing privileges asset owners: the first beneficiaries are dealers, banks, and large instittions that sell assets to central banks ror raise money cheaply on capital markets. ^{6 7}

• These benefits arrive via asset prices first, and not wages or broad consumer demand. ^{5 10}

• By the time money ’trickles down’, prices have already adjusted upwards; late receivers lose their purchasing power. This is why we feel that the ladder is being pulled up; even if the GDP looks fine and growing.

So, how do we flip this first-recipient? Democratic socialism.

If the problem is who gets the benefits first, the fix is to change this channel.

• Housing first - not asset prices: socialized or public housing and tenant protections stabilize shelter costs, which weakens the asset-inflation channel. ^{8 3} Evidence-rich modesl (e.g. Vienna, Singapore) show large public supply keeps prices tethered to wages.

• Public power and mission-driven investment: New Yrok’s Build Public Renewables act authorizes the state power authority to build and sell clean power directly, with labour standards - public produvtion that routes benefits to ratepayers and workers instead of just sharehodlers. ¹¹

• Labour institions: sectoral standards and collective bargaining shift income toward wages - so gains show up in paycheques, not just portfolios. ¹²

• Smart redistribution: from the IMF’s own work, typical redistribution isn’t growth-negative and can even extend expansions -which undercuts the idea that equity is a trade-off.

Zohran’s platform sits squarely in this lane: rent relief / socialized housing blunt the asset channel, stronger labour standards ensure gains arrive as income and not just asset marks.

Sources