The Price of Tomorrow: Why Deflation is the Key to an Abundant Future by Jeff Booth

(New York: Stanley, 2020), 208

Booth's thesis is that technology is deflationary and accelerating exponentially, but our economy is propped up with debt and our governments have turned capitalism into crony capitalism by becoming lenders of last resort. I agree with many of his observation and found his summaries of quantitative easing, creative destruction, cognitive biases, energy, and AI to be interesting even if a bit full of cliché. He does not present a compelling solution, however, apart from a vague plea to embrace deflation and adopt Bitcoin.

Notes


Contents


Preface

  • Continuing on the existing path will ensure chaos; it's not reasonable to think that what worked in the past will work in the future
  • He reads 50 books per year

Introduction

Summary: Technology is deflationary and we are entering a great age of deflation. But our deflating economy is masked by the artificial rise in prices driven by an enormous rise in credit and debt. The cost of this all is the discontent and populism it sows.

What ironic words from Keynes:

Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.
–John Maynard Keynes, The General Theory of Employment, Interest and Money

  • Technology is deflationary, and we are entering into an age of deflation
  • The only thing driving growth today is easy credit: "The mirage of growth today is nothing more than a debt-fuelled spending binge." (12)
  • In Deflation the holders of currency win; in Inflation holders of assets win
  • Ray Dalio gives, in ~Principles for Navigating Big Debt Crises, the four levers you can pull to bring debt and service levels down to income and cash flows that are required to service them:
    1. Austerity - spending less
    2. Debt defaults/restructuring
    3. The central bank printing money or other guarantees (MMT)
    4. Transfers of money from those who have more than they need to those who have less (UBI)

Chapter 1: Printing Money

Summary: Printing money—aka Quantitative Easing—is dysfunctional capitalism where the government decides who wins and loses and confiscates wealth from its citizens in the form of inflation. Our prosperity is a Ponzi scheme, and the music will end. "First currency wars, then trade wars, then real wars."

  • Debt that can't be paid back was at the heart of the housing crisis, and will be at the heart of the next crisis
  • The system works on trust: remove trust and it can unravel quickly
  • Devaluing your currently lowers your labor rate against competitors, creating a rate to the bottom that pushes up global asset prices (cf. 2021-04-17-Currency Wars)
  • John Maynard Keynes: "By a continuing process of inflation, governments can confiscate, secretly and unobserved, and important part of the wealth of their citizens." (34)

Chapter 2: Creative Destruction

Summary: Schumpeter coined "Creative destruction" where innovation destroys existing companies but replaces them with more value and fuels growth (but he also saw this as contributing to its collapse). Minsky foresaw governments always acting as lenders of last resort to bail out the market. Putting the two together, and adding technological deflation, sows the seeds for an unimaginable collapse.

  • Joseph A. Schumpeter coined the term "creative destruction": information not having the same constraints as physical goods is an example of this
    • But it also portends its collapse: "In breaking down the pre-capitalist framework of society, capitalism thus broke not only barriers that impeded its progress but also flying buttresses that prevented its collapse. The capitalist process in much the same way in which it destroyed the institutional framework of feudal society also undermines its own." (62, from Capitalism, Socialism, and Democracy by Joseph A. Schumpeter, 139; this is similar to the argument Patrick Deneen presents in 2018-05-29-Why Liberalism Failed)
  • "Forecasting the timing of change and taking advantage of it may be the most important skillsets of a visionary entrepreneur." (50)
  • Today's digital monopolies: "you are either the platform or the arbitrage on the platform...in the long term, there is no in-between" (62, cf. 2021-11-30-Ten Arguments for Deleting Your Social Media Accounts Right Now)
  • Hyman Minsky: debt itself does not undermine capitalism, but the socialization of the losses to stabilize an economy to prevent it from collapsing (63)

Chapter 3: It Is Hard to Think Differently

Summary: We are wired to think with heuristics that are often wrong (cf. Daniel Kahneman), and need to overcome this by reading widely across disciplines and sniffing out where we are wrong.

  • The stories we create are important because they allow us to make sense of the world by infusing a narrative with emotion, which makes our stories memorable.
  • Leadership: The best leaders are constantly learning, curious about where they made mistakes and actively looking for areas where they might have it wrong (80)

Chapter 4: The Technology Boom

Summary: Technology is increasing exponentially (Moore's Law), and will continue (examples of self-driving cars, VR/AR, and additive manufacturing). But this exponential growth will create a phase change where the rules change.

  • Self-driving cars are all about utilization rates and infrastructure for parking
  • VR/AR is all about tourism? → seems like a more compelling reason is needed and could be made

Chapter 5: The Future of Energy

Summary: Cheap, abundant solar energy will b ea massive deflationary force and beneficial for society if we make the switch from fossil fuels.

  • Swanson's Law: price of solar drops 20% for every doubling of volume shipped (about 75% every 10 years)

Chapter 6: The Future of Intelligence

Summary: This is a brief history of AI: writing, printing, Babbage, Turing, Shannon, Bayes, Alpha Go.

  • "Error correction is the basis of all intelligence"

Chapter 7: Who Will Be the Masters?

Summary: The facts of AI suggest social disruption from loss of jobs and rise in division and polarization.

  • "With enough data, compute power, and storage, almost any problem that could be solved by a human could be better solved by a computer" (142)
  • Brain-computer interfaces as the next step beyond books as an extension of the human mind (155)

Chapter 8: Us versus Them

Summary: Our system leads to inequality, which promotes extremism which leads to an "us vs them" mentality. To combat this we need bigger goals that we can all unite behind.

Chapter 9: Can We Cooperate?

Summary: He gives an overview of game theory, argues that the rules of capitalism have changed since the 2008 bailouts (now crony capitalism), and suggests that the abundance and deflation from technology can change the payoff of non-cooperation in the future.

  • Option 3 MMT: just "rearranging deck chairs on the Titanic": it can only end in inequality, loss of trust, polarization, revolution, and wars
  • Option 4 UBI: difficult to execute, doesn't deal with the root cause issues

Chapter 10: A Call to Action

Summary: The two mainstream ways forward are either MMT/stimulus, or UBI/wealth redistribution; but both will eventually need a debt reset. His proposed solution is to let deflation happen and adopt Bitcoin as our currency.

  • "What if the natural order of things was permitted? What if, instead of trying to stop deflation at all costs, we embrace it?" (202)
  • "Allowing abundance without the jobs might actually open an entirely new enlightenment era where we have time to enjoy the benefits that technology brings." (204)

Topics: Economics, Inflation, Deflation, Bitcoin

Source: Cory, 2021-11-04 Podcast-Fix the Money Fix The World with Lawrence Lepard

Bibliography

  • ~Principles for Navigating Big Debt Crises by Ray Dalio (13)
  • Between Debt and the Devil by Adair Turner (28)
  • The Long Tail by Chris Anderson (41)
  • Capitalism, Socialism, and Democracy by Joseph A. Schumpeter (62)
  • Stabilizing an Unstable Economy by Hyman Minsky (63)
  • 2020-12-21-Antifragile by Nassim Nicholas Taleb (64, 103)
  • Thinking Fast and Slow by Daniel Kahneman (72)
  • The Hero with a Thousand Faces by Joseph Campbell (76)
  • The No Asshole Rule by Bob Sutton (80)
  • Superintelligence by Nick Bostrom (96)
  • "Monetary Policy with Negative Interest Rates" by the International Monetary Fund
  • Films Watched: The Imitation Game (130)
  • The Master Algorithm by Pedro Domingos (133)
  • Outliers by Malcolm Gladwell (137)
  • Group Conflict and Cooperation by Muzafer Sherif (162)
  • Actionable Gamification by Yu-kai Chou (168)
  • Exponential Organizations by Salim Ismail (191)

Created: 2021-12-01-Wed
Updated: 2023-01-23-Mon