The Fed’s Losing Battle with Deflation (w/ Jeff Booth)

MAX WIETHE: I’m sitting down with Jeff Booth,
author of the Price of Tomorrow and also an entrepreneur, thank you for coming in all
the way from Vancouver, Jeff. JEFF BOOTH: Thanks. Thanks for having me, Max. MAX WIETHE: It’s our pleasure. Well, before we get into a little bit about
your background to help understand the lens through which you’re viewing this issue of
deflation and technology and the way that’s going to impact society, I’d like to just
get a brief summary of the book for our viewers so they can understand what we’re going to
be talking about today. JEFF BOOTH: The book you mentioned, it is
called the Price of Tomorrow, why technology is key to an abundant future. It’s about what’s happening in the world today,
through the lens of you see the divide in political spectrums, you see the divide of
the social contract in our world breaking down and it can be pulled back to technology
is deflationary. That’s not a guess that’s a fact and it rides
an exponential wave of deflation. What that means is we should be seeing lower
and lower cost and higher and higher gains abundance everywhere in our world. Why we’re not is because central governments
and monetary stimulus around the world that’s trying to prevent that. Because we’ve grown up in a world where inflation
rate wins, and we can’t see that deflation could be a good thing. MAX WIETHE: I do think you make an interesting
case for that in your book. Before we go a little bit deeper into exactly
how you lay out your thesis, why don’t we go back a little bit to understand your background,
and how you came to these ideas. JEFF BOOTH: My background is as a technology
entrepreneur, and I’ve started on numerous companies, one of which grew to over $500
billion market cap. I’m on boards of numerous other technology
companies. In an interesting analog to what I’m seeing
is, engineers, there’s something called the engineer’s ring, and it’s a ring that symbolizes
our work has meaning, our work has consequences. The story behind it comes from a bridge collapse
in Montreal in the 1920s. Now, when you’re an engineer, you have to
take an oath, our work has consequences. In technology, our work has consequences. The consequences actually could be profoundly
great. Every single technology company I’m involved
in or helping entrepreneurs are intent on making the world better through technology. If you look at what’s going to happen out
of the jobs, because of technology, artificial intelligence and what’s happening, it’s hard
to square that peg. It’s really hard because our job as technology
entrepreneurs is to make things more efficient and the technology that we’re able to use
today to deploy to make that happen come at the cost of jobs. I know today, there’s some people that say,
oh, no, don’t worry, there’s going to be more jobs in the future, more net new jobs in the
future. I do not believe that’s true, and we could
go into that. If the technology can create a more efficient
future, and we don’t change our social structures or the way that our economies are built, then
we’re going to drive polarization into our economies, and ultimately, that’s going to
end in a really bad spot for society. MAX WIETHE: Is it this societal change that
you think we need to make? That was the reason that you wrote the book? Why did you decide to put pen to paper? JEFF BOOTH: For my children. For the impact, my children won’t grow up
in the world that I grew up in, unless their societal change on this. How you get elected in a cycle like this of
division is you create internal division in a country and then that internal division
isn’t big enough to stay elected, and you need to blame another country. If you just look through the lens of what’s
happening in the polarization of the world today, Hitler’s a good example in the ’30s. Pray on, because people don’t want to face
the first principles, the facts, it’s easy to drive blame and division into that. We have a structural change that’s hitting
society. We’re not talking about the first principles,
we’re talking about everything that’s in the news is two orders of magnitude away from
the first principles. That’s why I wrote the book. MAX WIETHE: You really start out the book
with the first principles, some of them being the misunderstandings that we have about the
way that our world functions and the way that it’s going to function in the future. Then also the truths that you try and lay
out as your truth. I think that’s a great place to start to really
dive into the meat of the book, that first section. JEFF BOOTH: Well, we grew up, I did, too,
my parents did, their parents did, their parents did, believing inflation was good. My parents bought a home for, call it, $100,000
in 1970, that home was worth $1.5 million today. They got raises through their careers, paid
back the home in the future dollars that were worth less. That whole path has driven a lot of prosperity
in the world, so I’m not arguing the path. What I’m arguing is today, the deflationary
nature of technology is a bigger force, and nothing you’re going to do to stop it. Let’s just look at deflation versus inflation
from that concept and say, is it good or bad? It’s not good or bad, people win or people
lose, where you put your money matters. In a deflationary environment, the value of
your dollars goes up. I would think that that would be a good thing,
because it means goods and services are getting less and we get more for less. When central banks around the world say we
need to drive inflation, that comes down to we have too much debt in the world, and if
you have deflation with too much debt in the world you create a negative spiral. Again, deflation or inflation isn’t good or
bad, it’s where does your money go to drive a better outcome. If you have deflation today, technology deflation
and we can go into that, that is going to accelerate and the only way to stop that acceleration
of deflation is debasing currencies or spending money you don’t have, then the consequence
of that is asset prices rising, stock prices rising, and everybody that has assets or stocks
are winners out of that. I’m a winner out of that. In fact, because of zero interest rate policy,
the funds that are raising giant funds to invest in technology and take jobs faster
have more capital because they’re trying to– that whole thing is driving a faster feedback
cycle but it’s also the divide of our societies. Because if you have assets, they’re getting
artificially promoted. If you don’t, you can’t keep up to the rate
of that asset price rise. You’re picking the pocket of some people and
giving it to others. That’s why we have massive inequality in the
world that’s accelerating inequality. MAX WIETHE: I think one of the things you
talked about as you called it, technology deflation, not all deflation is the same. A lot of people, when they hear the word deflation,
their mind immediately goes to the 1930s in the Great Depression, which I call it demand
side deflation, there was people didn’t have any money and so to sell goods at all, you
had to lower the prices and so that deflation on its face looks bad. The deflation you’re talking about is of a
completely different nature. What are some of the like the most important
technologies, I think people need to keep their eye on to understand the deflationary
forces that are coming our way? JEFF BOOTH: I use this example in the book,
but it’s an important example because I’ve asked this question to pose 10s of thousands
of times to audience all over the world. The question is, if I fold a piece of paper
on itself, one times, two times, three times, a normal 8.5 by 11 piece of paper, if I could
fold that paper 50 times, I can only fold it seven, but if I could fold that paper 50
times, how thick is the piece of paper? Most answers I get from all over the world
are about a couple inches. I’ve had a couple people say to the roof,
but out of 10s of thousands of people are answering, no one has ever guessed to the
sun. That single piece of paper would fold to the
sun, and it’s an exponential pattern. Moore’s law or quantum behind Moore’s law,
but Moore’s law for now is driving, accelerating that every 18 months, we get a double of compute
power. Why that matters a lot, those two analogues
matter a lot, is it’s the same reason we misunderstand technology in the beginning. There’s a hype cycle in technology because
the fold doesn’t do anything. We expect something and it doesn’t do anything. If you now compare those two things, we’ll
unfold 33 with regards to technology, so we’re not in the small folds anymore, we’re on the
really thick folds. The big steps in technology. If you’re looking back today and saying self-driving
cars, all of this technology that’s coming, you’re looking back backwards the last 50
years, and the last 50 years in the next 18 months will double. If you can’t get the answer from a piece of
paper moving to the sun and nobody can get the answer from piece of paper moving the
sun, unless you’ve heard it before, then you similarly can’t get the answer for what technology
means going forward. If you look at today, you talked about some
of the different technologies, I would say it’s a base layer of everything we do. In fact, I don’t think people even realize
that they’re celebrating technology and creating the monopolies that we see before us today. Google, your searches are free. Then they add Maps, then they add Waze. Everything is free that you’re using. Amazon, prices keep going down then they add
Movies, then they add this. The technology companies today are celebrated
for the same deflation that they’re bringing to our lives. We’re using them because of that. That is the product that we see. We have this crazy belief, crazy belief that
we can get deflation in some parts of our society and inflation everywhere else and
run an economic model that we used to run. Going forward if you think fold 34, fold 35,
what’s going to happen in that doubling rate of technology, if it took $185 trillion in
the last 20 years to essentially stop deflation, $185 trillion monetary easing debt creation
to get a nominal inflation rate, going forward, that number is going to explode. You have a Ponzi scheme of debt, credit creation,
and at some point, it’s going to break. MAX WIETHE: Do you think the social consequences
of that printing could come to fruition and slow down this deflationary cycle because
of the social problems that will come to roost first? JEFF BOOTH: If you look at the newspapers
today, if you look at most of what is in the news today, it’s the social problems that
everybody’s talking about. Whether it’s Trump on one side, Bernie on
the other side, or it’s the social consequences of what we’re talking about that are rising
and is creating divide in the world like we’ve never seen. Well, we’ve seen but we’ve seen that the height
of World Wars. MAX WIETHE: Yeah, but those monopolies that
you’re talking about that are driving the technological evolution, which is inherently
deflationary what if there’s talk about breaking up these monopolies, and that could slow things
down and you get into the power of monopolies later in the book specifically with regard
to AI and how the importance of large data sets that are always being updated are extremely
important and so that in some ways, if the goal is to achieve some AI superiority, then
you almost need these monopolies, and that’s going to slow down that deflationary cycle
potentially, if we have these societal issues, which are clearly rearing their head faster
than runaway deflation. JEFF BOOTH: Let’s dig into AI a little bit. It’s one of the things, not the only thing,
there’s a whole bunch of deflation coming. Let’s take a look at AI as a first principle. The way we learn is through error correction. The more you practice, the better you get,
through error correction, but we can’t see all of the data sets we have to choose to
see certain data sets. AI as it adds more and more data sets, it’s
actually the same thing. It’s error correction at scale. If you talk to, I’m friends with many of them,
if you talk to top AI researchers, then somewhere between five and 20 years, we’re going to
have general purpose AI that’s better than us at everything. If every job, five and 20 years, that’s not
a long time scale. If every single job is a function of our intelligence,
and it’s hard not to see that. If every single job is a function of our intelligence
and we’re going to have Ais that are more intelligent than us, how can you logically
conclude that there’s going to be more jobs in the future? That path is going to– today, economists
compare general purpose technologies, AI and electricity and say, we’ve been through this
before and the policy tools through electrification worked and yes, there was retraining that
needed to happen and everything else but there no jobs in the future. I think it’s foolish to compare electricity
to AI. Nobody said electricity is going to be smarter
than human beings. Electricity was important breakthrough as
electrification created new industries and everything else, but nobody ever said electricity–
two things. Electricity wasn’t doubling its performance
every 18 months and nobody ever said it was going to be smarter than humans. I think it’s a bad analog. If you think that the policy tools that worked
in the ’30s to be able to bridge societies through that transition will work again in
this transition, I think you’re not looking at the first principles of what’s happening
in technology. MAX WIETHE: AI is one of them. Another interesting area of deflationary technology
that you get into is energy. Energy in itself also feeds back into a lot
of the other technologies which could be deflationary. I think it’s important that we talk about
that as well. JEFF BOOTH: There is no life on earth without
energy. For years, we didn’t see the consequences
of the energy and all the jobs of energy. We dig up all of the energy, not anymore,
but most of the energy from plants, animals that got the energy from the sun before. That whole job exploration, refining, put
it in your car, all of that produced a lot of jobs, we didn’t see the second order consequences
of those jobs. Energy itself is about 9% to 10% of any economy. The race for lower cost energy is a critical
matter in economic. It’s what drove the race for coal. It’s really hard to stop a race for oil, race
for all around the world, because if you don’t have lowers cost energy versus your competitor,
your economy fails because its core to everything. We now have solar energy that is on par with
the lowest cost energies in the world and following that same exponential trend of lower
and lower costs. The whole infrastructure of digging things
up, refining them, having offsets to the environment and all the damage that costs in the future
will look foolish. There’s still going to be a massive transition
time, but today, that has a huge consequence for if you’re adding deflationary net nature
of solar one’s built, you’re not bringing coal to the solar farm. A lot of different jobs go away and it adds
deflation, it adds to all of the other deflationary trends that we’re seeing. I just don’t see how governments are going
to stop it. At the other side of it, why is it a bad thing? If you think about the abundance that that
could bring you, if you think about the abundance in your life that that could bring you with
lower and lower energy cost, to at some point potentially being free energy, why is that
a bad thing? MAX WIETHE: I can’t personally think of any
good reasons but there are some counterarguments that people would make that new commodities
are going to become more important as new technologies arise and that solar panels and
the battery technology, that we’re going to need to store that energy is made up of these
different minerals, which we don’t mind at the rates that we’re going to need to mind
them at. You’ll see the inflation come from other areas. Yes, oil might be in a secular downtrend and
declining in price, but you’re going to see that that price of oil is going to make its
way into other commodities. How do you- – JEFF BOOTH: If you add up all
of these exponential technologies that are moving, we are in a secular downtrend. If you said today, we have all the jobs of
the traditional industry and all the new jobs of the build out of the new. I actually see right now, that’s today, and
that’s happening in a number of different industries. Tomorrow, it won’t look like that. Once you hit the breaking point of some of
these technologies, it’ll change dramatically, and it will drop all of the existing jobs. I would love to have this debate, but I don’t
see where the jobs are in the long term that create net new jobs globally, net new high
paying jobs globally. For our existing economy to work the way around
inflation, that would have to happen. MAX WIETHE: It’s not a short term, a switch
to– you acknowledge that a short term switch to solar could cause inflation in certain
areas, but over the long run, these trends are inherently deflationary and that will
win out over time. It’s not that this is some short term thing
that deflation is on the horizon. Next year, not that you couldn’t see these
same forces playing out, but it’s not like it’s going to take over tomorrow. JEFF BOOTH: I would ask you this, you would
already see it. $185 trillion in the last 20 years has been
created to be able to increase GDP around the world by $46 trillion per year. Just ask yourself, what would asset prices
look like, what would the deflation and inflation look like without the $185 trillion? You would already see it. What my premise is, is that’s going to accelerate? Today, we’re stopping it. Central banks all around the world, whether
it’s US, whether it’s Euro, whether it’s China, the printing press is on trying to stop that
from happening. I suspect it’s going to stay on. I suspect because we can’t see the different
way we need to construct society that we’re going to keep taking the short term juice
until it breaks, but you would have already seen it without that printer. MAX WIETHE: If they’re going to keep printing,
what’s going to break first? Is it going to be these systems that we have
now at the central banks and the government’s as they exist, or is deflation going to run
away beforehand and these governments are going to have to figure out how to deal with
it? Are we going to restructure before the deflation
hits? JEFF BOOTH: I think the restructure happens
in a different way. Unfortunately. I wrote the book so that we could have really
critical debate around core issues rather than the secondary effect that seems to be
driving the debate today. It’s better to use an example here, and Blockbuster. Everybody talks about Blockbuster and they’re
9000 stores and why they didn’t see Netflix coming. Blockbuster, for the time that they grew their
business, 9000 stores was the thing that was driving the business. At the time when they didn’t buy Netflix for
$50 million, download speeds, remember slow speeds, they couldn’t– Netflix wasn’t delivering
videos through technology, through download speeds. They were emailing videos, the business didn’t
make a lot of sense. Blockbuster missed the exponential trend of
technology, what would happen? That made their business irrelevant overnight. By the time it was irrelevant, it didn’t matter
what they did. What they did is added candy aisles to the
stores, and it just delayed their collapse by one year. It’s easy to look at these examples in creative
destruction in companies where the smartest and brightest minds can’t see it. If you actually just zoom up a level, all
of us have been in an inflationary environment all our lives. We can’t see it because we don’t question
these things because they’ve always been true. I would say, what’s happening right now is
there’s a structural change that’s so great that’s happening to society through technology
that people can’t see it. We stay on a path and making tweaks to an
old system similar to how Blockbuster added candy aisles to their stores, thinking that
that’s going to solve it. Through that lens, if you see what’s coming,
and why you might be trapped in a bias as well, which is really easy to see how we all
get trapped in those things that we don’t question anymore and move to the next thing,
it’s just important time because we’ve never seen technology like this. MAX WIETHE: Well, I’m not really pushing back
against that idea. I’m more trying to get your input on what
is going to happen first is the printing, which is offsetting the deflation as we see
now, going to become the societal issue that will cause a restructuring before we see the
deflation or will the deflation be the thing which makes the debts untenable and thus,
we have to start thinking about not literally restructuring the debt, but restructuring
society first? JEFF BOOTH: I didn’t really look– but I will. The printing, these are probability distributions. This is I can’t say, I’m not going to say
this is going to happen or this is going to happen. I wrote the book to hopefully drive up debate
that this doesn’t happen. What do I suspect is going to happen? Printing is going to continue, but printing
isn’t just going to continue, it’s going to accelerate to a rate that is staggering. That printing all around the world, whether
it’s China, Japan, everything else will rise into asset prices and everything else and
further driving equality and society is going to break. When that happens, people vote for people
who say it’s not your fault, it’s their fault. Once people believe that it’s not your fault,
it’s their fault, it’s hard to unring that bell. What ends up happening is you drive society,
you break society, and that ends up in revolutions and wars. That’s unfortunately what I suspect is going
to happen if we keep playing the game we’re playing, because the force of deflation is
so great, it’s like we’re trying to stop gravity by flapping our arms. We’re not going to stop it. Without a realization that we’re not going
to stop it and rebuild society in a different way to take advantage of it, society is going
to break. MAX WIETHE: I think that’s a great way to
get into how you ended the book, which is with way that you talked about just now what
you think will happen, but you did lay out some examples of ways that you think we can
think about restructuring ourselves as a society to deal with these deflationary forces. What do you think would be– The way without
revolution, what does that going to look like? JEFF BOOTH: If you go back to is deflation
good or bad, there needs to be a reset of debt around the world or something to be able
to bridge it. I’m not suggesting that it’s one thing but
I did lay out a simple premise. It’s going to sound crazy but I think we might
be asking the wrong question. Governments all around the world, every government,
how do we protect our high paying jobs? How do we gain more high paying jobs, and
as a consequence, in a deflationary world, we need to print to be able to do it? We need to do it. What if we’re asking the wrong question? What if the question is how do we build a
society where we don’t need them? What if we let deflation happen and prices
just kept going lower and lower? As jobs fell out of the market, you didn’t
have to have this massive transfer of wealth from the rich to the poor to be able to drop
the people that were left off of the path of deflation? Because if it’s true that technology is going
to do more and more of these jobs, wouldn’t it seem logical to build a society where we
can benefit from that technology instead of stuck in an old framework where we have to
drive higher and higher and higher paying jobs when we know they’re not going to be
there? Why don’t we let it happen? In fact, capitalism itself would work perfectly
there. We don’t live in a capitalist society anymore. We live in crony capitalism where if we are
printing money, capitalism itself, allowing things to fail, and where you’re actually
paid for your difference and ingenuity and everything else not because you have assets
that were artificially priced would work perfectly if you let deflation happen. MAX WIETHE: What if we’re starting from a
place of too great of inequality where the people at the bottom of the pyramid don’t
have enough as those deflationary forces kick in to be able to survive? If prices dropped to zero immediately and
we go from a world of scarcity to a post-scarcity capitalist economy immediately and everything
costs next to nothing, then yeah, people can live off of their savings, their nonexistent
savings, people don’t have any money at all. There’s huge amounts of people who have less
than $500 in savings. That’s some serious deflation, that we would
need to be able to go to a world where $500 in savings and no job is going to be able
to get you through life. JEFF BOOTH: Let’s dig into that a little bit
more. Today, you have a problem. Let’s just take what you just said. There’s a whole bunch of people without $500
in savings. I agree with that, there’s a whole bunch of
people. How will artificially printing more money
solve their problem? Because what you will do there is post prices
will go up, stock prices will go up, rent prices will go up, they don’t participate
in any of those and their dollars will be worth less and less as you drive inflation
and they won’t be able to– the current path cannot work. That’s what I’m getting at. The new path, how we transition to something,
I’m not saying there’s too much debt in the world today, there’s over 250 trillion dollars
of debt in the world to run an $80 trillion world economy. That data is going to have to be figured out
at some point on a transition. What I’m saying is that transition is going
to happen whether we like it or not. Your show talks about it, Bitcoin, I believe
it’s one of the things in my portfolio. It’s my hedge against this. It could go to zero, it has risk, it has ups
and downs. I actually believe it’s one of those things
that as governments debase their currencies, and they’re going to have to continue to do
so, then what is a currency? It’s just trust in an exchange rate, I lend
you my money, I lose utility of money today and you have the inverse, you gain utility
of money today, which you can spend, and you lose it later with interest. If that’s an exchange between us or countries
or companies and everything else, and you pretend to if you change the denomination
and you change your utility of money, pretend to pay me back, I start to lose trust in the
currency. That currency breakdown is likely what’s going
to happen at some point. Whether it’s Bitcoin or a form of trust, that
I see that as a really good hedge against what’s happening because at some point, the
existing system is going to break. MAX WIETHE: I don’t disagree with you there,
but I was more trying to get at you said without a transfer of wealth. That was the phrase that I touched on, and
that there is a group of people who, no matter how deflationary we get, there is going to
have to be some transfer of wealth there. It doesn’t matter if we restructure the debts,
they don’t really care about the debts. They care about being able to afford a house,
being able to afford health care, being able to put food on their table. Even if we restructure the global debt, and
people stopped debasing the currency and we have cheap prices, they’re still not going
to be able to do that. I’m leading into UBI, and those sorts of other
things but I think that in the world that you’re describing, it’s almost undoubtable
that those things would be a part of that. JEFF BOOTH: Well, let’s look at both sides
of the political spectrum, or the socialism versus capitalism. On socialism, if a large part of the population
drops out, and there’s only a few people at the top making an enormous amount of money,
then there’s either going to be revolution, where those people take the money and at some
point in the future, and that’s going to come in first, it’s going to be way higher taxes
on wealth. That’s the whole path on one side of the political
spectrum, way higher taxes to pay for the people that have dropped out. That’s one part. If you add to that, that more and more jobs
are going to leave, and more and more and monopolies out of artificial intelligence
are going to be created, there’s going to be very few people at the very top. That’s the path, that’s the path the current
world is on. What that looks like on that current path,
on the socialist side is more and more taxes, more and more taxes, more and more taxes to
pay for the other and if you don’t do that, revolution at some point. On the capitalist’s side is it’s hard to see
your– I’m an entrepreneur, it’s hard to see what you believe is created from your ingenuity
being given to somebody else. Less taxes, less taxes, less taxes, and more
in a free market. We don’t live in a free market anymore if
you have to produce $185 trillion of debt to create growth. A free market would be you didn’t need to
do that. Both, right now, and what you have is, if
you talk about UBI as an example. UBI says, okay, let’s give everybody a working
wage and that’ll make the problem go away. If you think about the trying to make that
happen in a society today, imagine a person wants to live in New York, because they think
jobs prospects are higher there, but also the rents are way higher here. They don’t have a job. Do you pay them more, or somebody that has
a needy child or something, do you pay them more? Because you’re taking from the wealthy and
giving to the left out of society, on UBI, you raise a whole bunch of cornucopia of other
problems that divide society further. Ultimately, if you look at the inflation,
deflation debate, instead of that, and you say where we’re going, then UBI, all it does
is it sits on top of the existing system that we’ve had forever. It doesn’t talk about a first principle from
which deflation is. If we’re going to have deflation, now UBI
might need to be there as a transfer to something else, there might be a whole bunch of other
things that are needed as we transfer economies. If the underlying thing is it’s going to be
more and more deflationary going forward, I don’t see why we should talk about that
because that’s the most important thing to how societies are built today or how economies
are built today. MAX WIETHE: I guess what I’m saying is the
revolutions will be perpetual. If you don’t have some UBI, that the revolutions
will be perpetual in this deflationary world because once the deflationary forces are truly
understood and people aren’t taught this other side of things, then will you even move to
New York because the jobs are better? Are you moving to New York because you like,
nobody’s going to be looking for jobs, you’ll have no motivation to look for a job, the
chance of success in you becoming one of that top percent of people who is able to participate
in this endgame economy where things are automated, AI is thinking for us and energy is extremely
cheap? JEFF BOOTH: These are hard concepts to grapple
with, but it doesn’t make them not true. Economics is driven by scarcity and technology
creates abundance. We’re sitting in the studio right now and
the most valuable thing is the air we breathe. Without it, we die in a couple minutes yet
it’s free because it’s abundant. Through that lens, it’s hard to see you could
create a model for air or oxygen underwater where it’s scarce, you could create a model
for oxygen if we pollute our air so badly that it becomes scarce. Without that, it’s free because it’s abundant. Technology creates abundance everywhere. It’s going to be it’s not just in your phones
anymore. It looked back and look at your phone. Like it’s hard to believe that– my first
phone was $2,000. My first phone bill was $1200, and all it
did is made phone calls. It’s hard to believe what I have free on my
phone today at that abundance, that technology isn’t now just in our phones, it’s moving
to every part of society. Why wouldn’t we logically expect to see that
and if we could see that, we could drive a really exciting future, a future of abundance
for everybody. The path to that is going to be challenging. The path to that right now, if you look out
your window, if you look at the political divide, not just in the United States, but
all over the world, it’s already there. Burying our heads in the sand and saying that
that’s not going to get worse, I think is ignorant. I think it’s going to get a lot worse. MAX WIETHE: Well, it sounds like we’re really
discussing a world that’s post scarcity. That a post scarcity world, a lot of the economic
concepts which we hold as truths are proven to be false, and that we need to reconsider
how we restructure ourselves moving forward to understand this new world of post scarcity
economy. JEFF BOOTH: That’s the debate we should be
having. That is a debate political circles around
the world at all sorts, that’s the debate we should be having. It’s an important debate. MAX WIETHE: I think that’s if you look at
the candidacy, the former candidacy of Andrew Yang, that’s what he was trying to have with
him throwing himself into the ring and now, the Democratic debate has gone a little bit
back towards looking at the symptoms of this deflationary issue and Yang to me, this is
all personal opinion here but Yang to me was the one who was looking at these causes of
deflation and saying this is what we need to be talking about, not these really symptoms. JEFF BOOTH: Even if his policy response on
UBI, that might not be the response. At least he was somebody that was active in
the debate around the first principles and I agree with you, an intellectual debate around
what we need to do rather than throwing stones. MAX WIETHE: We’re going to change pace a little
bit here. You talked about Bitcoin a bit as something
that you hold in your portfolio and I do want to couch this part of the conversation with
the disclaimer that you’re not a financial advisor or a hedge fund manager but you are
an entrepreneur and businessman. How are you looking at, in a world where this
deflation is going to be a force, how are you looking at where you’re putting your money,
the types of businesses that you’re investing in, the time horizons that you’re looking
at, how are you investing around this? JEFF BOOTH: If you think about what we’ve
talked a lot about, what will central banks likely do? If central banks don’t print, then I think
you would want to be out of the market, you’d want to be in cash, but they will likely print
so you need to be in the market, but the game is actually not what’s happening out here. The game is what are central banks doing? If you take that to its logical conclusion,
first of all, what companies would I be in, I would be in a bunch of the companies that
I’m involved in or technology monopolies. I would have all your listeners, readers look
at network effects. A network effect is– a the telephone works
on a network effect. It’s worth zero if I’m the only one with the
telephone, and the value of the network increases with the traditional user. If you have a telephone, you and I can talk. If one other person, one other person and
the internet itself is designed, really strong network effects, as are the big monopolies
on top of it. Most of the value that’s been created in monopolies
are around network effects. I look for network effects in companies or
design around network effects in companies and I have had tremendous success in my own
portfolio around companies that have the demonstrate that because the value to all users keep going
up and up and up and as a byproduct, their algorithms get better. As a byproduct, nobody uses a second place
algorithm. There’s still lots of opportunities for companies
to be created in the end of there. I’m really excited about the technology companies
I’m involved in, really excited about that. I would have money there. Then if printing is going to happen, you’d
need to be in the market. Then I would look at what is the logical next
step from there. The logical next step from there is, at some
point, taxes are going to have to go way up. If you have, let’s say, you’re investing in
real estate and real estate has been asked that if China’s going to devalue their currency,
which they’re going to print money and devalue their currency, then the holders of that currency
in China need to get it out of China, and they needed to put it somewhere and it goes
into our real estate, and the real estate goes up, and then our rents go up and everything
else. Those things are likely to accelerate and
those things are likely to continue to happen, but because you can’t move it, it can be taxed. Taxes at some point down the road are going
to go up as well as you try to pay back all of the stimulus and debt that you’re producing. Be careful of how all in I was on any asset
class like that. At some point, the moving around deck chairs
for the Titanic about the monetary policy is going to break. I don’t know what that point looks like, but
Bitcoin itself works on a network effect as well. The more and more users of a system increase
the value of the system. Bitcoin overall, actually has that potential
to operate on the network effect and then at some point, drive massive trust in it,
and that trust might be from currency holders in Venezuela, who Bitcoin, while Bitcoin last
year lost 30% of its value, it didn’t lose 1.8 million percent of its value from the
inflation rate. Those people won, they could move that currency,
it was life saving for people in Venezuela. That might happen from a whole bunch of different
countries, might happen from people in China getting into it so that they can move and
safe from currency devaluation. At some point, with enough people using that,
whether it’s a currency or not, whether it’s a hold of value or store of value that enough
people trust, it can just change the game over at all. I look for asymmetric bets. Almost unlimited upside and limited downside. If I said, where is the gold market today
versus a Bitcoin market today and what could happen? It’s an asymmetric bet. I hold some of that in my portfolio. MAX WIETHE: Wonderful. Well, Jeff, it was a fantastic read and one
that I very much enjoyed. Thanks so much for coming in. JEFF BOOTH: Thank you very much.

86 thoughts on “The Fed’s Losing Battle with Deflation (w/ Jeff Booth)

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  2. The continued attempt to stop deflation is hurting millenials in particular and preventing them from building real wealth. The baby boomers are evil as F***. Nevertheless, in the end, deflation, technology and demographic changes cannot be stopped and America's best times are still ahead of us!!

  3. The divisions in society is a direct consequence of identity politics, race bating, and rewarding a victim mentality.

  4. We do not have massive inequity, and it is NOT accelerating… The quality of life for all is raised every year, and the lowest income bracket is earning a high % income each year, more than any other income bracket.

    This progressive ideology creates dystopian societies like we seen in California. The Democrat ran cities are becoming only homeless and ultra wealthy billionaires.

  5. Is technology is causing deflation to why are home prices and car prices continuing to increase in value? It has a lot more to do with the short and long term debt cycle.

    We might see jobs being cut after the next recession which could lead to a decline in birth rates which having record high tax rates also occur.

  6. Banks are a fraud, borrowing at 4%, collecting 40%, lending ten times deposits. Lending at 18% in a zero inflation system, banks collect 180%. Usury is a crime. Counterfeiting is a crime. Counterfeiters are traditionally punished with death because they destroy society. What to do?

  7. Ray Kurzweil wrote a book about this 20 years ago. Exponential technological growth causing massive deflation. Seemed pretty kooky at the time.

  8. Our modern day technology is still very antiquated. Look at the stenograph and stenomask we rely on today in court reporting. I can go on for a full day naming such antiquated products we can't get away from. It's not moving at break neck speeds in most other categories.

  9. He is correct, tech is definitely deflationary (think farming alone) but the wealth is being captured by the top. In other words, due to massive productivity gains, you should all be working say 20 hours a week and have the equivalent of a full time pay in terms of purchasing power at the very least. This explains the wealth gap and inflation. Central banks continue to print, dilute the currency past the productivity gains, and you see inflation and why you cannot get ahead. Inflation is a game you cannot win. Assets get inflated, you don't have assets (you cannot afford them), while your paycheck buys less. Blame the voters. They want the gov to go into debt to pay for freebies today and pay for them tomorrow. An honest politician could not be elected.

  10. Cultural lag due to evolutionary baggage
    ✝ 🇺🇸 💵 must go to reprogram human minds into a sustainable society. Profit cant motivate without corruption therefore the system will fail. The new human rights movement is a book of truth

  11. You don't have to print anything. It's just clicking with a mouse. Click…here's a "billion dollars". Even inflation is deflationary now 😂

  12. Why even bother to Tax the People when Governments can Print Infinite Sums of Paper Money to Run the Nation . Taxation & going after Tax Dodgers is an expensive & thankless business entailing Insane amounts of Citizens Dollars .

  13. Wow this guy is going to be really surprised once inflation rears its head. Inflation is the expansion of currency supply, and not higher prices. Higher prices are a result of inflation. You can't consume what you don't produce.

  14. Not 5 minutes into the interview and he's spewing broken window fallacy. Machines do not take away jobs. We have the whole industrial revolution as proof. You do not make humans poorer by making them more efficient.

  15. One of the best interviews and subject matter i have seen in a long time. Sadly we are not even close as a society to be able to debate this in the main stream. Its divide and conquer gutter trash politics as far as the eye can see. Revolution and death will be had before this sort of enlightenment can take root. Thanks sharing with everyone.

  16. Is it actually a bad thing if less people work? I don't the economics of it, and it's certainly not aligned with how it is now, nor human behaviour, but if a company doesn't have to pay it's workers why couldn't these companies act like government, say with an Amazon for instance, and just pour all profits back out into society as welfare?

  17. The fundamental issue is whether or not technology will actually be able to replicate the huge amount of cheap energy that oil provides today BEFORE we run out of cheap oil. I think not. Peak debt is already accelerating the disruption of peak oil and I very much doubt that technology will be able to prevent the coming collapse due to its inability to quickly invent a suitable replacement for fossil fuels fast enough to prevent collapse. If society after a reset is able to pick up the technology trail maybe the future will be more abundant.

  18. Horrible stammering speaker, worse that Peter Theil. No original ideas; just a stuttering, effeminate parrot. "AI" is a marketing ploy to keep idiots buying stawks lol. It's like flying cars in the 60's. Forget about it.

  19. A debt jubilee where the poor and the frugal who have little debt would receive cash in lieu of having debts forgiven AND freeing gold and silver to be real money again (widely establishing gold and silver bonds paying interest in metal for deposits of metal) would go a long way to help transition whether or not technology succeeds on bringing cheap energy back or not.
    :: Also, It is ironic that the coronavirus is bringing UBI. I predict that we will have ongoing UBI soon.

  20. 2014 it was clear our economy was in need of deflation. The value already deflated. The prices didn’t make sense because of it. They’re fools to think they can just pretend it’s not so and print more money to artificially grow. The healthiest economy is the one in which we are as honest with ourselves about how much everything is really contributing and value it accordingly and price it accordingly, and growth only comes by offering true innovation, production, and invention. Not just raising prices and cutting corners.

  21. The economic ecology balances itself when left to it's own devices. It's the envy, greed and political leverage being used against the builders and makers that creates these infuriating causalities we see in our unbalanced and constantly bubble blowing system. When you vote in a political 'taker by force,' you enter a duplicitous cycle of entitlement. It ultimately always results in abandonment of social cohesion. It shouldn't be forgotten that the USA, and it's legal structure was seeded by tradesman attempting to unshackle themselves from authoritarianism. Fast forward 300 years and we're right back to all the things that they were attempting to flee from. It was never governments job to level the playing field for people. It's their job to clear the field of obstacles. It's true that technology is deflationary, but how easily one forgets that even machines need a designer, replacement parts, calibration, upgrades. logistic support, real estate and a power source. Much like the automotive sector, nobody builds a machine and it become 'immortal.'

  22. Jeff: Eric Weinstein and Peter thiel have stated that the threat of AI is overstated. Their ideas have been worked out, so it's not in a dismissive manner… It would be interesting to debate them. Meanwhile many of the tech leaders are logically worked out that the future will be the value of human labour becoming next to nothing: UBI. We need to talk about this more, we are setting ourselves up for a world without room for human agency.

  23. How is it that this Fear of Starving got started? Certainly this phenomenon will only create Inflation. The US focused too much on Oil
    Production, instead of FOOD production.

  24. I'm curious how his talk of technology creating abundance squares with the world running up against the limits our production capacity. Isn't abundance at some point constrained by the world's production limitations on copper, silver, uranium, cobalt, rare earths, and other strategic resources? That seems like a very important angle in the calculus that is not really touched on.

  25. I hate to hear equality,there is no such thing.The only place equality's could even have a. Chance of existing is in a court room.

  26. I've always thought that deflation was a bigger threat than inflation (look at Japan). Ironically he recommends Bitcoin (which was supposed to be an inflation hedge) for the upcoming deflationary issues that our country will have.

  27. Well electricity allows for machines which do many many times more work than humans. It's not a far off comparison to first order AI. At 5th level sure people will only need to work a few hours. It's a symbiosis

  28. No you have it all wrong the prosperity built from the after WW11 and really starting in the 1960's was for the Baby Boomers and has lasted until now, but as we retire and die out so does the prosperity we created for our generation, which has not occured since the Roman Empire, and as we die so will our first world economies, and will revert back to what it should be, the rich and the poor, the middle class will disappear

  29. I would say his conclusion that there will be no jobs is false. There are already a lot of meaningless jobs created to offset social consequences.
    The coffee machine walker, for instance. This creature walks between desk and machine in search of meaning.
    Pretend jobs. You pretend to pay me non hyperinflationary CB currency and I pretend to stay sane. All roads lead to Soviet sistema.

  30. And who will keep all those robots and AI machines running and who will keep improving these? Robots and AI themselves? It would be great, but its highly futuristic … we can't even keep a website up and running without dozens of expensive man-hours … think of all the argri-machines maintenance, airplane maintenance, nursing homes care, police, infrastructure development …. sure we will USE AI and robots to become more effective and efficient … but every time we do this our ambitions and needs increase; as soon as we grow all food fully automated, sustainable, etc then we want to create new foods/tastes … as soon as we automate car production (I am pretty sure we can automate production of 1920 cars these days) we want better cars with more software and smart safety features (like our new cars today are way different then the 1920 cars). And on it goes …. for every innovation into automated efficiency we increase our economic output our VALUES change; thus the economy expands into new markets to cater these new needs. This, in the next 100 years, will still be done by humans as we won't jump from barely keeping websites up and running to a fully automated, sustainable robot/AI society over night … it will still take decades. Even IF we imagine a futuristic world where there is no scarcity I can still imagine all kind of new jobs being created that we value, however in this theoretical world I can see indeed that it would be deflationary or even better; cashless (everything is available in abundance supplied by machines … why not make it free then). Only THEN we will have no use for money for most basic products and services … but we may still use some variant of money or credits to fulfill our human-to-human needs; pay for someone to tell a story … pay for someone to dance …. pay for someone to be our inspiration or spiritual leader …. pay for …. etc ….

    SO …. as this is a highly futuristic scenario I don't think it would make sense to build a portfolio that expects extreme deflation. If you have a balanced asset allocation with 10-20% Bonds for deflationary protection and 10-20% real assets (Gold/Commodities/REITS) and TIPS it protects you against both scenarios … with then 60-80% in Globally Diversified Equity (for the long term and younger investor I guess) it gives you plenty of room to grow wealth, while protecting against both inflation and deflation. Especially diversifying globally would make sense as many developing countries will not reach deflation through automation any time soon (trust me; I lived in South East Asia for over 10 years and I can see first hand how many people are still farming by hand or cooking food on the street).

  31. technology is bad, it takes away purpose for the common man, all that will happen is a major breakdown of society

  32. Well worth a listen. I immediately ordered Mr. Booth's book. Refreshing to hear someone's insights into where we really are and where we're headed vs. the standard rear view mirror biases and fixations.

  33. These smart people are intelligent but not wise. That's why they cant see it. I can see it because Austrian and nature.

  34. I heard all these promises/warnings that AI is just around the corner back in the 1980's. Why should I believe the hype this time? No one ever addresses this question. They just take it for granted the hype can be assumed as an accurate forecast.

  35. Everything starts off free – atmosphere, sunlight, rain, dirt. People get paid to add value – farmers, miners, manufacturers, teachers, nurses etc etc. So what would the world be like if machines did everything – designed, built and repaired themselves; produced the food, dug up and refined the raw materials, electricity, manufactures, health services etc etc? The machines wouldn't need to be paid. Would everything be free? What would people do to avoid psychotic boredom? I think they would do what they've always done. Some would retreat to the past in a remote subsistence wilderness. Some would succumb to limitless hedonism. Some would escape into the limits of exploration. And some would imagine even better ways of doing things and teach the machines to be better. And if AI learns by error correction, it can only become expert at what it was told to do. It cannot imagine new things to do. How many apps have been created by machines without human input? I don't know but my guess is none – all the AI and machines are tools used by humans to make new things and processes more efficiently. Just a better toaster/dishwasher/vehicle/surgeon/paralegal/soldier. AI will never write War and Peace or interpret the Bible to paint the Sistine Chapel. When I was finishing high school in the early 70's, our teachers told us our biggest challenge in the future would be what to do with our spare time, because computers and machines would be doing most of the work – yeah right. I think this speaker's conclusion will be equally overturned by human ingenuity.

  36. The system will break but that won't benefit gold or bitcoin. When CB's want to replace $US as world reserve currency they will create a new one. Otherwise a country with no gold/bitcoin would be worth nothing.

  37. The only I see in all that you talk about is just a lot of symptoms on the problem that most countries don´t have a real democratic system ( like the one they have in Switzerland) were elit, politics and administration are forced to follow and protect the individuals choises, rights and assets..instead of be a corrupt, superior cancer on them. Real democracy is the only thing who can otherside balance the dynamics in human ecosystem whatever direction it have.

  38. Great interview but Booth is missing two MAJOR issues. 1) BTC (or other crypto) can be squashed by legislation making it illegal and 2) central banks are ready to roll out their own cryptos. BTC is far too slow in processing transactions so a newer crypto that can verify as fast as a credit / debit card does during a store transaction would need to be present.

  39. There still needs to be some stable store of wealth. An 80 year old can't be expected to keep producing and have her lifestyle and status defined only by her current output.

  40. Technology will not double every year indefinitely in fact it's starting to slow down. Moore's law is not like the laws of physics. If he's basing his entire premise off of that then I think most of his predictions are false. He's also not understanding market forces. Even if we could make self driving cars if no one can buy them they won't make many of them for a while. Because there isn't a market for them. There are so many products that are advanced that don't make it to market because there is no market for them. So I think he needs to reconsider his story

  41. Love your breakdown of Inflation & Deflation, especially about the abundance of Deflation through societal change and not continue with inflating assets (w/ money printing) which will prolong, wilden, and worsen the financial system–thus, the increasing suffering of people as a whole. Please bring Jeff Booth again when you can Real Vission Finance.

  42. Interesting conversation. How much will this scenario actually be a post scarcity society? Greed/expectations makes people want more, and pins their self worth relative to others. Plus with rising population, some of the most basic needs/desires are inherently further limited, land, physical space and quality environment. I think one main aspect missed in this discussion about pending changes to society/economy is the fact that economic success is quite corrupted, the "best" people aren't necessarily in silicon valley or wall street, those places have a bias towards geographic proximity, greed, and cultural affiliations. In a post uber AI who are these top earners, not the smartest people… but skilled humanists like artists, nurses etc?.. or just like now it's the people with access to money and inside influence being biased towards chairman opportunities. We are on a resentment coaster, technology has many benefits, but also many social/cultural/existential negatives and increasing unearned income/wealth disparity will lead to violent social unrest if the certain situations arise… like maybe in a economic depression amid institutional bungling of a pandemic.

  43. Why do so many tech people start every reply with the word 'so' .. it's highly annoying! Anyway, deflation is a problem because as things get cheaper, people wait to buy and businesses probably give up competing so you have an economic slow down I guess.

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