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

Central to the book is the idea that we live in extraordinary times. Our economic, political and social system has failed.

Clinging to fundamentally flawed ways and false beliefs will create pain.

We have the answers. Global prosperity is possible.

One blocker to global prosperity is our continued belief and trust in our current failed system. This belief is due to us clinging to fundamentally flawed ways and false beliefs.

We shut our eyes to broken systems and hope government will take care of us. They won't.

"Technological advances are happening faster than our ability to understand them. In a world that moves faster than we can imagine, we cannot afford to stand still. We cannot afford to cling to systems and pretend they are working because they did in an era before technology.

Continuing on the existing path, without significant changes to the way we think about economics and the way we have constructed economies will ensure chaos".

System fail

System Fail is this colossal global dysfunction of cost-of-living crisis, crumbling trust, exploding inequality, burning planet, suffering of the vulnerable, and hurt people.

The most basic expectation of a "system" is to lead us to a better tomorrow, especially for the next generation. Our current system fails this fundamental test of a better tomorrow.

The vast majority of people living in the current socio-economic-political system will have a worse future, see their children have worse social lives, be economically worse off than them, and be less free with fewer human rights in a tyrannical, totalitarian, techno-fascist, Orwellian system. Yet, they continue as normal.

People all over the world subconsciously know that things are not right. But they carry on as if nothing has changed.

"Our economic systems were not built for a world driven by technology where prices keep falling. They were built for a pre-technology era when labour and capital were inextricably linked, an era that counted on growth and inflation, an era where we made money from scarcity and inefficiency. That era is over. But we keep on pretending that those economic systems still work".

"The seemingly random events of Brexit, Trump, and a rise in populism and hate in our world are not haphazard or isolated at all. They are all connected to a loss in hope for a better future for large portions of the population. Underlying this loss of hope is a new economic reality where it’s not just the poor who are missing out on economic gains. Much of the middle class is also feeling squeezed.

Instead of technology allowing for a fifteen-hour work week, as Keynes predicted when he penned his 1930s essay “Economic Possibilities for Our Grandchildren,” vast numbers of people are working longer, in jobs they rightly fear will soon be gone".

Intensive Care

Our economy and social systems are in Intensive Care of the Government. Governments all over the world destroyed our economy and systems, and now are working to transition to new even worse system as part of The Great Reset.

Failed systems appear to be working because of massive government intervention in the form of cheap and abundant credit.

Governments keep us alive through handouts and welfare state. COVID was used as a necessary excuse to hide this.

Governments keep themselves, industries and Wall St. viable through cheap and abundant credit. This is what the $34 trillion debt is for.

"The only thing driving growth in the world today is easy credit, which is being created at a pace that is hard to comprehend".

"The rise of that credit and corresponding debt is keeping us locked into a system where we are the proverbial frogs in a pot with the heat of the water slowly rising and we do not notice. And as we try to artificially drive an economic system built for the past, we are creating more than just economic trouble. On our current path, our world will become profoundly more polarized and unsafe".

"Is it any wonder that the biggest movers in financial markets today are betting not on the growth of companies but instead on the direction of central bankers and governments with regard to monetary policy?"

Broken economic systems create social problems

"It is easy to point at the wealthy and assign blame, but the focus should instead be on a broken system that reinforces radical inequality".

"The loss in faith of systems meant to be reliable predictably leads to blame and division—all of which can be opportunistically redirected to target groups such as immigrants, religious groups, political parties, other countries, and so on.

In other words, populism explodes because of an unjust system".

"Countries that once considered themselves enlightened are torn by ugly xenophobia, committed to protectionism and closing their borders. Entire populations are being swayed by politicians who incite more anger and polarization by creating “us versus them” narratives without understanding the root causes of our new reality".

"even if most people don’t realize why, discontent is rising. Owners of assets and those who have access to debt and leverage have been tremendous winners. So have technology companies that are using it to create monopolies bigger than was possible in the past. But it is coming at a cost. The cost is the populism that is rising around the world. And that cost is set to explode".

Technology leads to deflation, bigger government leads to inflation

Technology, capitalism, and globalization made things better and cheaper(deflation).

Government continues to get bigger and bigger. People demanding welfare makes it even bigger. Government finances it's growth with inflation.

Governments create inflation by printing money and using it themselves. The unit value of money with general public goes down as they there is more money in circulation. Government gets more money to grow, public gets the bill in the form of inflation.

Government debt is easy to pay back with inflation. A $1m debt is easier to pay back in 10 years as value of $1m declines over 10 years with inflation. A $1m debt is harder to pay back in 10 years with deflation.

"Governments and central banks will do almost anything to stop deflation".

Government cannot get bigger and bigger without inflation. Government cannot fight wars, become ever more intrusive, provide welfare state to its citizens, and support big retirement funds for themselves without inflation.

"Debt combined with deflation is a toxic combination, because borrowers have to pay the same for their interest payments while earning less".

"Debt-fuelled spending is not always bad. Often, debt can be used to grow wisely by funding smart long-term investments. A business that takes on debt to invest in automation gains more leverage against its competitors and can pay back that debt with a better return to the business in the future thanks to that automation.

But when a business continues to spend more than it earns, or invests its debt in things that do not provide an economic return, the debt becomes a weight on future growth as current dollars need to be allocated to pay the servicing cost of the interest or payments".

"When debt is growing much faster than a country’s economy, at what point does the music stop?".

This is no longer sustainable. "it has taken approximately $185 trillion of global debt to achieve $46 trillion of global growth".

The outcome: "First currency wars, then trade wars, then real wars".

Evolution

Government should do something. Can they? What are their choices?

Austerity: Spend less on public services and infrastructure.

Debt defaults/restructuring: Possible, but could lead to collapse in confidence in US Dollar.

The central bank printing money or other guarantees: Politically safest and likely outcome as the problem is solved by printing money. Consequence will be hyperinflation for the public.

Tax the rich: "Transfers of money from those who have more than they need to those who have less (much higher taxes for the rich)". Unlikely as 'rich' can find ways to avoid taxes, move wealth, or pay to change the rules.


People, entities, corporations, and governments are unlikely to evolve.

It is the same with corporations stuck with old business models and old ways of doing business. "it is a rare exception in history when a monopoly company of the past does what is necessary to stay relevant in the future".

"The average thirty-three-year tenure of companies on the S&P 500 list is forecasted to shrink to just twelve years by 2027 due to technology. It makes sense—transition requires long-term thinking".

New Bretton Woods

The author talks of inevitability of a new Bretton Woods framework: "While I am sure that governments will not voluntarily give up control of their currencies, if there is not a coordinated international effort on a Bretton Woods type of framework that establishes rules around currency exchange rates, it will happen regardless—just in a different way".

"a currency only holds value because of the deemed trust we have in it".

This is where we are. Eroding trust in currency, rising debt, inflation, inequality, social problems, and "First currency wars, then trade wars, then real wars".

"It is clear that something must be done. But because the issues are so complex and thorny in nature, it is easy to put our heads in the sand and hope others will solve them".

If this trust in currency is lost due to inflation and debt, then one or more alternative currency will emerge in our multi-polar world.

"The more that trust is eroded, the more likely that an alternative currency becomes a more trusted mechanism. That alternative—whether Bitcoin or something different—could emerge quickly" - with or without a New Bretton Woods.






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