More than 25,000 Bitcoiners descended on Miami Beach last week for Bitcoin Conference 2022 and it did not disappoint.
Hearing the best and the brightest from disparate worlds of thought speak about the problems Bitcoin potentially solves has me inspired to think differently about how technology is changing the way we (small businesses) help customers solve problems every day.
This panel between four macroeconomic heavyweights led me down a rabbit hole that has me thinking long and hard about the following statement made by the one and only Jeff Booth:
"Our economic systems were not built for a world driven by technology where prices keep falling."
Technological deflation is an unstoppable force
Technology drives productivity. Productivity drives gains. Gains drive deflation.
Human beings are innovating, solving problems, and delivering the satisfaction of wants better, faster, and cheaper than ever before. This causes prices to decrease organically.
But we are at a crossroads.
Our current economic system is driven by easy credit and an artificial expansion of the money supply. It is at odds against the principle of technological deflation.
The deflationary forces of technology and the inflationary forces of our economic system are at war.
Technology could drive massive abundance, but not if we continue to adhere to an archaic economic system designed for a pre-technology era that counts on never-ending growth and inflation.
As the Federal Reserve tries to artificially drive an economic system built for the past, it creates more than just economic uncertainty.
The top 5% of the U.S. population now holds more than 2/3 of the wealth, while the remaining 95% fights for their share of the other third.
Societies naturally becomes more unsafe when large amounts of people with increasing anxiety about their own economic future see incredible wealth creation in the hands of very few people.
This trend of greater wealth inequality and polarization is a major threat to our collective future.
A new economic framework is needed...fast
Jeff Booth, author of The Price of Tomorrow: Why Deflation is the Key to an Abundant Future, argues we need to build a new framework in our local and global economies. Or the same technology that has the power to bring abundance to the world will, instead, destroy it.
We grew up believing that no matter who we are, if we work hard enough, we can achieve almost anything we desire.
Ever higher-paying jobs are central to this social construct. We expect to start our careers, earn more over time, and hopefully, at the same time, outrun rising prices.
But what happens when we can't count on a system of growth and inflation anymore?
What if a more powerful force (technology) renders our efforts to create inflation irrelevant?
And, what if, by desperately trying to hold on to this inflationary economic model, we drive more wealth inequality and more polarization?
This is where we are today. The never-ending growth and inflation we've come to expect and the systems we've built our economies around are falling apart.
Technology is proving to be too great a deflationary force. It can't be stopped no matter what anyone, including central banks, does to stop it for the sake of never-ending growth and inflation.
A new economic framework requires a whole new way of thinking
Transitions require long-term thinking. It often requires going against the grain of where current profits are. Bets on the future are essentially big bets against where markets are today.
The cost of not investing in long-term thinking is death.
Meanwhile, the short-term solutions proposed by central banks - negative interest rates, expanding the money supply, and national/local tax cuts to increase spending - all keep the current party going by driving more debt.
In 2000, the world economy was approximately $33.5 Trillion with an estimated total debt of $62 Trillion.
Today, the world economy has grown to about $100 Trillion. But to achieve that growth, the total debt has grown to approximately $303 Trillion.
In other words, it has taken approximately $241 Trillion of global debt to achieve $66.5 Trillion of global growth in the last 22 years.
The math does not add up.
This system is not sustainable and only has one end game - higher inequality, people losing trust in the system due to not being able to make ends meet, more polarization, and commonplace revolutions and wars (see Ukraine-Russia conflict).
But what if we permit the natural order of things?
What if, instead of trying to intervene with free markets to stop deflation at all costs, we embrace it?
As technology spreads, Booth argues, deflation happens at the rate it should. It becomes celebrated because it means we get more for less. We allow ourselves to accept abundance.
As technology removes jobs and fewer overall jobs are needed in our economy, prices will keep falling, allowing those who lose jobs a way to share in the benefit of technology abundance without massive transfers of wealth.
If technology-driven price declines continue to the point of something becoming free, we let that happen too.
People will no longer have to be on an endless hamster wheel to pay for things that are constantly rising in price only because the Federal Reserve inflates our money supply at will, extends easy credit to some, and increases debt ad infinitum.
As difficult as this might be to accept because it is such a radical change to the way we've always lived, it seems to some (like Jeff Booth and Cathie Wood) that it is the only real choice we have going forward.
Technology deflation no longer exists in just pockets of our economy like it did 10 to 15 years ago. It underpins everything we do today.
In Closing
The fear of a future without jobs and the self-worth they bring stops us from imagining a better world in which they might not even be required.
Allowing abundance without the never-ending need for more jobs might open an entirely new era where we have TIME to enjoy the benefits technology brings.
A true capitalist system could work well in this environment because there would still be an incentive to work harder and innovate.
Those creating value would be paid for their value creation at a rate that matches the new reality of supply and demand in our digital world.
As an entire infrastructure needed to support more jobs to support price inflation resulting from monetary easing is removed, life becomes cheaper and thus the burden to those on the never-ending hamster wheel drops.
I know. This is a lot to think about and digest. But the future is already here. It's just not evenly distributed...yet.
As always, stay alert, stay educated, and most of all, stay cool.
Talk soon,
Old Man Winter
