Why We Need to Restructure Society for a Deflationary Economy (w/ Jeff Booth)
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.