How Technological Deflation is Driving Central Banks (w/ Jeff Booth)

TL;DR

Technology-driven deflation is a powerful force that cannot be stopped, and it has both winners and losers, creating inequality in society.

Transcript

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 drive... Read More

Key Insights

• 🙈 Inflation has traditionally been seen as desirable for economic growth, but technology-driven deflation poses new challenges.
• 🤑 Deflation can benefit consumers by providing more goods and services for less money.
• 🥺 Central banks promote inflation to manage excessive debt, but it can lead to asset price inflation and deepening inequality.
• 🧑‍🏭 Technology-driven deflation is different from demand-side deflation and is influenced by factors like Moore's Law and emerging technologies.
• ✊ Technology companies are celebrated for their contribution to deflation, but their monopolistic power and inequality are side effects.

Questions & Answers

Q: How does the deflation caused by technology differ from demand-side deflation seen in the Great Depression?

Demand-side deflation during the Great Depression occurred due to lack of money, leading to price reductions. Technology-driven deflation, on the other hand, happens because of advancements and increased efficiency, resulting in lower costs for goods and services.

Q: Which technologies should we keep an eye on to understand deflationary forces?

Moore's Law, which describes exponential growth in computing power, is a crucial factor. Self-driving cars and other emerging technologies will continue to drive deflationary forces.

Q: Why do technology companies receive praise despite their contribution to deflation?

Technology companies like Google and Amazon provide free or low-cost services by leveraging technology-driven deflation. People use these services without realizing their role in creating monopolies and inequality.

Q: Will the current economic model be sustainable in the face of increasing technological advancements?

The exponential growth of technology will require an ever-increasing amount of monetary easing and debt creation to combat deflation. This Ponzi scheme of debt creation is not sustainable in the long run.

Summary & Key Takeaways

• Inflation has traditionally been viewed as good for economic prosperity, but the deflationary nature of technology is now a bigger force that cannot be stopped.

• In deflationary environments, the value of money increases, leading to more goods and services for less money.

• Central banks promote inflation to address the problem of excessive global debt, but this can lead to a negative spiral and asset price inflation that benefits those with assets.