This blogpost summarizes some of the points from the book titled “The Price of Tomorrow” by Jeff Booth.

The End of Inflation

The author takes a shot at the current economic systems across the world and says that were not built for a world where prices fall, a typical feature of deflationary world caused by technological changes.

The current system is driven by - easy credit and high debt levels giving rise to asset inflation. Technology has always created ever increasing powerful devices/tools/systems at a decreasing cost. Tech by default is deflationary and it would be foolhardy to think that this deflationary force will only be pertinent to a few industries. With data and technology playing a major role across all industries, the deflationary force will start to change the game for many players in the economy. This means that prices of goods and services will fall across several domains and hence the old paradigm of economics will need a revamp. By sticking to the old paradigm of inflation lead growth, everyone who has hitherto invested in assets to increase in value will be forced to rethink.

What is Deflation ?

Deflation, put simply, is when you get more for your money—just as inflation is when you get less for your money. With deflation, a currency becomes more valuable because its buying power goes up in relation to goods and services. With inflation, it’s the opposite: the prices of goods and services go up and therefore a currency’s value is lower as purchasing power is less.

So, Is Deflation good or bad ?

Deflation is not intrinsically good or bad. It just matters where you put your money. On each side of the equation, there are winners and losers. With inflation, holders of assets win, since the dollars in the future are worth less and it would therefore take more dollars to buy assets at a later date—like my parents and their first house. With deflation, holders of currency are the winners, since their dollars can buy more goods and services in the future than they could today.

The natural question that arises is, “If technology is so pervasive and is deflationary, why are prices of consumer goods going up?”. The author blames it on the current economic policies followed by various central banks and countries. The rise is entirely artificial and is driven by credit and debt.

Indeed the debt levels for governments have gone up in the world and this has resulted in an asset bubbles.

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.

Printing Money

Each country wants to increase its GDP in this global economy. GDP comprises Consumer Spending, Investments, Net Exports and Government Spending. In the case of USA, 70% of GDP is consumer spending and hence the economy relies a lot on C and hence anything that is a threat to C is fought by the central banks and the govt. China depends on exports and it tries its best to make sure that its good are competitive in the world.

So, each country is maintaining policies that incentivize its side of the equation with government help. If any of those variables changes too quickly in either economy, chaos ensues as the major part of their respective economies collapse.

The author says that the current policies across the world are Ponzi schemes. Why ? By targeting inflation rates, central banks around the world make sure that the debt is easier to pay back. However this also means that currency becomes worth less over time. This essentially means that by allowing easy credit policy, QE, etc. the governments are paving way for the currency to depreciate and become worth less and less over time.

Creative Destruction and Hard to think Differently

The author spends the next few chapters about the way technology has disrupted many industries and brought the cost of goods and services down dramatically. It also talks about various companies, once that were super-powerful, had to bite the dust, given the rise of new technologies. I think the point that the author is trying to make is that technology will forever keep changing the landscape of “largest companies in a country”. These companies might increase in the marketcap but the technology cost that they provide will in itself go down as all technologies are deflationary

The Future of ……

The author spends a few chapters in to specific details around the future of energy, the future of machine learning and AI.

Rest of the Chapters

The author meanders through a range of wide range of topics and then ultimately proposes a solution that world should not stop deflation at all costs and instead embrace it. It might result in a short term pain but will yield long term benefits. A global reset to debt is needed and implementation of such bold policy looks very unlikely, given that there are many vested interests for maintaining the status quo of “inflation targeting-easy credit-high debt-asset inflation”. May be it will happen in the future but when is anyone’s guess.

Takeaway

This book is a popular read in the crypto community as the author suggests that cryptocurrency or similar Blockchain chain solutions might be a good way to brace up for the deflationary force that is going to hit everyone if now now, later. Whatever be the outcome, the book will leave you more open minded to the possibility of world of falling prices, soaring unemployment levels and ABUNDANCE everywhere, thanks to technology that is inherently deflationary