#268: Jeff Booth on Why We Need to Embrace Deflation

Jeff Booth is the author of the new book titled The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future. In this conversation, Anthony and Jeff discuss the difference between inflation and deflation, why technology is inherently deflationary, how easy credit has led to a massive asset bubble, why the world will need to move to a deflationary economy, and how Jeff is currently thinking about the economic crisis we are facing. =============================== Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link http://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. =============================== Ledger hardware wallets empower you to optimally secure, own and control your crypto. Visit ledger.com and give yourself peace of mind by knowing that your cryptocurrencies are safe. ===============================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off.

• 0:11Anthony Pompliano?

  Jeff Booth is the author of the new book titled The Price of Tomorrow: Why Deflation Is The Key To An Abundant Future. In this conversation, we discuss the difference between inflation and deflation, why technology is inherently deflationary, how easy credit has led to a massive asset bubble, why the world will need to move to a deflationary economy, and how Jeff is currently thinking about the economic crisis we are facing. I really enjoyed this conversation, and Jeff did a great job. Before I get into this episode, though, I want to quickly talk about our two sponsors. The first is Crypto.com. They're a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency.

• 0:53Anthony Pompliano?

  They have a vision to put cryptocurrency in every wallet, which is frankly why we're all here. The Crypto.com app offers a full range of financial products with competitive pricing, well-designed user experience, and high security. It's the best place to buy, sell, and pay with crypto. These guys have been longtime supporters of Off the Chain, and they keep launching new product after new product. So do yourself a favor and go to Crypto.com to check them out. Again, Crypto.com. Great URL, great products. Crypto.com, the place where mass adoption is occurring. Our second sponsor is Ledger. They've got all sorts of great custody products. They've pre-recorded an advertisement that I'm going to play right now, and then we'll get into the episode with Jeff. I hope you guys enjoy this one.

• 1:35Speaker 01

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• 2:18Speaker 01

  Control, scalability, agility, because security is not enough.

• 2:24Speaker 02

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 2:50Anthony Pompliano?

  All right, guys, bang, bang. I have Jeff here. We've got a ton to talk about. You recently wrote a book and have a bunch of really cool ideas that I think that people will be interested in learning about. So thanks so much for coming on and doing this.

• 3:05Speaker 03

  Thanks a lot for having me.

• 3:06Anthony Pompliano?

  Yeah, let's go right through your background first because you are not an author by trade. So let's start there and we can then get into some of the ideas.

• 3:15Speaker 03

  Yeah, good, good call. Yeah, a book is not something I wanted to write. I felt I had to write. So I'm a technology executive, technology co-founder of multiple companies. I've started four companies. One of those companies grew to half a billion dollars in market cap over, over the course of 19 years and, and, and just a whole bunch of technology boards. So I'm sitting at the front seat of what, how, how technology is changing the world.

• 3:50Anthony Pompliano?

  Very cool. And, and the book, what was kind of the genesis for why to write the book?

• 3:58Speaker 03

  I looked, I looked forward in what's happening with technology and, and how it's bumping up against an existing system that won't work in the future. And I said, and I thought my kids won't grow up in the same world I, I grew up in. The future will not look anything like the past. All of the benefits that, that were provided to us, I think will be stripped away. And the world will look very different unless we get our heads around what's happening.

• 4:27Anthony Pompliano?

  For sure. And so the book is called The Price of Tomorrow, Why Deflation Is The Key To An Abundant Future? Let's just start with kind of the 101. What is deflation and what is inflation?

• 4:39Speaker 03

  Okay. Um. So, uh, yeah, and, and again, people have an emotional attachment to these. They shouldn't, right? It's just, it, it, this, the facts of it. Inflation is when your money loses value and, and assets go up in price as a result. Right? Because the purchasing power of your money goes down, so goods and services get more expensive. And deflation is the opposite. Your, your purchasing power goes up because goods and services get, uh, get less expensive. And there's a whole bunch of an emotional context to that. It actually has nothing to do with the facts. Right? And so people will just blindly say deflation is bad, inflation is good, without realizing.

• 5:22Speaker 03

  Kind of, it, with inflation, you're actually saying, I'm destroying the value of the currency. Right? That's, that's what you were trying to, to, so when, when a government has an inflationary target. What if they said, we are going to try to essentially make the currency worthless or worth less? Um, would people be on the street, rising up? And, and they might, right? So, um, it's, but, but it's, I think it's important to detach the emotion from the facts. And then you can, then, then you can, yeah, then you can debate the facts and build better systems.

• 6:00Anthony Pompliano?

  So let's talk about inflation first, because that's obviously the system that we live in today. Um, the fiat currencies and, and kind of the economic model. Um, help us understand like, how exactly does inflation work? And then what is the reasoning behind why we have the inflationary model we have? Like, what's the kind of defense of inflation?

• 6:21Speaker 03

  Well, what, uh, number one, and I just, it's provided the world a lot of wealth, right? It's, uh, the, the, uh, is we've been in an inflationary environment for a long time. Our parents grew up in it, their parents grew up in it, um, and, and so on. And it's provided the world, uh, a lot of wealth. But in that, um, the, um, assets go up in price. So if you borrow today with, uh, money, uh, or you borrow from the bank today. Then with inflation, your incomes will rise over time and the money will be worth less. Right? And so you pay that, that money back later on with inflation, with dollars that are worth less.

• 7:02Speaker 03

  And and the asset prices rise. A good example is is a house. My parents bought their first house for, I think it was sixty nine thousand dollars. In in the seventies, that house is worth one point five million today. And the debt it was paid back, I think they took a fifty nine thousand dollar debt, which was a lot to that time. And and they paid it back over time as their incomes rose. So that's that's the world we we live in. And it's not bad. Some people win more, right? The debt holders win more and everything else, and it's not and it's not bad. But we've had a structural break. And it's not COVID. The structural break is technology that has changed the rules.

• 7:47Anthony Pompliano?

  Yeah. And so the current economic system we have was really built for the old world, right? And so if it was built for the old world, maybe describe a little bit about your thought process of like that industrial revolution type world is dying. And what I think you're arguing here is the fact that we need a new economic model for the world we're going into, right? It's kind of like we had an old world with an old economic system, that old economic system matched the world we were in. Now, if the world changes to this technology-enabled world, now all of a sudden, you're arguing that we actually need a new economic model for the future, correct?

• 8:24Speaker 03

  Correct. And and if you if you look at this, you can see it everywhere, by the way. It's all of the evidence points to it, but people are ignoring it because they don't want to believe it. And and so so so I'll give some proof points, and it's probably the best example that everybody has in their hand is their iPhone or smartphone. That phone twenty, it was only invented, not quite thirteen years ago. Right? And and look at the phone, what's on it today? Just about all your apps are free, right? You use Google for free, Waze for free, it's all free. So you have the power, you have the power more than presidents had twenty years ago, thirty years ago, sitting in the palm of your hands, and it's all free.

• 9:10Speaker 03

  It's a you can buy, and by the way, it's not deflation bad free. We don't wait for when when the new iPhone comes up, there's a line around the block to buy it, even though you can get last year's for next to nothing on a on a plan of twenty dollars a month and have everything for free. So that technology deflation is a good thing. Right, our Google searches are in fact that all of the platform companies from music to Google to Amazon. It's all they're all created actually using that same same example. You know, technology or you're an investor in technology. I'm very much an investor in technology and and it's a good thing that every technology executive I work with.

• 9:53Speaker 03

  Is trying to do good in the world and provide more efficiency and better more abundance using technology. And that comes at the cost of jobs. So that's what's that that's what's happening overall. And it's accelerating in the world. The only thing masking that is massive increase in debt and leverage. Where you're pulling demand forward from the future with debt that you can never pay back in the future. And so that massive amount of debt and monetary easing in the last twenty years to get negligible inflation rates.

• 10:33Speaker 03

  Is a hundred and eighty five trillion dollars to produce forty six trillion dollars of economic return in GDP. So when debt is growing way faster than GDP, you know something's wrong, right? And and here's the thing, this is before COVID. This is before everything I predicted all of these these events before they before they were happening. COVID accelerates the trend to technology, right? And it accelerates Zoom went from ten million users to two hundred million users in a in a month. How many of those users don't need the same commercial real estate when they come back out of COVID?

• 11:13Speaker 03

  And and so how much changes, how fast this changes, how fast robotics is changing, how fast AI is is moving? People that aren't close to technology don't realize how fast this is moving. And and and our old systems weren't built for that technology deflation. Because when if you have deflation.

• 11:37Speaker 03

  Debt explodes in real terms. You can never pay it back. So if you have, if you have effectively economy that's built on massive debt creation. And you allow deflation, you have to reset the debt. And that's a problem that central bankers all over the world are facing. They don't know what to do, right? And because this is, and so instead of doing what you, instead of facing the facts, you keep papering over the facts. And every time you paper over the facts, if you look at the stock market rising because, because you're juicing, Fed's, Fed's taking anything off the balance sheets. It's not capitalism.

• 12:18Speaker 03

  You're picking the pockets of, of, of this, of your, of, of the poor and paying the rich because asset prices go up. Um, and, and that leads to division of society. Revolutions and wars and there's a reset in that event, and no, no matter what.

• 12:37Anthony Pompliano?

  Yeah, I think this is a really important part where basically people don't realize uh, the inflation has an impact on a portion of the population, but it also benefits the other portion, right? Um, I actually recently tweeted and said, every time that more money is printed, the rich people cheer because they know they're going to get richer, right? Because those asset prices will continue to rise over time. Whereas the bottom, you know, fifty percent or so of Americans, uh, in some cases, the bottom ninety percent, uh, they end up getting hurt and they don't even realize it. So it's almost like you've got one group that understands the rules of the game and the other that doesn't.

• 13:11Speaker 03

  Did you read Paul Volcker's quote back, uh, back a number of years ago? Um, he, he, he, he said, we, we've convinced, we have a, a bunch of enormously rich people that have convinced themselves they're rich because of their smart and constructive. Right? And, and it's not that. It's because you've rigged to the rules of the game. And, and, and by the way, there, I understand how hard this is from a banking policy and everything else. So let's, what, to, to do that, let's just use a little example and, and, and, uh, you and me and, and our own little economy and it will expand it. So let's say you and I went to went went to school together. I I decided to save money.

• 13:57Speaker 03

  You decided to come out of school and and borrow money. Spend a lot actually, right? You borrowed five hundred K. I didn't. I tried to save. Right? And let's call that year two thousand two.

• 14:11Speaker 03

  Yours, your economy, what it looks like to everybody else around you. You buy a house, you hire gardeners, everything else. If you can't pay back the five hundred thousand. Then you have a real problem. But if instead of paying back the five hundred thousand, you borrow another million two years later. To be able to do that. And then you buy another house. And everything else, you could never pay back the five hundred thousand, but you use some of the million to be able to pay back the the house. Interest and some to buy another house. And then I, as your friend, I go and rent one of those houses. And you and you believe and everyone looks at you and says, wow, look at how much success you have. Right?

• 14:54Speaker 03

  And then you can't keep up to that and you borrow another million. But you buy another house and then you think, wow, I'm going to create a business around this. And you employ tons of people and you all that leverage is juicing returns and the asset prices are going up the whole time. I'm waiting patiently, thinking. It's all a host of cards. He can't pay for any of it. It's all going to come crashing down. I'm waiting for the day that. That it all comes crashing down and I make my fortune with my cash. When when when the market resets. But what happens is I misunderstand and I misunderstand that. The central banks are part of that game. Right? And the banking system is part of that game.

• 15:36Speaker 03

  And everybody was fooled by all the jobs that that your gardeners, your vacations, your boats, everything else created. And everybody copying you doing the same thing. And all of that leverage pushed up housing prices and my rents kept going up as well. Right? I'm on the other other side. And it looked like it was really working. And then two thousand eight it comes. And banks stop lending to each other because they can't trust the balance sheets. All over the world, the internet connections are global. The central bankers think it's only subprime. And it explodes everywhere. And if they don't save the system, we end up with a depression.

• 16:17Speaker 03

  Right? That's what would have happened in 2008, a global depression, and that would have been really bad.

• 16:25Speaker 03

  But the cost of saving the system saves you. And everybody else who leveraged the system. And kills me because my cash is destroyed and value. It's just a transfer of wealth. And so we wonder why we have

• 16:44Speaker 03

  this insane amount of wealth disparity. And it's because we're gaming the system.

• 16:50Anthony Pompliano?

  And I guess in that situation, then, let's go to kind of the new economic model. So we're well aware that we're entering a new world, a technology-enabled world. In that world, if we're able to switch from inflation to deflation, what does the new world look like?

• 17:10Speaker 03

  So this is going to break people's brains, but again, that's why it's hard to I think you need to detach the emotion from the facts. If you actually, if you could reset today, like imagine a total reset, you had no debt in the world. And you could reset. You wouldn't need as many jobs. Right? Because jobs would fall at the natural rate of technology deflation. And things would get lower and lower cost over that course. And you also wouldn't need a massive social safety net to be able to protect the people that fell out. Because the natural course, gravity would happen. Right? Instead of fighting gravity and pretending you're going to stop it. You would allow that to happen. And actually, capitalism would work perfectly in that system.

• 17:56Speaker 03

  Because the people who wanted to work more. Would create all sorts of value and get paid more for the pie for the people that fell off the that treadmill. Because jobs are coming out of the of of society, a society with robotics, AI, everything else, people that fall wouldn't fall to fall. And and and not be able to feed their families.

• 18:21Anthony Pompliano?

  Because their savings would basically be getting more valuable.

• 18:25Speaker 03

  Exactly, and and and and and you exactly, you're not, you're not distorting capitalism. You're not, it it think about this right right now with because all that happened in two thousand eight forward now is we papered over the problem, we created a way bigger problem. Right? And now COVID exposed that. So the system is so much more fragile now. And so you have governments, and I talked about this in the book, remember I talked about this in the book. Before this happened, right? Because it's predictable no matter what, there's nothing that there's nothing central governments around the world are going to be able to do to stop technology technological deflation, nothing. It's a structural, it's a it's a structural difference.

• 19:09Speaker 03

  And it's it's like I use this example quite often. It's like Blockbuster. Um, nine thousand stores. Not seeing Netflix because technology was moving so fast and didn't see that the rate of speed of download speed would change their economic model overnight.

• 19:30Speaker 03

  Um, and instead of buying Netflix for fifty million dollars. They added candy aisles to their Blockbuster stores. Right? And if you if you zoom up to what we're doing, what central banks all over the world are doing, we're adding candy aisles to the Blockbuster stores. Right? And and think about this, so you have. You're juicing return because if you actually wrote down the assets and this is an important policy decision too. Right? And and so it's not good, bad people, there's a whole bunch of people in. In Twitterland and everything else and saying all these terrible people.

• 20:06Speaker 03

  If you're in their shoes and you look out and you see we have a global depression coming, or we can try to keep this going, this deck chairs on the Titanic going, you might do the same thing. Right? So the policy response right now is, yeah, they're not looking at the second order and third order consequences of the policy decisions. They're looking at right now, what do I do with facing this unemployment rate and everything else? But by by throwing money, so to yesterday, the Fed announced the $2.3 trillion in essentially junk bonds, right?

• 20:47Speaker 03

  And and that would look like subprime, that would have got the whole thing would have gone to zero. And so the Fed took that off the balance sheet of people that are that are created the problem and and replace fresh cap for fresh cash. The result of that means the asset prices don't fall like they need to. Right? So as asset prices are automatically juiced and they they stay high and they'll go higher because you're destroying the currency underneath.

• 21:16Speaker 03

  And and then and then the whole bunch of people left out of society, you have to pay them to to be able to pay for those high asset prices and rent and and and so the amount of wasted money staggering on both sides of this equation and you're driving this divide socialism, capitalism, and both people are talking about the system, the old system, and all the solutions on top of it are old solutions on on top of it because they have don't know that it's a structural change.

• 21:48Anthony Pompliano?

  Yeah, I think part of this is people don't understand how the system works, obviously. But what you're talking about here is in this deflationary environment, there's two things that I think are really important. So the first is this idea that right now we ask American citizens. And citizens around the world, be an expert at what you do for a living. So whether you're a teacher, fireman, investor, you know, whatever it is you do for a professional living, you've got to be a professional, right? You've got to be one of the best. Then we also say, by the way, you can't just make money and hold on to that money. Because ultimately, that money will lose value over time. We're going to incentivize you to either spend it or invest it.

• 22:30Anthony Pompliano?

  And so you can spend it, right? You can be a consumer and consume more. Or we then say to you, you either have to become a professional investor as well, or you're gonna have to pay somebody who is a professional to invest the money for you. And so what ends up occurring here is the idea of saving actually isn't nearly as valuable as it should be, right? You're basically saving something that's just leaking through the holes in a bucket to some degree. And so when you move to a deflationary environment, what you can actually say to somebody is, the money that you are paid, if you save it, over time, you will become wealthier, you'll be rewarded for having a low time preference and for saving, rather than be incentivized to either become a professional investor or pay somebody to invest your capital.

• 23:14Anthony Pompliano?

  And I think that just that alone changes the way that wealth is distributed throughout the world, simply by taking the bottom fifty percent and structurally putting them at an advantage rather than a disadvantage.

• 23:27Speaker 03

  Yeah, exactly. And capitalism works perfectly in that system. The, uh, the, so, e- exactly. So today, instead of thinking it as money, think about it as I put a pizza in the bank, right, so I can eat. And I go back to the, and I, and it's in four slices and I can eat for four days. And then I go back to the bank and it's in six slices.

• 23:57Speaker 03

  Um, and I can't, I'm, I'm still hungry, right? I got, um, I, I got my, um, I got my pizza, um, but it doesn't feed me the, the same. I got what they, they, they, they said, but they divided it and it doesn't feed me the same. And so if you think about what's happening in our economies, right? That's what's happening in, um, in, in, in our economies. And so no wonder people are rising up. Um, no wonder they're. No wonder the bottom half is looking at at at things we didn't see, we haven't seen since the thirties, right? Twenties and thirties, socialism and how rampant that whole, because the system right now doesn't work.

• 24:43Anthony Pompliano?

  Yeah, let's talk about the transition period between the inflation to deflation, right? So we kind of understand how the existing system works. We understand here's a world that could work better. The transition is, I think, the part that scares the shit out of most people, right? They say.

• 24:59Speaker 03

  And it should, yeah.

• 25:00Anthony Pompliano?

  Yeah, and and so what in your opinion, like, how does that transition most likely happen? And then what is the good parts of the transition? And then what are the scary, bad parts of it?

• 25:11Speaker 03

  So so a cleansing of the system is required, right? That cleansing of the system is going to happen one way or the other. That's if we keep doing what we're doing, currencies are going to break. Because now it's just game theory and global currencies and everybody's printing more. So if every currency is printing more, you've ruined trust of what the fundamental unit of value is. And and if you can't trust that trade, trade collapses and and and so. And that's not, that's this, that's a huge problem, but that's a small problem. The bigger problem of that is politicians get elected with that and and blame other people for creating the problem, which creates revolution and war.

• 25:57Speaker 03

  Right, you can see that in your politic, in the US political cycle today. You can see it around the world and it's all caused from the same thing. It's it's people want to believe somebody and they'll believe anybody. It's in it's easier to say it's his fault rather than to to say it's a structural problem. It's easier to blame somebody, it's easier to blame China, it's easier to blame somebody else. And then as that starts to happen and and you you you have, you have to create a bigger enemy is effectively what that looks like.

• 26:27Speaker 03

  And so if you keep doing what we're doing, that's what you can expect revolutions and wars to be commonplace. Um, they're really ugly. Um, and and and you have politicians that take the the bottom fifty percent. And say it's not your fault, it's their their their fault. And when that divide becomes too much, those assets will get taken anyways. Right? It won't look, uh, uh, so so the the rich in that case are diluting themselves if it can go on. Is it there'd be pitchforks in the street? And and then that'll move from country to country. That's it what the existing system looks like. Um, if you allowed deflation to happen, if you just said, um, full stop.

• 27:10Speaker 03

  Um, and so one argument, that's a bad bad outcome, right? The other argument is potentially just as bad an outcome. And that uh, that let to play, let capitalism work and and stop propping up banks, everything else and let the system fail and re and reset. You would go through a world global multi-year depression. Right? And and and there would be a lot of unemployment, there would be a lot of problems in in that. So so because the problem is now so big.

• 27:43Speaker 03

  The solution there isn't, I I would love to say there's a really easy solution and here's what it is. Um, I can't say that right now. And nobody can. And the people that are saying that are diluting themselves, right? They they're not looking at for this from a first principle standpoint, or looking at the second order and third order consequences of their decision. But those are the facts where we are.

• 28:09Anthony Pompliano?

  And and so I guess in that environment, so if you go with the first one where there's the wars, the revolutions, et cetera. It's not so much uh, one country versus another, it's basically the people versus the establishment, right?

• 28:22Speaker 03

  But the problem is it turns into, look at the rise of Hitler in in the thirties, right? Um, it was a friend, it was a fringe party that came into power because there were breadlines in the streets, right? And and that and that happened because the US called their debt, right? And and they had to go into this hyperinflation environment to to get out of the debt. So they had to print money like crazy to get out of the debt. And that forced people in the street with no jobs and they couldn't feed themselves. And in that environment.

• 28:56Speaker 03

  People rise up and and say it's not your fault. It's these people that have the money. It's their fault. And when you've done that, and that's not a big enough thing to retain power, you have to create a bigger enemy outside your country. So you're right, the first order consequence is rising up in the streets, right, in inside countries. Second order consequence, that's not a big enough enemy to retain power. And so you have to, um, it it's such a, it's really predictable, right? We've seen it through throughout history. Anytime you get into this, uh, this. Currency battles, this is, this is what is likely outcome. It doesn't need to look like that.

• 29:39Speaker 03

  Um, but there needs to be very critical debate. On the first principles on what's changed, um, to be able to avoid that, uh, to be able to avoid that outcome.

• 29:50Anthony Pompliano?

  And I guess then if you go to the second option, which is let the system fail, right? Let the bad companies get flushed out, etc. The is the argument that they won't do that because of the short term pain?

• 30:01Speaker 03

  That is the, that's, that's, that's the argument. The, the, the, the short term pain, name a politician that does the, the long term good. Right? They, they, it's, it's really difficult to, to, to, to play is a, a, a long term bet against how much short term pain. So that's, that's actually what, and I know you're a fan of Bitcoin. I am as well. Um. I hope I don't need it, right? I, I really hope I don't need it, but, but all of the data is supporting that I'm going to, right? Because if I need it, what that means is currencies have failed everywhere and it becomes a new standard.

• 30:41Speaker 03

  And we have a harsh reset and it explodes in value. Yes, it creates a lot of wealth for people that know that early, that are the tons of wealth. But the reset is so severe in the world that, uh, that it, it also creates staggering pain.

• 30:57Anthony Pompliano?

  Yeah. And I guess as part of that, is Bitcoin the only answer? Or is there something like gold, right? That's just kind of more sound money? Or maybe there's something else like, what do you think the potential solutions or options are?

• 31:11Speaker 03

  So, so as a policy response right now is so, and I'm involved in this in Canada. But, but you saw the same thing Tim Corcoran said. Well, the policy, the best policy response right now would be where are the jobs in the future going to be? If you, if you're an individual country or state or anything else, where are the jobs going to be? And, and double down there instead of propping up the, the existing system, right? Make a huge bet on where the jobs are going to be in the future. That bet is technology, right? And, and so technology is going to accelerate from here. And that is where the jobs are going to be, but it won't create enough jobs to replace the one that is they're destroying. That's kind of the point.

• 31:56Speaker 03

  So if, if you're playing game theory and doing what you could do for an, in one economy,

• 32:02Speaker 03

  double, triple, quadruple down on technology because you built, it's a, it's the new, they used to build roads, right? The roads are now technology lands, right? The, the backbone of our world is a technology landscape. And that's where, and that's where the investment should be going. For the countries that do that, they'll come out stronger, right? But if every country does that, which is likely, it's pretty predictable. If a bunch of countries did that, then everybody's competing for the same scarce technology jobs. And it's going to, but you're going to have deflation anyways, like no matter what.

• 32:41Speaker 03

  So from a, so that's would be the policy response that could.

• 32:49Speaker 03

  That that could actually probably make at least the money that you spent spend. Make a bigger difference to to your economy. And and and then you wouldn't naturally prop up prices. That should fall and it would it would transition slowly. You still have you're still with the amount of debt in the world. There's a mountain of debt in any economy. You're gonna still have to reset that debt at some point. And and that that reset. A lot of people are gonna be wiped out. Right? A lot of people that think debts can debt can be paid forever by increasing more debt. Could more debt, more debt. Those people are gonna be wiped out.

• 33:31Anthony Pompliano?

  What happens to governments, meaning the national debt and and things like that? Where it's not on the individual level or kind of the the individual corporate level. It's actually on a more macro scale, something like the US government's debt.

• 33:45Speaker 03

  Well, that's it. That is the same thing. It's so that's why I say the the game right now is in currencies. Right? And so so the the it's moved from. The debt went from technology companies to dot com boom to housing to asset bubble after asset bubble after asset bubble. And it and that wasn't enough. And each time. You needed more debt to replace the problem created before because the structure has changed. Right? And now it's just moved to currencies. So that's actually why Bitcoin is a logical progression. Because what is a currency? Right? All it it like it's a piece of paper with faces on it. It's uh and if if if pump you.

• 34:30Speaker 03

  You lend me a whole bunch of money. Right? And I can't pay you back, but I have a little magic printing machine. That I can change the the nominal value of that currency and pretend to pay you back. You probably wouldn't do that again. You probably wouldn't lend to me again, right? And so that's what's happening in governments all over the world. You're starting to get to, you're starting to that critical point where how many zeros can you add to this thing? And still trust the foundation of currency and you can't.

• 34:59Anthony Pompliano?

  Yeah, I recently wrote something where I basically said, uh, the magician has been exposed, right? And it's this idea of like, the entire economy is built on the fact that 50% or more of, uh, the participants in the economy don't understand how money works. Because if they did, right? It's the Henry Ford quote, if they understood how it worked, they'd be, you know, revolting in the streets by tomorrow.

• 35:19Speaker 03

  Right.

• 35:19Anthony Pompliano?

  And so I think what is happening right now, and I'm still kind of thinking through it, so don't hold me exactly to this, but it feels like the Federal Reserve is having to explain the magic trick to the national audience. And what's interesting to me is you've got, you know, 16 million Americans, give or take, who have lost their job in the last three weeks. Add that up with the 5.8 million that were already previously unemployed. So you got about 21, 22 million, uh, Americans that are sitting at home, no jobs, should be in the labor force. There's no sports on television, right? And so all they can do is they can basically play on social media. They can, uh, watch Netflix or they can pay attention to COVID-19 and economic news, right?

• 35:58Speaker 03

  And you're probably busy as a result.

• 36:00Anthony Pompliano?

  Yeah, and it's just not that much going on, right? And, and so this is kind of like prime time, uh, television is what's going on in the economy and with the virus. And so right at that moment when everyone's paying attention and also everyone's fearful, you then get the Federal Reserve saying, we have unlimited money. We can just print the money, right? We're going to print two trillion here, two trillion here, here's another trillion, et cetera. And what I think happens is all of a sudden you're giving a crash course in, um, what money is and how it works to the bottom 50% that you never wanted to understand how money works. Right? You were counting on them not to know it, but now you've revealed the magic trick to them. And so the, the question that I think will come out of this is something like, wait a second.

• 36:43Anthony Pompliano?

  You can make as much money as you want out of thin air. Why do I pay you taxes if you can just create the money anyways? Right? And you start to get more of these like populist type questions where people start to just say, this doesn't make sense to me. Right? And I think that's kind of step one of many, many steps that eventually end up in social unrest. But it, you know, it's not immediate. But I do think that it all starts with kind of revealing the magic trick and having to do it on a national stage and transparent. Because you're trying to solve the short term problems.

• 37:14Speaker 03

  Yeah, and I don't know, I don't know even so. So if you looked at prime time TV. Do you think, do you think anybody really understands the magic trick?

• 37:24Anthony Pompliano?

  I, I don't think that there's any explanation of it. What I think ends up happening is people see, wait a minute, where two trillion dollars come from? Right? And they're almost like, it's like being the difference between going to a college and sitting there and somebody saying, okay, pull off the textbook. And we're going to teach you, you know, line by line, exactly how this is theoretically supposed to work. Versus somebody says, hey, you want to be a fireman? Run into that fire. Right? And either you figure out how to fight the fire or you die. And over time, what ends up happening is the people who just learn by doing. That's essentially what's happening here, right? Is you're learning by seeing it actually happen. Uh, and so not everyone gets educated, but I think more people are educated watching this than probably, you know, previously by just going to school or something like that.

• 38:05Speaker 03

  Maybe, and that's why it shows like what you do is so important right now. Um, because, because it breaks through the, it breaks through the clutter that people are, people are talking about and, and, and, and, and, and gives some light to some of the first principles, what's really happening behind the magic curtain.

• 38:24Anthony Pompliano?

  Yeah. What, what do you think the, uh, the, the TV covers that we're seeing right now? Good, bad, uh, everywhere in between?

• 38:32Speaker 03

  I try not to, I try not to tune in and watch because, because I find, I find it's all done for sound bites. And for, um, and, and, and it's short term and everything else. I, I don't think the right solution, I don't think the right thing to do in, in, in is say, what would you have us do? And and still make the wrong decision, right? So so so I I understand the problem, right? I totally understand the problem. I understand where governments have created so much money and they've kicked the can down the road. Now, remember Nassim Taleb's Nassim Taleb's quote that sometimes preventing the forest fire

• 39:14Speaker 03

  creates a bigger fire on the horizon because you you don't clear the bush and the dead bush, so the next fire is way bigger. That's what we're doing, right? And so so that is not solving a problem. That is making future generations pay for a problem that is exponentially bigger. So what you have right now, and actually, if you looked at the numbers, it's it's it's such, it's it's crazy. You have technology moving exponentially, right? And and you know this, but technology runs on Moore's law, which is an exponential pattern. And and even if Moore's law ends in a number of cycles,

• 39:54Speaker 03

  quantum computers, the digitization, AI is moving so fast, you could assume we're gonna have an exponential pattern in technology for a long time to come. Why that matters a lot, I use this to quote before.

• 40:10Speaker 03

  If you fold a piece of paper fifty times on itself,

• 40:15Speaker 03

  at fold fifty, I've asked this to tens of thousands of people, and most people would say it'll fold fifty, it'll be two inches thick. At fold fifty, if you could, you can only fold it seven times on itself, but at fold fifty, the piece of paper would be from here to the sun.

• 40:32Speaker 03

  And and what you just did with your face is I've seen that tens of thousands of times, and it's not it's not that it's just an exponential pattern. It's not I'm smarter. The first time I saw that, I thought there's no way it goes to the sun. I had to Google it.

• 40:51Speaker 03

  To see it. All human beings miss exponential patterns. We're bad at it, everybody. Otherwise, you'd have way more guesses that went to the sun, right? So so in if you looked at the data. So we all are bad at exponential patterns, but we have an exponential pattern underneath technology. That's that's that's doubling at that rate. And we're looking backwards in time of technology. And making predictions on a linear scale looking forwards. And what's happening right now in technology, we're in this, the steep steps. Right, so name a technology company or a technology industry and what ends up happening in the early folds? You have this hype cycle, they call it the Gartner hype cycle, right?

• 41:36Speaker 03

  It was a hype cycle because people overestimate the impact, the benefit. And, and they, and it rise, tons of money goes into that and then it collapses. But it keeps doubling. And, and so what ends up happening is on the first fold of a piece of paper.

• 41:55Speaker 03

  It looks like nothing. And so if tell, somebody tells you it's gonna, on the second fold, it's gonna be great. Second fold, it looks like nothing.

• 42:04Speaker 03

  We're on fold thirty-three right now, if you take those a- a- analogs together.

• 42:10Speaker 03

  Fold thirty-four doubles the last fifty years.

• 42:15Speaker 03

  And, and, and if you now compare that to the debt creation. It's a mirror image. The amount of debt to try to pretend we live in the old world is rising exactly lockstep. To, to the amount of technology deflation that's happening. And if you, if you add in the unfunded liabilities. Social, social safety net pensions, everything else in the black pool, everything else, you would see it really clearly. Um, and. And if that wasn't bad enough, right, so to prove the point that the old system won't work anymore. That's looking backwards.

• 42:57Speaker 03

  Looking forwards, that's, that's kind of what I put in the, the book and a lot of people are talking about right now. This was perfectly predictable. Right, perfectly predictable because the amount of debt needed right now. To, to keep, to pretend we still live in the old world. Um, is so crazy. It, it's so much more than even the wildest predictions on Twitter are saying. And so at some point that breaks.

• 43:27Anthony Pompliano?

  Yeah. Do you think that there's a world where they recognize this and they just let it break? They let the defaults happen and, and they let the cleansing? Or is it just, i- it's impossible for them to do that because of the game theory?

• 43:41Speaker 03

  Now we're now we're playing with probabilities, so it's hard to say these the next number of years will look very different. It's gonna break anyways, no matter what.

• 43:57Speaker 03

  If if if there was a global coordinated effort to say, we're gonna write off some of this, a whole pile of this debt, write it to zero, a whole bunch of people fail, and we're gonna have a new standard like Bretton Woods, where we can trust money again globally. Bitcoin wouldn't survive in that. You could create a digital Bitcoin that was backed by all all current currencies that that could actually replace trust. That would be, and by the way, I'm personally long on Bitcoin, so that would not be, that might not be a good thing for that value, right? But but I don't think that that could happen in the today's trust environment.

• 44:42Anthony Pompliano?

  Yeah, it's almost like the things that they would need to do in order to be successful. There's just no way they'll do it because it would involve such incredible global coordination among countries that just don't get along.

• 44:53Speaker 03

  In a in a world, the the the the lack of trust is actually coming from the same thing that we talked about before, the lack of trust, when every country needs to manipulate their currency to drive the global jobs agenda. Right? Then there's a total lack of lack of trust in in in currencies, and to try to come back together and say, we're gonna fix that globally right now. I don't think there's a chance.

• 45:19Anthony Pompliano?

  Yeah.

• 45:19Speaker 03

  And and and that's actually, that would play into why I'm really long on Bitcoin, because it's gonna happen no matter what.

• 45:26Anthony Pompliano?

  Yeah, it almost feels like there's this element of you get one of two options, right, to solve the problem. The first option would be global coordination where everyone trusts each other. We come together, we create a new standard, you write off the old debt, and we move forward under Bretton Woods II, right, or whatever you wanna call it. But that involves complete trust of everyone at the table to kind of coordinate and agree together. The other option is trust no one, right? Which essentially is what Bitcoin is. And the trust no one option means uh there's gonna be no one in control. There's gonna be no one in charge. And you actually don't need to trust anyone else because you have the full transparency to verify uh you know, kind of blocks, etc.

• 46:09Anthony Pompliano?

  And so you either get a hundred percent trust or you get a hundred percent, you know, no trust. And I think you're probably in the same camp as I of like, I just don't see the world where everyone comes together and coordinates. And therefore that would suggest then you end up in a world where trust no one ends up being the dominant um kind of approach.

• 46:26Speaker 03

  Yeah, and if you play that, play that forward, so game theory predicts or that um the sum of everyone is better when people cooperate, right?

• 46:40Speaker 03

  But what ends up happening is everyone coordinating cooperating creates an incentive for somebody to cheat. Right? And so as and and so if you look at that through uh through Bretton Woods or anything else, even to pay changing the gold reserve off the so. Everyone cooperated, world's in a great place. Um and and then US can't pay Vietnam wars and everything else off the gold standard. And causing people not to cooperate as as much for a while, albeit currency backed all other world currencies or eighty percent of world currencies. And it looked like it was going, but you started manipulating.

• 47:24Speaker 03

  At which point every other currency has to manipulate too. One has to manipulate to drive their jobs, Euro does, every other currency. So and that problem gets bigger and bigger and bigger. So if you look through game theory, what ends up happening is um you have you have cooperation. And then, then no cooperation, and then cooperation again, and, and no cooperation. We're lens of the world. Um, it's a simple example would be driving in the carpool lane, right? If everybody, if the carpool lane is only used for people who carpool, um, it works really well for people who carpool. If a lot of people cheat, then incentive accrues to those people who cheat.

• 48:06Speaker 03

  And then i- if nobody catches those people that cheat, everybody cheats, then there's no carpool advantage. Right? So, i- i- so, looking through this whole thing, through that, through that lens and countries and currencies and everything else is a really important thing. But I would totally agree with you. I cannot see, um,

• 48:27Speaker 03

  it's a, it's a small possibility, but it's, uh, it's improbable that governments today, this far away from, from cooperation, could come together and cooperate on a global scale that, that needs to happen to be able to prevent kind of a reset.

• 48:42Anthony Pompliano?

  Yeah. So it's a pretty crazy world we're living in. What's the one thing that would change your mind? Like, is there something that could happen that could change your mind about needing to move into the deflationary world?

• 48:54Speaker 03

  I don't think so. I, I, I, so, so, um, i- if technology is deflationary, and that's not, and when I say if, it is clearly deflationary. Right? Um, uh, it's, that's not a guess, it's a fact. And if technology is moving into every industry,

• 49:15Speaker 03

  then, then there's no possible way that we can run an inflationary world anymore without Jerry raking a system. And that's what we're seeing. Right? It's, it's, that's why I say it's way more important. Let's just talk about, let's just talk about the changes that are, uh, the, uh, that have happened and rebuild a society that works better for everybody using what's, what the facts are clearly pointing at.

• 49:44Anthony Pompliano?

  Yeah. It, it's, it's a really interesting thing. So I think that there's the structural, uh, challenges, right? Obviously, which you've outlined in terms of where we are, why it's unsustainable. Uh, and then it's very clear as to where we need to go. The big question mark, I think, is that transition period, right?

• 50:03Speaker 03

  And so it's, yeah.

• 50:06Speaker 03

  Agreed.

• 50:07Anthony Pompliano?

  Yeah, and and on the transition period, I just don't see one where out where there's no social unrest. Right. I don't see like an orderly transition. And that's the part that I think a lot of people are just like, how do we do that? And the answers they keep coming to make them uncomfortable.

• 50:28Speaker 03

  Yeah, so and I think that's, but that is the truth, right? So, so if,

• 50:35Speaker 03

  if deflation is is is is in our future, if what I say, if what if what I said, have people look deeper, read the book, you could debate that fact and everything else and and prove me wrong on that. I can't see any, any world where that isn't isn't true, but I'm happy to debate that.

• 50:59Speaker 03

  The other thing is, it's just started. It's going to get way worse. The technology, if you think about, think about how many people that are working from home now will stay working from home. Right. Think about what that looks like. Think about the acceleration to digital that's happening right now out of COVID. And and how that accelerates retail store closures, how that accelerates. A whole pile of industries, commercial real estate that might not be need to price where it is because it's not needed as much. So it's it's it's all over the place in every part of society. But if that's a fact, and I think it's a pretty clear fact,

• 51:42Speaker 03

  then then let's talk about what the solution looks like in that. Because if you need to protect people's wages and you don't need to juice those people's wages to protect a staggering amount of debt that you created in the first place. Right? If if if you don't need to pay them more to keep up with the treadmill that you put them on in the first place. Right? Wouldn't that be a good thing? So so next next year, instead of your your Mars bar costing nine to a dollar, it costs 90 cents. And the year after that, 80 cents and everything else and you're following. Isn't that a good thing for society?

• 52:22Speaker 03

  There's there's this misconception about economics and people put their head in the sand with economics because they think it's too complicated. And here's the thing. A lot of economists make it too complicated trying to explain things that just clearly aren't there.

• 52:38Speaker 03

  And and and that scares people from asking the first principle type of type of questions. Economics isn't about value, it's about scarcity. Right? The air you breathe is the most important thing in your life right now. You don't pay for it, right? You pay for it if you go diving underwater where air is scarce. You pay, you might pay for it in in in Vegas where if it's if if there's lots of smoke in the air or air is polluted, but you don't pay for your air because it's abundant and free. And you can't create economic models about where where there's abundance.

• 53:21Speaker 03

  Technology creates abundance everywhere. Right? And and so so and that's a good thing for society. We should allow, we should, we should be celebrating.

• 53:33Anthony Pompliano?

  Yeah. It it it's this crazy thing where there's a separation between what sounds to be the right saying kind of prudent thing and the thing that everyone's drunk and addicted to. Right? And and that's ultimately what it ends up coming down to.

• 53:52Speaker 03

  Yeah, yeah, that's you you you set up perfectly. It's it's a hit of cocaine, right? And you need a bigger hit every time to eventually the patient dies.

• 54:03Anthony Pompliano?

  Yeah. Before we wrap up, I always do rapid fire questions. What uh what's your most controversial thought in either technology or or finance?

• 54:12Speaker 03

  Yeah, controversial in finances is this one. That in technology, AI is going to effectively

• 54:24Speaker 03

  the speed and rate of growth of AI. AI is going to be smarter than all of us. More creative or everything else. It's logical pattern. Every single job is a function of intelligence. So how could you get more jobs if you if AI is going to be smarter than all of us?

• 54:44Anthony Pompliano?

  How long does that take?

• 54:47Speaker 03

  Low case, the uh, the top researchers are saying five years. I think it's gonna be longer, forty years. But that whole trend across that landscape is all gonna be deflationary. Right? Cause it's gonna be more and more and more the entire entire time exponentially more the entire time. But eh, say it's a hundred years. It doesn't matter, right? The timeframe. So if that if that is going to happen, which it's going to happen. Um, then uh, then uh, then then we have to rebuild uh, society to to for it anyways.

• 55:20Anthony Pompliano?

  Yeah. What's the uh, the best book you've ever read? O- other than your own?

• 55:25Speaker 03

  Um, I I love thinking fast and thinking slow. Um, yeah, ju- just because it it it forces you to, I made a whole bunch of mistakes in reading the book. They take you through uh, and and it forces you to realize the to task questions that you might not have asked yourself before and kind of find find blind spots uh, in your own critical thinking.

• 55:48Anthony Pompliano?

  Yeah, this uh, Daniel Pink, I believe, right?

• 55:50Speaker 03

  Yeah, Daniel Kahneman.

• 55:51Anthony Pompliano?

  Daniel Kahneman, okay, got it. Uh, very cool. Uh, believer in aliens? Yes, no? No?

• 55:58Speaker 03

  So it would say, say, do I believe in in another, maybe, do I believe in in life on other worlds? Yes, I guess so. Yeah, it'd be hard to say uh, on on how many worlds to to say no.

• 56:12Anthony Pompliano?

  Wha- what is the logic for believing that there is other life? I I'm with you. I just wonder what the logic is.

• 56:17Speaker 03

  The amount of the the amount of uh, the amount of planets and solar si- and stars in our solar system, it's just illogical to think that there isn't uh, life somewhere else. So when when you first said aliens, I I was thinking about people visiting Earth.

• 56:33Anthony Pompliano?

  Yeah, well, so uh, I've asked this question to, you know, two hundred and sixty, two hundred and seventy people, whatever it's been now. And uh, over ninety-five percent of people say yes. You know, I I believe in something being out there, etc. Uh, which is a much higher percentage than I would have guessed before I started asking everyone that question.

• 56:49Speaker 03

  Yeah, but you you ask a whole bunch of people that uh, look at probability distributions and and and and if you looked at the probabilities with that many planets, it'd be impossible to say no.

• 57:01Anthony Pompliano?

  Exactly. What um, what one question do you have for me to uh, to finish up?

• 57:07Speaker 03

  Um. More of a question, more of a statement. Keep doing what you're doing. Like this, it's it it it means a lot right now. It's really, really important work. I didn't write the book. I don't need, I don't need a book sale to for so I didn't write the book for any reason to so, but somebody like you with your, what you're doing makes a huge difference to, it can make a huge difference to what's happening. So, thanks.

• 57:38Anthony Pompliano?

  Yeah, I appreciate that. As I tell people, what started out as me doing a bunch of learning has now turned into, there's a sense of responsibility to some degree, right, to kind of continue to share what, what I think and I'm learning. So, it's a weird world we're living in because I don't think I ever expected to be in this position, but here we are. As I'm sure you didn't expect to write a book at some point, right?

• 58:02Speaker 03

  Exactly, exactly.

• 58:05Anthony Pompliano?

  Absolutely. All right. Well, guys, I hope that you guys enjoyed this. Please go get the book, The Price of Tomorrow: Why Deflation is the Key to the Abundant Future. Obviously, there's a number of really important ideas in there, and I think Jeff's done a great job. So, I appreciate you jumping on here and I'll have to do it again as, as that world becomes more of a reality.

• 58:26Speaker 03

  Awesome. Thanks.

• 58:28Anthony Pompliano?

  Hey, everyone. Pop here. If you like this episode of Off the Chain and want to help us take crypto to the top of the apple, Spotify and other podcast charts, please do us a favor and rate, review and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.