The Book in a Nutshell
Technology is progressing at an unprecedented rate, with unprecedented implications for our lives and livelihoods. In The Price of Tomorrow, Jeff Booth explores how our current economic systems are built on the basis of debt and inflation, but will soon confront an unstoppable force of deflation from new technologies. Rather than fight this force by dividing our societies further through currency debasement and further debt, Booth suggests we need a reset in our approach.
Book Summary: The Key Ideas
#1: Our Sick Economic System. Our debt-dependent economic growth has created an economic system that is not fit for purpose. As technological advancement accelerates into unprecedented territory, our need for inflation to support this system is being confronted by the natural force of deflation. We need to urgently rethink our approach.
#2: The Unstoppable Deflationary Force of Technology. The emergence of new technologies, such as self-driving cars, virtual reality and additive manufacturing, will soon create unstoppable deflationary pressure on this system. Coupled with innovation in renewable energy and artificial intelligence, this deflationary pressure cannot be stopped through our model of currency debasement and debt.
#3: The Dangers and Possible Solutions. Our current approach is widening inequality and will inevitably lead to discontent that sows the seeds for totalitarianism. While history tells us that policymakers will probably turn to further money printing and universal basic income as responses, a fuller reset is inevitable. We need to decentralise and fix our monetary system, and we need to confront the deflationary reality now rather than later.
Book Notes: The Key Ideas in Detail
The below are more detailed notes on the key ideas from The Price of Tomorrow by Jeff Booth, along with some quotations that caught my eye. These notes do not by any means cover the full breadth of the book. They are instead intended to serve as an introduction to some of the key ideas, from which to decide whether the book is worth further attention.
Key Idea #1: Our Sick Economic System
We are entering an unprecedented age of deflation, driven by technological advancement. The problem, Booth argues, is that our economic systems aren’t built for this deflation. Worse, because of the speed of technological progress, what worked in the past will not work in the future.
Our current economic growth is entirely dependent on credit expansion and currency manipulation. This debt is locking us in a system that can only end badly, widening inequality, increasing discontent and raising the possibility of extremism.
But while we try to create inflation and growth through this debt cycle, Booth believes that the deflationary nature of technology is becoming too great. By clinging to our old approach, we risk simply amplifying inequality and polarisation.
“On one side, we have this incredible deflationary force driven by technology, and on the other side, we have a force trying to stop it. That force is a money printing machine.”
This debt-saddled approach to our economies is like a Ponzi scheme, with inflation targets designed to sustain the scheme.
“If it takes ever-increasing credit growth to achieve economic growth, how are our economies any different from a Ponzi scheme?”
2008 was a critical signal of this direction. By responding to the 2008 financial crisis with quantitative easing (QE) and the creation of moral hazard, central banks gifted risk-free returns to asset holders at taxpayers’ expense.
The process of printing (QE) has had and will continue to have a corrosive effect on society. It impoverishes many through purchasing power erosion while enriching the wealthiest. This inevitably breeds discontent and frustration.
But the system of monetary stimulus and credit expansion is being sustained because of the finely balanced and interconnected economic implications for GDP growth.
Whatever policymakers do, however, they are ignoring the reality. Tariffs, currency manipulation and debt escalation cannot solve the reality that the inflationary environment is breaking down due to technology.
While established monopolies have in the past been disrupted by new entrants with improved technology (creative destruction), today’s monopolies (or platforms, as Booth calls them) are inherently deflationary, creating an even greater counterforce for inflation.
When you put this process of innovation up against our illusory asset inflation and mounting debt, it must force policymakers to see things differently. Policymakers need to challenge their blindspot bias and be prepared to challenge the old economic paradigm.
Key Idea #2: The Unstoppable Deflationary Force of Technology
Technological advancement is characterised by periods of exponential growth that slow before a new technology takes over exponential growth. Booth describes this process as “the sigmoid function curve of technology”.
In the near future, this type of exponential progress will drive incredible abundance and deflation. Booth points to a number of examples of technologies set to have such an effect.
Self-driving cars, which are closer than people think, will drive down waste and cost. They will also reduce the need for parking, creating implications for land use. But as Booth puts it, “that waste and cost are today’s jobs.” Look no further than taxi drivers for an example.
Virtual and augmented reality, which seems to some an absurd proposition, will have enormous implications for the business and leisure travel industry, which recruits a huge number of people across the world. Again, it is not hard to see how this will act as a deflationary force.
Additive manufacturing and 3D printing will likely have profound implications for logistics industries and its jobs. Why would we import if it is more economical to print locally?
All three of these examples are deflationary. In other words, they reduce cost but in turn, they also reduce the number of people needed to support them.
Booth argues that the only way to counteract the deflationary effects of such technological advancement is by growing debt exponentially to keep up. But this is simply impossible and unsustainable in the long run. What’s more, it creates a negative feedback loop, with future interest obligations creating a drag on growth on top of deflationary forces.
“If the only way to keep growing is through the addition of more and more debt that cannot be repaid, can we honestly say we have an economic system that works?”
When we consider the role of energy in our economies, we may face an even more deflationary step function. Renewable sources of energy have the potential to completely upend existing energy infrastructure and employment. Booth suggests that solar has the best chance of success, owing to its rapidly reducing cost.
Then there is the big question of artificial intelligence. It will soon move into many domains of our economies, altering the way we perform knowledge work. And as machine intelligence overtakes human intelligence, Booth argues that it will not be another luddite moment. New jobs are unlikely to be sufficient to fully replace old jobs.
“If every job is a function of our intelligence, as computers beat us at intelligence, how could any job be safe?”
Key Idea #3: The Dangers and Possible Solutions
We are wired to work in tribes. Social belonging is a critical feature of human wellbeing. Booth argues that the combination of wealth inequality, technology that reinforces our belief patterns, and our innate “us versus them” instinct risk creating a dangerous reinforcing loop. These factors are at the heart of rising extremism, driven by economic disparities:
“People do not naturally hate others when they’re content or have abundance. They are manipulated into it when they feel discounted or that they have nothing to lose.”
The risk, Booth suggests, is that totalitarians will use this frustration and division to consolidate power, while relying on our psychological vulnerabilities to widen the “us versus them” divide.
To take advantage of the age of deflation and abundance, we must cooperate and break the cycle. Booth discusses the role of cooperation and non-cooperation through the lens of game theory. As technology is deflationary and also addresses many of the conflicts over scarce resources, the incentive to “cheat” or “betray” should become smaller.
But how to solve the debt spiral?
Referring to Ray Dalio’s book, Principles for Navigating Debt Crises, there are four ways to navigate debt crises:
- Debt defaults or restructuring
- Central bank printing and other monetary stimulus
- Transfers of wealth (i.e. higher taxes for the rich) and universal basic income
The unfortunate reality is that policymakers almost always turn to the last two options, and mostly option 3.
Central bank stimulus aims to sustain the debt-driven growth, at least in the short run. People feel richer, asset prices appreciate, but eventually the effects of currency debasement take their toll.
Ultimately, the strategy fails because bondholders begin to price the risk. Societies become increasingly polarized, too, and as inequality increases, the risk of totalitarianism grows. Worse, history tells us that this process often precedes revolutions and wars.
Option 4 is also not an optimal solution. Higher taxes on the wealthy create disincentives to innovate and drive growth. Again, this means that we create a drag on the growth that policymakers desperately need to support the debt.
Universal basic income (UBI) is another probable approach. Not only does it disincentivise work and incentivise being paid for nothing, but this policy is also practically complex to administer. But the real problem here is that wealth transfers simply don’t address the root cause of the problem.
Both approaches ignore the necessity and inevitability of a debt reset. But worse, both options rely on governments controlling monetary policy and controlling the value of money.
Our debt spiral started as a result of the scrapping of the gold standard. Booth points to Bitcoin as an example of a potential monetary solution, which is decentralised in nature, fixed in supply, and, in theory, unable to be manipulated by anyone.
To truly resolve our debt spiral and to take advantage of the age of deflation, Booth advocates the simplest solution of all. Why don’t we stop intervening and simply let deflation play out? Booth believes that while it may be painful at first, the long-term result is much more preferable than sustaining the debt cycle for longer.