From debt-supercycle to tech supercycle

By Our Reporter
Jeff Booth

Tech entrepreneur Jeff Booth on why deflation is the key to the future

Technology rides an exponential wave of deflation, said Jeff Booth, author of The Price of Tomorrow: Why Deflation Is Key to an Abundant Future, in a recent interview. The Vancour-based tech entrepreneur believes that deflation is a good thing if only we could learn to embrace it. “Every 18 months we get a double of compute power. Technology forms the base layer of everything we do. Tech companies today are celebrated for the same deflation they are bringing to the customer.”

Booth makes the case that secular deflationary trends will be the ultimate undoing of monetary policy and technology is driving this deflation at an increasing rate.

When central banks around the world say we need to drive inflation, that comes down to having too much debt in the world, he said. “If you have deflation with too much debt you create a negative spiral. We need to change that. We have massive inequality in the world because of it. We have this crazy belief that we can get deflation in some parts and inflation in others and run an economic model but that is not possible.”

Deflation works in the opposite way to inflation. With inflation, says Booth, debt is borrowed today and paid back with currency tomorrow that is worth less, which in turn makes the cost of the debt less. “As long as the debt is driving good growth, it’s easy to see why economists, governments and the business community are generally comfortable with this arrangement. With deflation, prices get cheaper.”

But economists worry about a deflationary spiral: deflation can ultimately lead to a feedback loop, where people believe products will get cheaper if they just wait long enough, so they stop buying and wait. “That decreases all consumption and, in turn, hinders the growth and wealth of the economy.”

Booth though believes that society is trapped in a debt supercycle, where higher-than-ever debts have no realistic prospect of ever being repaid because growth has slowed. Both creditors and debtors here ultimately get hurt, as evidenced by the 2007-2008 subprime mortgage crisis in the U.S.

“Rapid innovation, founded on technologies like AI, machine learning and 3D printing, is ushering in a period of massive deflation. Stuff is easier to produce and cheaper than ever. And this phenomenon is just getting started. We’re entering a “technology supercycle” that’s bigger and more powerful.”

If technology can create a more efficient future but we don’t change societal structures or the way economies are built that is ultimately going to drive polarisation into our economies and that will end in a really bad spot for society, said Booth, who added that he wrote the book for his children. “My children won’t grow up in the world I did unless there is societal change. We need to accept deflation and embrace the abundance it can bring.”

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