Latest / Freedom Flip / The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future by Jeff Booth (EP035)

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The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future by Jeff Booth (EP035) · Freedom Flip

• 0:00
  January 10, 2008, quote, the Federal Reserve is not forecast currently forecasting a recession.
• 0:07
  Ben Bernanke interview with CNBC.
• 0:09
  July 16, 2008, Fannie Mae and Freddie Mac are well capitalized and in no danger of failing.
• 0:16
  Ben Bernanke speaking to Congress.
• 0:18
  September 18, 2008.
• 0:19
  Quote, We are in a danger of a broad systematic collapse, and action needs to be taken urgently to head it off.
• 0:26
  We need the authority to spend several hundred billion.
• 0:29
  Hank Paulson in the Oval Office, September 18, 2008.
• 0:33
  The Price of Tomorrow by Jeff Booth.
• 0:36
  So this is a banger book.
• 0:38
  As you can see, it kind of shines a light that nobody understands what the hell is really going on.
• 0:44
  And our entire system is potentially going to shift now because of technology in a way we never understood.
• 0:52
  Because the entire system with technology is actually how the prices go down.
• 0:57
  Now, when I hear that, it doesn't make sense.
• 0:59
  It blows my brain.
• 1:00
  It's like, no, no, no.
• 1:01
  Gravity, my whole life, gravity goes down, prices go up, right?
• 1:04
  It's more expensive to buy things over time.
• 1:06
  My money's worth less.
• 1:08
  This book explains why all of that is wrong.
• 1:11
  So I'm very, very excited to dive deep into this book.
• 1:15
  I think that this book, I have never read the book, but I watched hours and hours and hours of interviews of Jeff.
• 1:22
  I think that Jeff Booth is incredible and he has a very unique, very particular way of taking a look at this situation.
• 1:30
  He has a great phrase, which I'm sure that we're going to get into the book, which is the natural state of a free market is deflation.
• 1:39
  And I think that in the last five, six years, Americans started to realize that inflation is something that happens and it's something that sometimes can get a little bit out of control.
• 1:51
  And for whatever reason, we are being told by the authorities that having a little bit of inflation is good.
• 1:59
  How they come about 1%, 2%, that's our target for inflation.
• 2:05
  It's kind of bizarre, or at least it's not easy to understand from my point of view, because it's basically saying it's okay for us to...
• 2:14
  to erode your savings by 2% every single year.
• 2:18
  And I think that the biggest excuse that they say is, well, if this is not the case, then you will be saving money.
• 2:25
  You will be hoarding money because prices are going to be falling.
• 2:29
  Which I think that is something that we see all the time.
• 2:32
  Like look at the price of a computer 30 years ago and a price of a computer today and compare the characteristics of both computers.
• 2:40
  The computers are, technology has definitely,
• 2:43
  Driven price down.
• 2:45
  Definitely.
• 2:45
  Like 100% confirmed.
• 2:47
  Yeah, I have a funny example of that.
• 2:49
  I'm getting some new TVs, and my brain was still stuck in like the 1990s, where I was like, ah, these are going to cost me like $5,000 for a new 60-inch TV.
• 2:58
  And somebody, or I looked it up, it was like, what?
• 3:01
  What?
• 3:02
  These are like 350 bucks.
• 3:04
  Are you kidding me?
• 3:05
  I can get it shipped to my house for $400.
• 3:07
  And it was one of those, my brain is broken because it's stuck in prices from 10, 15 years ago.
• 3:13
  And there's a famous chart that shows highly regulated industries, healthcare, education, etc.
• 3:19
  Prices are exponentially going up.
• 3:21
  Technology, computers, TVs, etc.
• 3:23
  Prices are going down.
• 3:25
  Yeah, so that is the difference between a free market and a market that is not free.
• 3:30
  Healthcare, for example, or education is not a free market.
• 3:33
  The government is in the middle picking winners and losers, which drives the price higher.
• 3:39
  Housing is the same thing.
• 3:41
  Yep.
• 3:41
  So let's dive into some bangers.
• 3:43
  So at a high level with the table context, the book just flows.
• 3:47
  He kind of explains how money printing works, how economy works, then creative destruction, entrepreneurs goes into technology, goes into the future of energy and intelligence, and then knocks you out of the park with like...
• 4:01
  why governments create us versus them, and then the call to action.
• 4:05
  So this is kind of the flow of the book.
• 4:06
  So the first banger on page 12, so he says, in 2000, the total debt in the world was approximately 62 trillion.
• 4:15
  At the same time, the world economy in 2000 was about 33.5 trillion.
• 4:19
  So,
• 4:21
  So just zoom out.
• 4:22
  Total world economy, 33.5.
• 4:25
  Total debt, 62 trillion in the world in 2000.
• 4:29
  Since 2000, the world economy has grown from US 33.5 trillion to US 80 trillion.
• 4:35
  But to achieve that growth,
• 4:37
  The total debt has grown to over U.S. $247 trillion as of the third quarter of 2018, according to the Institute of International Finance.
• 4:45
  In other words, it has taken approximately $185 trillion of debt to achieve only $46 trillion of global growth.
• 4:53
  Okay.
• 4:55
  So simple.
• 4:56
  Let me break that down.
• 4:57
  All that is to say for every $1 of growth in the global economy, we had to use $4 of debt.
• 5:03
  So that's like me coming to you, Bank Pablo, and saying, hey, can I borrow $4, Pablo?
• 5:07
  You're like, yeah, sure.
• 5:09
  As long as you're going to pay me back, here's $4.
• 5:11
  And all I can make with that is $1 of revenue.
• 5:14
  Yeah, that's pretty bad.
• 5:16
  It's very, very bad.
• 5:21
  Wait a second.
• 5:21
  Are you saying that the governments are not good capital allocators?
• 5:25
  Is that your conspiracy theory here?
• 5:28
  It's a very interesting thing.
• 5:31
  So I think the next one that's kind of interesting, he talks a little bit on page 18, is...
• 5:36
  Talks about, you know, this is the important thing to realize with most world wars and major wars.
• 5:40
  They all start as currency wars.
• 5:42
  That's the first one.
• 5:43
  Then trade wars.
• 5:45
  And then the third is the real wars.
• 5:49
  So you polarize, you drive protectionism, and then you result in nationalism.
• 5:53
  World War I, World War II, all these prior ones.
• 5:55
  He goes into those details of how that kind of occurs historically.
• 5:59
  So the third one on page 19, I kind of talk about Ben Bernanke.
• 6:03
  It goes through the former Fed chair.
• 6:05
  He has all this confidence in 2006, 2007.
• 6:07
  Then 2008, he's still confident.
• 6:10
  I'm sorry, during 2007.
• 6:11
  And then he's basically like, the whole world's blowing up.
• 6:14
  On a dime, he just flips.
• 6:15
  Yeah.
• 6:16
  And I think this is the realization that those who are in charge of economic policy, of printing currencies, of et cetera, they don't really understand.
• 6:24
  Not that I do either, but they pretend as if they do.
• 6:28
  It's a big show.
• 6:29
  It's a big act that they're building confidence.
• 6:32
  You are saying that he didn't even know.
• 6:35
  I have a different opinion.
• 6:37
  I think that they know.
• 6:39
  I think that they just, I wouldn't say that they are lying on purpose, but I think that if they say what they know, then confidence will go to shit.
• 6:48
  And then people will start taking certain actions that will make the whole thing even worse.
• 6:54
  Interesting.
• 6:55
  That's what I think that happens.
• 6:57
  There is a great example in Argentina, early 2000s, before the whole country blew up, where the guy is basically saying, guys, if you deposit dollars in the bank, don't worry, you will get dollars.
• 7:10
  And all that to then what happened is all the banks like, hey, I know that you deposit dollars.
• 7:15
  We're going to give you pesos at a third of what you deposited.
• 7:19
  And not all at once.
• 7:20
  It's going to take a couple of years.
• 7:22
  So if he comes and says, hey, listen, we are in deep shit, most likely you will not get your dollars.
• 7:28
  Guess what do you think is going to happen the second after?
• 7:31
  Everyone will go to the banks and the whole thing will collapse.
• 7:34
  Now, you may say, well, the whole thing collapsed anyways.
• 7:37
  You are right.
• 7:38
  Yes.
• 7:39
  But I really think that these guys know exactly what's going on and they are just lying.
• 7:44
  Because they believe that that's the best way to deal with that situation.
• 7:49
  It's an interesting theory.
• 7:50
  Neither of us knows, right?
• 7:51
  Either could be right.
• 7:53
  The truth either way is what you're hearing or what is being presented is not necessarily right.
• 7:59
  So doubt it, question it.
• 8:00
  Yes.
• 8:01
  Doubt it, question it, whether they're lying or whether they're just ignorant and think they're smart.
• 8:07
  It ends up being wrong.
• 8:07
  For me, a simple way of doing this is when you are hearing one of these guys, just flip it.
• 8:13
  Yeah.
• 8:13
  Just flip it.
• 8:13
  And that's most likely the right thing that is happening or that will happen.
• 8:18
  Yes.
• 8:19
  I love that.
• 8:20
  Okay.
• 8:20
  So then I didn't really understand this and I was a finance major in college.
• 8:24
  So, but in page 24 and 25, I really liked when he explained this concept for me, which was higher income countries, Europe, United States.
• 8:33
  typically rely on consumer spending as the primary driver of GDP growth, while lower-income countries are more likely to depend on net exports.
• 8:41
  These inputs compete against each other.
• 8:43
  For example, in countries with higher incomes, consumer spending naturally increases, but because their jobs pay more, their exports to other countries are disadvantaged by being more expensive.
• 8:53
  So basically what that says is in the U.S., it's all about how much I'm spending and I'm buying a lot of stuff, which countries that don't afford as much will just pay.
• 9:03
  Now, the problem is all these countries then play with their currency is what he explains.
• 9:07
  So he says what they try and do is then they try and deflate their currency so that it's actually they can get more exports.
• 9:14
  But then all the countries are like, no, I'll just deflate my currency so my country gets more exports.
• 9:19
  Exports.
• 9:20
  And there's just levers that trade with these.
• 9:22
  And some Americans or Europeans might hear this and go, well, this is unfair.
• 9:27
  Like, we should just create more products.
• 9:29
  And he says this banger on page 25.
• 9:31
  He goes, I'm sure that many people in the U.S. who are frustrated with China's role as a producer would not accept the 996 work weeks, 9 a.m. to 9 p.m. six days per week for average wages of $1,400 per month that many of their Chinese counterparts have.
• 9:46
  And it's a really good rebuttal.
• 9:48
  So a lot of this just kind of explains how the world works.
• 9:51
  And I didn't necessarily fully understand or appreciate that prior to the book.
• 9:55
  That's great.
• 9:55
  That's a great point of view.
• 9:56
  Yes.
• 9:57
  And then so page 42, it's a good reminder for those people alive in the 90s.
• 10:02
  So Blockbuster at its height of popularity had more than 84,000 employees and more than 9,000 stores.
• 10:08
  Wow.
• 10:10
  But over 9,000 stores globally.
• 10:11
  But Blockbuster didn't see the rate of technology.
• 10:15
  So when they finally saw it, what was coming, it was too late.
• 10:19
  9,000 stores with the attendant costs became a disadvantage almost overnight.
• 10:24
  So this is the neat thing he kind of pushes, that this big system, 84,000 employees, 9,000 stores overnight with digital delivery, first through CDs and then through online downstream.
• 10:35
  Yeah.
• 10:36
  It flipped them from being the 800-pound gorilla, the big powerful, to like the weakest thing in the world that's not going to last at all.
• 10:43
  And I think that's an example he's showing of the disruptive technology and what he calls, I think it's Joseph Schumpter is the economist that says creative destruction.
• 10:52
  Yeah, that's interesting.
• 10:53
  I don't think that it's all, it's about technology.
• 10:55
  I don't think that is the main issue.
• 10:57
  I think that the main issue is the people that are at the top, they think that they are invincible.
• 11:03
  And this happens even with countries.
• 11:05
  This is why the Roman Empire lost.
• 11:07
  This is why the British Empire lost.
• 11:09
  This is why the French Empire lost.
• 11:10
  This is why all empires collapse.
• 11:13
  It's because they think that they are the shit.
• 11:16
  And then all of a sudden, somebody else comes like, no, maybe not.
• 11:20
  Let me see how can I take market share from you?
• 11:23
  Yeah, I think you're right.
• 11:24
  I mean, in the military terms, it's usually because they did a bunch of wars that caused too much debt and expanded.
• 11:30
  Like, you know, Britain, it was Britain and Russia both going into Afghanistan and going into the Middle East kind of was the Achilles heel.
• 11:38
  I think you're right that it's a misstep by the leader.
• 11:40
  But let's say the leader was Steve Jobs and Elon Musk and an innovator.
• 11:44
  He still has 9,000 stores that depending on the lease and the guarantees for 5, 10 years, it's still a huge burden to shift the boat.
• 11:53
  It is, but I disagree with you.
• 11:55
  I think that it's 100% doable.
• 11:57
  Let's just take the example of Facebook.
• 11:59
  Mark Zuckerberg had just Facebook.
• 12:01
  But then he's like, he saw Instagram.
• 12:04
  Everyone shitted on him when he bought it for a billion bucks.
• 12:06
  And look, look what he made out of Instagram.
• 12:09
  Then he bought WhatsApp.
• 12:10
  Everyone is shitting on him because he bought WhatsApp.
• 12:12
  This is a guy that is at the forefront and is making sure that he doesn't get disrupted.
• 12:18
  Yeah, there's a really cool book on this called The Innovator's Dilemma, which explains what we're talking about, which is the challenge of keeping your old going.
• 12:26
  And he says this, did Blockbuster have bad management?
• 12:29
  No, they were trapped in existing frameworks.
• 12:32
  Even if they had known what was coming and could solve it, their existing business model didn't give them an advantage in the new market.
• 12:38
  The cost to keep the old business going and pivot to a new business would have been extraordinarily high.
• 12:43
  Netflix created Blockbuster was destroyed.
• 12:45
  Yeah.
• 12:45
  So his view is it's pure technology.
• 12:47
  Yours is pure management.
• 12:49
  I would probably say it's both.
• 12:50
  No, I wouldn't say that it's both, of course.
• 12:52
  It's both happening at the same time.
• 12:55
  The technology is available.
• 12:56
  The management sucks.
• 12:58
  They think that they are invincible.
• 13:00
  And then all of a sudden, they are not.
• 13:02
  Somebody else comes and eats their lunch.
• 13:04
  Question.
• 13:05
  Why is this book named The Price of Tomorrow?
• 13:09
  I don't know the answer to that.
• 13:12
  Yeah, I think I look at it as like, what is the price to exist tomorrow?
• 13:15
  Or what is the price of spinning now and getting dead?
• 13:18
  Or all of this kind of relates to where is the price going?
• 13:21
  If deflation really happens, we're going to watch prices drop to the floor.
• 13:25
  That's kind of what I was assuming.
• 13:28
  Okay, next banger, page 49 and 50.
• 13:30
  This one is, I think, about all the time.
• 13:32
  So look at the automotive industry.
• 13:34
  Henry Ford failed in his first business because the technology required to create the automobile made it too expensive to scale.
• 13:41
  He started Detroit Automotive Company in 1899.
• 13:43
  It failed in late 1901 because the cars were low quality and high price, but he persevered and created the Model T.
• 13:51
  So think about that.
• 13:52
  That's 1899 to 1901.
• 13:53
  Now flip to page 50.
• 13:56
  And I love this.
• 13:57
  In 2001, Amazon lost about 94% of its market value from its peak in 1999.
• 14:04
  And the analysts were all over it, with some saying it would not survive.
• 14:08
  I think that is so powerful to just remember.
• 14:11
  Henry Ford, 1899, bankrupt 1901.
• 14:14
  Jeff Bezos, peak of the world, 1999, 100 years later, basically bankrupt 2001.
• 14:21
  And it's like these guys that are really driven by technology and innovation, they come back and they create the technology of that hundred years that changes the world.
• 14:32
  100%.
• 14:32
  One more time, I just come back to leadership.
• 14:34
  I wouldn't call it management.
• 14:35
  It's just leadership.
• 14:37
  And you have, you just mentioned two people that are great examples of pure relentlessness and innovation.
• 14:45
  So page 71 gives the last example of this kind of innovative technology.
• 14:50
  In 1976, Kodak held 90% of film sales and 85% of camera sales in the United States.
• 14:56
  At its peak in 1996, it had over two-thirds of the global market with sales of $16 billion and a company value over $31 billion.
• 15:03
  The downfall of Kodak was incredible because Kodak employee Steve Sasson actually invented the first digital camera in 1975.
• 15:11
  and the first DSLR camera in 1989.
• 15:14
  Both times he pitched executives who failed to see how digital camera would shape the future of the industry.
• 15:19
  One more time, I don't think that they failed to see how it will change.
• 15:22
  I think that they failed to relinquish their short-term profits.
• 15:25
  That's it.
• 15:25
  Yeah, you're right.
• 15:27
  That's a great summary.
• 15:27
  They're very comfy with their fat bonuses.
• 15:30
  Yeah.
• 15:30
  And they're just executives.
• 15:32
  They are not innovators.
• 15:34
  They are not leaders.
• 15:37
  I love that.
• 15:37
  On page 93 and 94, he says, talking about cars, when you remove humans, you also remove human error.
• 15:45
  Approximately 94% of automotive accidents are caused by human error, according to National Safety Council in the United States.
• 15:53
  The estimated cost of major vehicle deaths, injuries, and property damage in 2017 was $413.8 billion.
• 16:01
  The cost includes wage and productivity losses, medical expenses, administrative expenses, and property damage.
• 16:08
  I guess that here what he's making the point is that technology is inherently deflationary, meaning that when there is a free market, technology driven by a free market,
• 16:20
  makes things be cheaper and cheaper and cheaper and cheaper and cheaper.
• 16:26
  This is what he's driving.
• 16:27
  And I think when you, he mentions kind of as autonomous driving, including Tesla and Waymo promised to underwrite their own insurance, that $414 billion gets wiped out, meaning it's not spent anymore.
• 16:39
  And so you nailed it.
• 16:40
  Everything becomes cheaper.
• 16:42
  We all live like kings where we have a personal driver and whatever car we want, whenever we want for pennies.
• 16:46
  And we live, you know, better than the richest man in the world did 20 years ago in terms of transportation.
• 16:52
  So definitely a powerful, a powerful banger.
• 16:57
  Go ahead, Papa.
• 16:58
  My understanding is that he talks a lot about
• 17:02
  how we live in a world where printing money is the way of living and expansion of credit and then what happens when that's the norm?
• 17:12
  Yeah, he does go into, you know, on page 102, I had that.
• 17:16
  Remember the world of 2018 has approximately $250 trillion of debt to run $80 trillion.
• 17:23
  That debt itself is a massive drag on the future growth because of interest payments on it.
• 17:27
  What about when we add another $555 trillion with the incredible amount of debt today?
• 17:32
  So he basically explains it's not really sustainable.
• 17:35
  And I think a lot of this, the reason I love the book is I was frankly pretty depressed when I thought about these numbers because I was using the old frameworks.
• 17:44
  I was like, dude, we're going off a cliff as a country, as a globe, as everything.
• 17:49
  And it's not sustainable and it's depressing and we're going to be in a bad place.
• 17:53
  And I think I was probably just reading too much Doomer stuff.
• 17:55
  And this was the first thing that really made sense.
• 17:58
  And he starts going into energy as well, the future of energy and these other areas where he kind of talks about how systems operate.
• 18:05
  And I think here's one banger example.
• 18:07
  In page 110, he goes into Let the Sun Shine In.
• 18:10
  He says, in less than two hours, more energy from the sun hits the earth than the yearly worldwide consumption of energy.
• 18:19
  That's awesome.
• 18:20
  Two hours.
• 18:22
  And, you know, that's when he starts kind of hitting you with these bangers.
• 18:25
  And page 111, Richard Swanson, founder of SunPower, states that the price of solar tends to drop 20% for every doubling of shipping volume.
• 18:33
  At present, trends of shipping volume that suggests cost will fall by 75% every 10 years.
• 18:38
  So just the cost of the energy goes down, and that ties directly to GDP growth, which is just so cool with this abundance mindset of where we're going.
• 18:47
  So...
• 18:48
  Okay, flip into the next one.
• 18:50
  I liked in 127, Karl Popper says, True ignorance is not the absence of knowledge, it's the refusal to acquire it.
• 18:57
  Pretty good to remember, like, we can't be closed-minded and think we already know how everything works.
• 19:03
  It's just everything that we were just talking about.
• 19:05
  Yeah.
• 19:06
  All these businesses and countries that fail is because they were closed-minded.
• 19:11
  They thought they knew.
• 19:12
  Yeah.
• 19:13
  And then he kind of goes into how we get programmed and, you know, how we get controlled.
• 19:17
  And this is interesting.
• 19:18
  He talks about Germany.
• 19:19
  So on page 173, he says, Germany began printing large amounts of money, which caused hyperinflation, wiping out all debt and all savings.
• 19:28
  One U.S. dollar in 1914 was equivalent to four German marks.
• 19:33
  By 1923, the same U.S. dollar was worth 4.2 trillion German marks.
• 19:40
  Imagine a life savings not being enough to purchase a loaf of bread.
• 19:43
  As the leader of the National Socialist Germany Workers' Party, or Nazi Party, Hitler used a growing frustration to build a strong following.
• 19:50
  He made a failed attempt at a revolution with his Munich Beer Hall and was in prison in 1923.
• 19:55
  While imprisoned, he wrote Mein Kampf.
• 19:57
  Pretty interesting.
• 19:59
  He's getting into inflation now.
• 20:00
  Yeah, gets into inflation.
• 20:02
  Printing money and...
• 20:05
  Here is the interesting part that I've been thinking a lot about is when you look, Peter, at different countries in the history of humanity that went through hyperinflation, which is basically all the empires in the past.
• 20:21
  Yeah.
• 20:22
  And then eventually they just change the currency to a new one to try to bring, try to make people forget about whatever was happening into a new thing.
• 20:30
  Try to bring the confidence back.
• 20:31
  What are the assets that if you held them, you lost?
• 20:35
  I think it'd be interesting to flip it and say, what are the assets you could hold that you wouldn't have lost?
• 20:39
  Well, we can do that.
• 20:41
  I think that the answer is much shorter.
• 20:43
  Your answer is going to be very big.
• 20:45
  And the answer to my question is very small.
• 20:48
  I thought most of the answers, most things would be going down with hyperinflation.
• 20:54
  In value.
• 20:54
  So if you have a house, you're saying the price of the house is going to go down.
• 20:57
  Yeah, because fewer buyers, the market isn't liquid.
• 21:01
  It's like most things just crash because of demand falling through the floor.
• 21:05
  Yeah, I don't think that you are wrong if you are just taking the exact moment of a crisis.
• 21:11
  But if you, when you look at the full spectrum, and again, unless the country becomes a shithole, but if not, the desire of people living in a house is going to remain high.
• 21:21
  The demand is high.
• 21:23
  The supply is...
• 21:25
  I want to say that it's fixed, but it doesn't increase as much as the demand.
• 21:28
  The short answer, Peter, is cash.
• 21:32
  If you held cash through an inflationary period, you lost.
• 21:36
  And the other one is debt.
• 21:37
  Oh, I see what you're saying.
• 21:38
  Over a five or 10-year phase.
• 21:40
  You're totally right.
• 21:41
  20 years, 30 years.
• 21:42
  Yeah.
• 21:43
  If you held debt, if someone owes you money, then you lost.
• 21:49
  If you owe money to someone and you didn't get wrecked in the middle, then you win.
• 21:54
  Yep.
• 21:55
  As long as you can survive the payments through the hardest period.
• 21:58
  Exactly.
• 21:59
  So this is why if you have a house with whatever mortgage it is, it doesn't really matter.
• 22:05
  After 30 years, you're going to be like, that was a great deal.
• 22:09
  Yeah.
• 22:10
  Thank God.
• 22:10
  That was awesome.
• 22:11
  That was a phenomenal deal.
• 22:13
  Yeah.
• 22:13
  It's actually funny.
• 22:14
  I think I just saw 40%, 40 or 50%, something like that, homeowners in the United States today have 4% or below 30-year mortgages.
• 22:25
  And 4% are below mortgages, which is pretty wild seeing that rates today are somewhere around like, I think 6% for a mortgage.
• 22:33
  Seven, yeah.
• 22:33
  Seven.
• 22:34
  It's like, oof, that's going to create a very illiquid market because everyone's kind of trapped, good or bad, in their current mortgage, not wanting an increase in rate.
• 22:43
  It's fascinating.
• 22:45
  Okay, so next banger, page 194.
• 22:47
  It's kind of interesting.
• 22:48
  It talks about, it says Ray Dalio talks about the four levers a government can pull to escape a debt crisis when the burden's high.
• 22:56
  Number one is austerity, which means spending less.
• 22:59
  Probably not happening.
• 23:00
  Number two, debt defaults or restructuring.
• 23:03
  You know, Argentina has been through it.
• 23:04
  Many countries have been through it.
• 23:06
  Number three is central bank printing money or other guarantees.
• 23:09
  Easy one.
• 23:10
  It's a tax no one gets to, you know, sign off for.
• 23:14
  It just happens in the background.
• 23:15
  Or number four is transfers of money from those who have more than they need to those who have less.
• 23:22
  Much higher taxes for the rich.
• 23:23
  I wrote theft next to it.
• 23:26
  those are the four levers which i think it's powerful to realize like the government can't solve anything without creating at least some kind of problem right theft is bad rich people want to leave because they don't want to be stolen from money printing is bad it actually squeezes the lower and middle class the most because they're holding the cash so there's kind of these trade-offs that hurt you in any of the four levers that the government will pull but
• 23:54
  And number three is printing money.
• 23:56
  Yes.
• 23:56
  Yeah, this is interesting.
• 23:57
  I think that the solution is number two, which is stop spending like a fucking drunk sailor.
• 24:03
  Stop it.
• 24:04
  And I understand.
• 24:05
  I'm sorry.
• 24:05
  Another way is stop stealing.
• 24:08
  Stop.
• 24:09
  The theft, come on, if you can stop the theft, I wouldn't say stop spending, just stop stealing.
• 24:14
  I think that we can, as humanity, if we stop stealing, I think that we can get out of this.
• 24:21
  But I don't think that anyone that is in power wants to stop stealing theft.
• 24:27
  or call it stop spending on things that gets them the votes for their next election.
• 24:33
  So the solution is if you owe a lot of money and you all own the money printing, then just print more money.
• 24:40
  And that debt, that money that you need to pay to somebody else is going to go down over time.
• 24:46
  The problem, and this is something that the U.S. is starting to face now, is people start questioning themselves.
• 24:53
  Are you able to pay?
• 24:55
  Are you as solid as you were before?
• 24:58
  I know that you are telling me you are, but what are you going to tell me?
• 25:01
  That you're not?
• 25:02
  So therefore, I'm going to demand more money in interest because you are a little bit more risky.
• 25:09
  That's when things start getting complicated.
• 25:11
  And that's what we are experiencing now.
• 25:13
  Yeah, I think you nailed it.
• 25:14
  And page 196, he talks about a day will come probably sooner than later when we realize that the only thing driving our economies is the explosion of debt.
• 25:22
  If governments need to run huge deficits with extremely low interest rates for fear of growth failing, even in economies that are running at near full employment, imagine how the debt and deficits explode in a recession or depression when the economy falters.
• 25:35
  Once bondholders determine that governments have little ability to repay or service the debt, the risk premium or interest rates on the debt will rise.
• 25:42
  Sure, governments can monetize and make their currencies worthless, but as other central banks monetize as well, the strategy becomes irrelevant.
• 25:50
  It's exactly what you're talking about.
• 25:52
  It is super interesting.
• 25:53
  And then, so he gets in, we're getting close to the end of the book.
• 25:56
  On 197, he talks about higher tax on the wealthy, guaranteed basic income.
• 26:00
  It says, one of the more prominent proposals in this camp is the universal basic income.
• 26:05
  And he really kind of talks about this shift where at the next page, 198, he talks about the most important problem with this solution, though, is simply this.
• 26:15
  It does not deal with the root cause, deflation.
• 26:18
  Deflation is being caused by technology, and because of that, it will ride the same exponential wave that technology does.
• 26:24
  That means that the rate of deflation without printing more money will only accelerate from here.
• 26:30
  The abundance that technology provides us doesn't require net new jobs around the world.
• 26:35
  It obliterates the work and the jobs we already have.
• 26:38
  That negative effect on jobs will accelerate globally.
• 26:41
  By cementing a dual class society, we only ignore the underlying structural change that caused it in the first place.
• 26:47
  Ignoring the underlying reason is likely to create even more division.
• 26:52
  This is fascinating because this book was released at the beginning of 2020.
• 26:57
  This is before the craziness of this pandemic and Americans understanding what is inflation, what is to live with 9% inflation and whatnot.
• 27:09
  And it's also hitting a lot of points that now are being discussed with AI.
• 27:14
  Definitely a visionary.
• 27:15
  Definitely he was able to see things that are happening now.
• 27:18
  He was way ahead of his time.
• 27:20
  And we're in kind of the last 10 pages, which have a couple interesting things I'll just tap on towards the end.
• 27:25
  So on page 200, he talks about this is kind of interesting, right?
• 27:30
  So at the end of, you know, we saw this trade war and all these issues that caused World War II.
• 27:38
  So vowing to not repeat those mistakes that led to mass employment, authoritarianism, World War II,
• 27:44
  Leaders of the world came together in 1944 to establish Britain Woods, a framework for global cooperation.
• 27:50
  A key construct of Britain Woods was an agreement upon international monetary system where all countries tied exchange rates to the price of gold and the U.S. dollar.
• 27:59
  The U.S. dollar became the primary currency of the world, and the U.S. dollar was tied to gold through a fixed exchange rate.
• 28:04
  The new rules established trust in an international framework that allowed global trade to expand and increase global prosperity, because it meant that countries could not artificially manipulate their currencies at will.
• 28:16
  Again, as game theory predicts, the agreement showed that when countries worked together with a clear understanding of the rules, prosperity was enhanced for all.
• 28:23
  But in 1971, the U.S. unilaterally terminated a critical aspect of the system, the conversion of the U.S. dollar to gold.
• 28:30
  And with that, the change created a system where the U.S. dollar, a fiat currency subject to domestic agenda, was a backbone of the world's economic order.
• 28:38
  From here, Brentwood's effectively ended.
• 28:41
  Since then, U.S. dollar became primary currency of the world without a peg to gold.
• 28:46
  Okay, that is a lot of information and for people that might not be very well versed in all this situation.
• 28:52
  After
• 28:53
  World War II, all the winning countries, they get together.
• 28:56
  I'm like, okay, got it.
• 28:57
  So the U.S. is going to be the main currency, and we're going to peg it to gold, meaning we cannot print more.
• 29:04
  We have to make sure that we have the reserves in gold that are backing the money that we have in circulation.
• 29:11
  But the story tells that eventually the money printing machine started going a little bit.
• 29:18
  A little bit beyond what it should based on the gold reserves that, by the way, I think that up to today, nobody knows what are the gold reserves, which is kind of like mind blowing.
• 29:27
  And then eventually, I think that in the 70s, before 71, France realizes that, hey, you know what?
• 29:34
  I think that I want all my gold back.
• 29:36
  And that's when the U.S. said temporarily, we are going to pause this convertibility of gold and U.S. dollars.
• 29:48
  And we are still waiting for that temporary thing to end.
• 29:52
  It's kind of like the temporary new government programs or, you know, job or division.
• 29:58
  They never end.
• 29:59
  They never end.
• 30:00
  So the final four pages on page 204.
• 30:03
  Sorry, one more thing that I want to add.
• 30:06
  What happens is after 1971, now the U.S. dollar, the paper, is not backed by anything hard, anything that is hard to produce like gold.
• 30:19
  It's just backed by the trust that the world has in the U.S. as a country and their military and so on and so forth.
• 30:28
  Correct.
• 30:29
  Great summer.
• 30:30
  Which is great, but the problem that we are seeing now is that confidence is starting to go down and down.
• 30:37
  Yeah, I think the book, so it shines a light on a lot of the negative perspectives I had and fears and FUD, fear, uncertainty and doubt.
• 30:47
  So these have been kind of gnawing at me for like 10 years.
• 30:50
  Again, it actually never mentions Bitcoin, which is interesting.
• 30:54
  And I know he's a fan, but he kind of sets up a lot of framework.
• 30:56
  On page 204, though, he had some bangers where he says, the fear of a future without those jobs and self-worth that they bring stops us from imagining a better world in which they might not even be required.
• 31:08
  Consider this alternative.
• 31:10
  Allowing abundance without the jobs might actually open an entirely new enlightenment era where we have time to enjoy the benefits that technology brings.
• 31:18
  A true capitalist system could work well in the environment because there would be an incentive to work harder and innovate.
• 31:24
  Prices of all things would fall, yes, but those creating value would be paid for their value creation at a rate that matched the new realities of supply and demand of our digital world.
• 31:34
  Well, how would you summarize that?
• 31:36
  He's basically saying we get scared thinking about my job's going to get lost.
• 31:40
  I do this thing with a hammer.
• 31:42
  So I'm too scared to imagine that maybe this job sucks.
• 31:45
  I think 70 or 80% of people say they hate, they use the word hate their job.
• 31:49
  Wow.
• 31:50
  And instead of, and that's not from the book, it's some prior information I had.
• 31:53
  At least 60%, somewhere between 60 and 80, use the word like hate.
• 31:57
  And I think it's so fascinating because we hate it, but we don't want to let it go.
• 32:01
  We don't even want to think about a scenario of letting it go.
• 32:04
  I think this is where he's saying, we're not even open to the concept of all these other great technological changes like the cars or the planes or any of these kind of huge changes.
• 32:14
  technology curves that increase the livelihood for everyone.
• 32:20
  And he uses this somewhere in the book as well.
• 32:22
  He talks about in the last like 50 years, we went from something like 50% of people living below poverty globally to now it's like 10 or 20% globally, which is amazing, right?
• 32:35
  It's like billions of people that now live above the global poverty line.
• 32:40
  And we just ignore that and get focused on whatever scary things on social media, the news or wherever we're consuming it.
• 32:46
  OK, so he says this is kind of the point you want to hit at the bottom of 204.
• 32:50
  The deflationary aspect of technology is too great a force and it will eventually overwhelm even the greatest efforts to stop it.
• 32:57
  Those efforts to stop it and the second order consequences of that fight to halt deflation will look insane to future generations.
• 33:06
  because that fight will bring on revolutions and wars that burn the existing system to the ground.
• 33:12
  Allowing that to happen seems insanely irresponsible, since humanity might also forever lose the opportunity to have the kind of social uplift that is possible with technology.
• 33:23
  Does this point make sense or do you want me to break that down?
• 33:25
  Break it down.
• 33:27
  It's basically saying we're going to see this technology that's going to reduce prices.
• 33:31
  And if we're trying to increase the money printer or government control or these other things, it can't really win in the end.
• 33:39
  Because as long as we allow entrepreneurs and capitalism do its thing, which is to solve our problems, make it cheaper, easier for everyone, it's going to just allow life to become super interesting, abundance oriented, where you don't necessarily have to work.
• 33:53
  Your basic needs are met.
• 33:55
  All of these things come as a consequence.
• 33:57
  Just like 100 years ago, the richest man in the world would have looked at us and said, I would kill to have your life.
• 34:03
  You know, if he could look in the future, he would trade in a second to be middle class or poor today.
• 34:07
  Is he making the point that there is no need, there's not going to be a need for work?
• 34:11
  Yeah, he said that in the prior page on 204.
• 34:14
  He said, basically, the fear we have about losing our job prevents us from looking at that clearly.
• 34:19
  That is interesting.
• 34:20
  I kind of really see that happening.
• 34:23
  Yeah, it's interesting.
• 34:25
  We'll dig in that.
• 34:26
  The last page, page 207.
• 34:30
  I really liked this piece he had.
• 34:31
  He said, I wrote this book to get us all talking and thinking and asking the big questions.
• 34:36
  At the bottom of the page, he says, the most important lesson in my life, which also came from my greatest strategy, the sudden loss of my brother.
• 34:44
  I do my best to live my life with that lesson as a North Star guiding every relationship and every decision.
• 34:50
  That lesson, our lives are defined by the positive impact we have on others.
• 34:54
  That's beautiful.
• 34:55
  That's the North Star of The Price of Tomorrow by Jeff Booth.