Jeff Booth: Central banks can't beat technology, and Bitcoin is a 'lifeboat'

Ashton Addison: You write that technology is a deflationary force, yet markets are built to grow with inflation. How do the two fit together?▶ 01:08

Jeff Booth: There's a fundamental misunderstanding most people have, and that's why I wrote the book. Technology provides exponential efficiency. I'm at the front edge of technology companies in different industries, and it would blow people away how fast things are moving if they really understood. That efficiency is deflationary: it saves labor, so prices go down. There isn't a CEO who puts in technology to make their prices go up. You do it to save time and to make things better and cheaper. It's why everything on your phone is free: your camera, your AI assistant, Google, Waze. Next year you could get the phone itself for free with a plan. That layer of technology is moving into every industry, so you'd expect prices to fall everywhere. So why aren't they? Global debt before COVID was $250 trillion to run an $80 trillion global economy, and $180 trillion of it came in the last 20 years. It came as a byproduct of technology driving prices down and an inflationary monetary policy that requires prices to go up. All the second-order effects, including politics and the wealth divide, are a function of that battle. In the end, monetary policy will not win this battle.

Ashton: What would it take for these two systems to come together?▶ 05:00

Jeff: They won't merge. There's too much politics involved. It's like saying a big business can change everything about itself to create a new business. That's why it typically doesn't happen. The change comes from the outside. When I wrote the book, I was hopeful that economists and politicians would see what was happening, because it's actually a good thing for society. You use technology to free your time. If you let gravity happen, things get lower and lower in cost and our time is freed. Stopping that by printing money robs the people least able to pay and puts it in the hands of the wealthy. They don't know they got a gift, and the poor don't realize their pockets were picked. Look at housing. Everybody believes it always goes up, but they don't ask whether it would go up without $185 trillion of stimulus in the last 20 years, or whether there will be another $185 trillion over the next 10 years to keep it going. There's no such thing as a free market right now. It's all manipulated. If you let deflation happen with this much debt, the debt explodes in real terms, so central banks are manipulating currency to stop it. That will break currency after currency, because they can't stop technology from advancing. These two forces are diametrically opposed, so we're going to have a reset to the world currency order one way or another.

Ashton: The Federal Reserve has said it will keep interest rates very low, and nobody knows for how long. What do you make of that?▶ 09:05

Jeff: I laugh at that comment. Look at the projections, and at what economists said inflation would be and why they can't get growth. Every time they try to raise rates, the economy collapses. Rates are going lower, even negative, because it's a structural problem. The US had a deficit of more than a trillion dollars before COVID. If you don't keep stimulating, the whole thing unwinds. So stimulate they will.

Ashton: Retail investors are moving into stocks, gold, silver and Bitcoin to preserve their wealth, but stocks don't look safe either. What do you make of those choices?▶ 10:41

Jeff: I understand all the choices. People are trying to get their money into a relative store of value. Technology stocks are one. They don't have debt, they have tons of cash, they work on network effects and they're growing fast. They might be overpriced, and they certainly would be if you let a free market decide, but they're a relative store of value. Throughout history, people denominate their wealth in their own currency: housing, stocks, everything. As that currency is destroyed, some people win, because stocks go up when what has really happened is that the currency has lost value. But when it really breaks, all of that wealth is denominated in the currency, and the reset is horrific for those people. Many don't see it because they're getting wealthy as a result, but they're frogs boiling in a pot. That leads to Bitcoin. Bitcoin is a lifeboat away from the economic storms that are coming, and I don't think it can be stopped. I might be wrong, but there's far more chance that Bitcoin is totally underappreciated as a safe asset and store of value than that I'm wrong. That's a bet I would play all day long.

Ashton: Governments are working on central bank digital currencies. Are they a step in the right direction?▶ 14:16

Jeff: No, I see them as opposites. In my book I cite an IMF working paper saying that interest rates in the next crisis would have to go to negative 6 percent to have a chance of avoiding the problem. Why can't they? Because people would take their money out of the bank and put it under the mattress, and the banks would collapse. But in a digital currency, if they can manipulate it and give you a negative rate, and you're doing everything in that currency, it's totally controlled. So I understand why central banks are desperate to have their own digital currencies. Bitcoin is completely different, and I don't think central banks can stop it. Some will try, but everyone who tries creates more of an incentive for other governments to accept Bitcoin. The game theory built into Bitcoin is what I think will drive it.

Ashton: In countries that have seen hyperinflation, people are already moving to Bitcoin. Venezuelans who bought at the $20,000 high are still ahead of the bolivar. What does that tell us?▶ 16:36

Jeff: You can't buy anything with the bolivar. As this plays out around the world, as with Germany, or the US with gold, the government comes and confiscates everything and forces you to revalue into its currency. That's impossible to do with Bitcoin, which is what makes it such a critical lifeboat for what's coming.

Ashton: What advice do you have for people who want to preserve their wealth through a potentially bumpy road ahead?▶ 17:41

Jeff: I'm going to change that question, if you don't mind. Most people think the problem is something else, like the Republican or Democratic party. But everything that tries to divide you from somebody else is fundamentally about one thing: a technology-driven world where technology advances and frees our time, and that requires deflation. Nothing in the existing system can stop that from happening. So when people blame others by looking at individual elements of the system, don't take the bait. It's something way bigger. If you understand what's happening from first principles, you'll be better protected in your life, as people divide against each other. You'll also be better protected in your wealth, because you can make good decisions on where to put it.