For this edition of THE SPOTLIGHT, we are going to do something different.
Below, we've copied a long but very interesting twitter post from a successful entrepreneur and technologist, Jeff Booth, author of the must-read book, The Price of Tomorrow.
In short, Jeff's thesis is twofold: technology is the most important deflationary force in the economy due to its exponential aspect, and trying to counter deflation by printing money will ultimately end up destroying any currency.
Now, here is Jeff Booth's twitter post:
"Just another example of a completely incoherent strategy that will end miserably. The Federal Reserve (in a desperate effort to drive inflation) takes rates to near zero and start the printing press.
In doing so, they waste a staggering amount of stimulus $$ by manipulating markets and removing free market price discovery. This keeps asset prices high AND encourages people to take on even more debt to buy more real estate (as real estate is a store of value against that money printing).
Which pushes real estate prices even higher (and rents on that real estate rise in lockstep). Which concentrates wealth into asset owners' hands faster and because rents rise in lockstep - it picks the pockets of non-asset owners faster too.
With millions unemployed and unable to pay the rent on those "assets" (that are artificially raised in price by the Fed in the first place).The government is then forced to step in and "save" those renters (those same renters that their policy is crushing).
Wasting more Government $$ and creating conflict with landlords (that piled on debt because of that same Fed policy). Trillions of wasted dollars (and we're only just getting started) pushing us further away from the root cause of it all.
That technology today has changed the rules of the game and Central banks (playing a different game) have no ability to stop it, short of destroying their currencies. By trying to, they only make the problem and "eventual unwind" worse.
Technology and quantitative easing exist in a perverse feedback loop. There are opposite forces. Quantitative easing trying to increase prices while technology trying to decrease prices.
By driving quantitative easing against the bigger force of technology, it creates a death spiral in banking profitability, resulting in tightening credit conditions for consumers and easier credit conditions for technology companies.
The technology companies in turn accelerate job losses in industry after industry as they automate functions. Ultimately resulting in drastic social unrest and the creation of new world order."
What do you think? Would you agree with Jeff Booth? Are you already using a hedge against deflation as part of a diversified portfolio?