WBD235 Audio Transcription

The Myth of Deflation with Jeff Booth

Interview date: Friday 19th June 2020

Note: the following is a transcription of my interview with Jeff Booth. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Jeff Booth, and we discuss the current economic & social situation, how an inflationary system has caused inequality & division and how Bitcoin & deflation can fix this.

“We have grown up in a different world, we’ve been programmed that deflation is a bad thing.”

— Jeff Booth

Interview Transcription

Peter McCormack: Jeff, how are you?

Jeff Booth: Great, Peter. Yourself?

Peter McCormack: Yes, doing very well thank you. Great to have you on the show. I had Preston Pysh on the show the other day and he talked about you. I'd seen you around but I hadn't read your book and I saw somebody else mentioned you, I think it was Isaiah Jackson.

Jeff Booth: Yeah, it's making its rounds right now for sure.

Peter McCormack: It is! It's a funny thing, I studied economics at school and in the UK, we have something called A levels, which is your last two years of school. I did economics and we were taught about Keynesian theory. It was just something that stuck with me for, I would say my whole life, until I discovered Bitcoin. Then we've got in this world where people are telling me, "No Pete, deflation's okay.

You don't need to be scared of deflation. Inflation's just a tool of the government" and here you are, writing a book, telling us to embrace deflation. Before we get into it, just give me the background, give me the Jeff story how you ended up becoming an author writing about deflation, because there must be a story behind this?

Jeff Booth: The author story is I never wanted to write a book, it's the last thing I wanted to do, in fact. I'm a technology entrepreneur, been an technology entrepreneur most of my life and I see how fast technology is moving. I see what governments are doing to stop deflation from happening and technology is deflationary. When I put those two things together and I saw the logical consequences of that action, technology is a bigger force and the governments can stop, I realized my kids wouldn't grow up in the same world I grew up in.

They wouldn't have the same chances, the whole next generation wouldn't have the same opportunities unless something was done about it. So I wrote the book as a protest to that and as something for my kids. I wrote it obviously before everything that's happening right now, and it predicts all of these things and so it predicts the next things as well. It's turned out to be a really important book right now.

Peter McCormack: Yeah, it is funny because when I was reading it, I was like... I started reading, I was listening to the audio book but I didn't actually look at the date of release, what was the date of release?

Jeff Booth: January 14th this year. Imagine writing a book... I didn't write it in December, it took me 18 months before that. But then just literally everything that's happening, obviously it didn't predict COVID, but it talks about there being an event that unwinds the system. It has nothing to do with COVID, it's a triggering event.

Peter McCormack: Yeah a lot of people have talked about, it's like the pin that burst the bubble. How much did 2008 influence you?

Jeff Booth: It for sure influenced me because the rules of capitalism were so distorted in that, but I realized actually, it was happening before 2008. This is something I've been talking about for a long time. Quite simply technology is doubling every 18 months to two years and for your listeners, imagine folding a piece of paper on itself, and you can only fold a piece of paper on itself seven times before you can't fold it anymore. But imagine you could keep folding, and you could keep folding that paper 50 times, that piece of paper would reach...

Peter McCormack: I know the answer, it goes to the sun, right?

Jeff Booth: The sun, yeah!

Peter McCormack: Let me tell you something funny. I don't know if I heard you saying this in another interview because of that, but I actually tried to explain this to my daughter. I showed her a piece of paper, I said, "If you fold this 50 times, how big would it be?" She did it with like her hands and she did like half a meter and I was like, "No, no, no. It'd be bigger than that." I explained to her, she's only ten, that it would go to the sun. As I tried to talk her through it and she wouldn't have it. So I did it on a calculator, I showed her how to calculate it, and even on the calculator she wouldn't have it.

Jeff Booth: I came up with that analogy about 10 years ago to be able to explain it. I've asked tens of thousands of people, on stages all over the world about this and most people answer less than your daughter did. Most people answer about two inches. You only know the answer if you've heard the answer before. Why that's critical is, we believe we understand how fast technology is moving but we don't have a clue. We have no clue how fast it's moving, because if you can't answer that question off the top of your head and how much it is at fold 55, you have no idea how fast technology is moving.

That's why it's so important, because if that's case, we're likely to misunderstand how fast technology is moving. Technology gives us abundance, technology drives... Are you going to give up your phone? Look at what's on your look at what's on your phone. For me, it's my guitar tuner, it's my AI assistant, it's Google, it's all of my information, it's my camera, it's my video player, it's everything all in the palm of my hand, for almost no cost. All of those things are free, that's the power of technology.

In fact, we use technology to make things more efficient, to reduce jobs, to give us more power so we don't have to do the things. That force and that doubling force is coming up against previous economic systems, and there's no way those previous economic systems will survive.

Peter McCormack: Yeah, it's interesting, I've got this other podcast, so I do the Bitcoin one Jeff, and I've got this other one called Defiance where I do other topics. I cover Bitcoin in it but I cover broader subjects. I did this show called The Good, The Bad and The Orwellian, The Future of Technology, I ended up speaking to this guy about SynBio and I think it was around the same time, I also heard an interview with Elon Musk talking about Neuralink.

Jeff Booth: Neuralink? The CEO of Neuralink is a friend of mine.

Peter McCormack: Interesting. I listened to that and then I did this interview... I should have written down his name, I'm really bad with names, but this guy and he's an author but he does a lot of research in synthetic biology. He does this really interesting thing where he talks about the fact that, he says, "800,000 people a year commit suicide. Of those, you get a handful of people who when they commit suicide will take out as many people with them as they can."

You have the Vegas shooter or the Germanwings pilot. He said, "The limit most of them have is technology," but now in a world where you have viruses that you can manipulate and CRISPR and things, he said, "We are a few steps technology from solving all the world's problems, but in the wrong hands, ending humanity."

Jeff Booth: I wrote about this in my book because I'm very close with a lot of the top AI researchers and how fast it's moving. You don't want a AI owned by a corporation or a government. The Lord Acton quotes, "Power corrupts, absolute power corrupts absolutely." The nature of technology, it's not technology that is a bad thing, but concentrated technology in the wrong hands is a really bad thing. That concentration risk of what's happening in technology, we could be easily be pawns in a system.

Peter McCormack: Power corrupts, absolute power corrupts absolutely. Power in hands of AI, we're all completely fucked.

Jeff Booth: Not necessarily. If AI is designed by great people and everything else with systems, maybe it makes better decisions than us.

Peter McCormack: It's all interesting. There's all these things coming to head, right at one time, whether it's technology, money, financial systems, politics, social unrest, this is the year 2020, where we're going to look back and say, "This was a really pivotal time." But I do want to get back to your book because there's some really important things in there. I do want to ask you something. Naturally, a lot of people out there don't agree on things, which is why we have a lot of unrest and lots of disagreements at the moment. It could be global warming, you have those who believe global warming is caused by humans, you have those who disagree with that and think it is just some government propaganda to create new taxes.

It can come down to specific policies with regard to how countries should run. You have libertarians and you have people who believe in the state. With regards to economics, you talk about why we should embrace deflation. Although my take isn't that we need to live in a deflationary society, my take from your book is that, it's actually a bit like most free market thinkers, that you believe whether we go through periods of inflation, deflation, whatever it is, it doesn't matter. Let the market do what it should do but we should not be scared of deflation. Is that a fair take?

Jeff Booth: I take it one further through the book, because of first principles thinking and first principles, but at a high level, yes. The reason for that is, you cannot have night without day, there is no light without darkness and there is no economic system that works if you protect it from failing. Deflation is a natural order of things in an economic system. If you change all the rules to stop it, you're warping any system so it's systematic. Let's think about some of the consequences. I'm sure on your show, I've heard on lots of podcasts, everybody's talking about those terrible CEOs that are asking for bailouts right now.

Imagine it from their world. You've created a system where the government says, "Negative interest rates," where the government says, "I am going to punish you. Your cash is going to be worth less next year if you keep it." If that CEO keeps cash, he's fired because the next CEO is buying back their stocks, and that CEO looks like a [Inaudible] and that's just in that system. What does that CEO do? Buys back stocks, gets rid of... The government is saying, "Don't keep cash, leverage at all costs" and so they leverage up, because you have this economic system designed for leverage.

Then when anything happens, any extraordinary, any event happens, all these people are going to be let go and they say, "I need a bailout," so the government comes in and gives a bailout and they further warp capitalism. The irony is those bailouts protect prices from falling and then the government has to reach in to the other side of all the people that were hurt by that, and give them more money to pay for artificially high prices that they created in the first place. It's insanity, it's absolutely insanity! So your question on that normal course, normal free markets allow that to cleanse.

They allow people who took a risk cleanse the system and go through but we're not allowing normal course. Now even if with that, if you add that's the normal if you looking backwards, if you look forwards against what's happening in technology, how fast it's going, deflation is inevitable. Constant deflation is inevitable because it's moving so fast, we can't keep up with how fast that's moving across society and that means jobs are coming out no matter what. If you would let the crisis fall along the natural order, the jobs were coming out, you wouldn't have people left out of society. Economics is about scarcity, not value. I can prove it. The most important thing right now, in your life and mine, more than anything else, is the air you're breathing. Why aren't you paying for it?

Because it's abundant, it's everywhere. Technology creates that everywhere. If you would allow that to happen, that's what would happen for society. The path that technology would be broadly shared across society as prices came down, you'd have abundance everywhere. It would take time, you'd have to go through this cycle anyways, that's going to have to cleanse the excesses. But it's hard to even think like that because we've grown up in a totally different world. It's so hard for our brains to accept what I'm saying, just like it's hard to accept the 50 folds to the sun. You look it up on the internet after you hear it because we've grown up in a different world, we've been programmed that deflation is a bad thing.

Peter McCormack: Funny you should say that, because even when I heard it, the thing to the sun, I'm sure it was you, I'm sure it was you or maybe it's Preston or whoever mentioned that, I was still like, "Yeah bullshit, it's not the sun. Maybe a skyscraper, but it’s not the sun." Then I looked it up and then I still didn't trust it. I got out a calculator and I had my daughter count to 50. I went times two, times two, times two, and then I got the number and then I measured it and I was like, "Yeah, fuck, it takes it to the sun!"

Jeff Booth: That's pretty normal. That's actually why I say, "You can't accept a lot of the things that you hear." It's so easy to do. They just reinforce on themselves and you build your foundations of knowledge on previous misinformation. Maybe it's better to use an example, Blockbuster versus Netflix. Everybody laughs at why Blockbuster didn't buy Netflix for $50 million and those terrible execs. What was the only thing they missed? How fast technology was moving.

That's the only thing they missed because when technology changed Netflix from a mail catalogue business, mail back and forth DVDs to download, remember what it looked like at that point? You can download a video in four days? Nobody's going to do that.

Peter McCormack: We had a different one. What was the one we had? LoveFilm in the UK. You used to be able to sign up and it'll be posted to you and then you'd send it back. But I was like, "Ah, do you know what? I'm still going to get a Blockbuster because I want to go and look on the wall and I want it now." The problem with the posting of the DVD was to save you a trip to the store, you didn't have the immediacy. As soon as you went to download, as soon as you had immediacy, it's like, "what? Don't need that!"

Jeff Booth: So what changed? All that changed is the technology. People missed how fast that changed and it left... When you said LoveFilm or Blockbuster, it left 9,000 stores with, "It's over." The game is over in a minute. By the way, that thing is what governments are doing right now to society as technology takes its course. That's what's happening.

Peter McCormack: But let me ask you something. Don't you miss going to Blockbuster? I used to love that.

Jeff Booth: I don't, because I always paid late fees!

Peter McCormack: But I used to love going, like on a Friday night, you'd go down with a friend and you'd just walk around the racks and you'd look what's out, then you buy her some popcorn. I used to love that experience and I do miss that as an experience but of course I've got Netflix now, I'm not asking for it to come back.

Jeff Booth: Again, here's the thing. We believe Walmart versus Main Street, Amazon versus... Today, what we'll say is, "Oh, we love this old time, but we won't support it. We'll go to the new thing that's easier and faster and better, and we have more abundance more choice." If it was an economic model that was viable and a lot of people chose it instead of Netflix, it would still be alive.

Peter McCormack: Let me ask you a couple of other things before we go a little bit deeper on this. Firstly, there's obviously a lot of economic thinkers, the Paul Krugman types, who believe in inflation, they believe deflation is dangerous, etc. You've written a book and let's be honest, you're not an economist by nature like an economics professor or such, what's the feedback been?

Obviously, there'll be a bunch of people, like Bitcoin people will be like, "This is what we've been saying. Jeff's got it right." But there must have been some people who've come to you and said, "No, you've got it wrong." The question I'm really asking, have you gotten into any specific debates around this? Also, have you managed to change anyone's mind?

Jeff Booth: Yes, lots! It's hard to read my book because it's fact-based, it's first principles and it's hard to actually read that and say, "No." I'm not saying some people that are going to take the opposite view, there's a whole bunch of wealth created by the opposite view. If you have assets and everything else and a whole bunch of leverage, the last thing you want is deflation. You'll fight that at all costs and keep the system going because your personal wealth is caught up in this.

But it's hard actually to read that book and come to any other conclusion than what I said. The editor-in-chief of The Globe and Mail, Canada's leading paper, he said, "You've prosecuted this argument and it's impossible to refute what you've said. The problem I keep thinking of is, how do we get there?" One of the top economists in Canada, I'm not going to say his name because he's in the system and he said to me, "Your book made me question everything I went to school for and everything I teach."

He's an economist professor now and, "How could you see it and no one else can see it?" A lot of times it takes somebody outside the system. That's what an entrepreneur does, an entrepreneur says, "Why is it look like this? It's going here" and they build to where it's going, where the pucks go. The old Wayne Gretzky quote, "Skate to where the puck's going, not where it is" and so they build to where it is.

Peter McCormack: Is he the guy who transferred to the Kings?

Jeff Booth: Yes.

Peter McCormack: I've watched a documentary about him on Netflix.

Jeff Booth: If that entrepreneur is right, to where the puck is going then they create tons of wealth as a different business falls under those wings. What's happening today... I think it actually takes an outside view. An outside view is way more likely to see what's happening than an inside view. For the same reason that we talked about before, if you can't question those base formations that you've been taught all your life, if you can't actually look deeper and say, "Is this true? Or is it just true because I want it to be true because I've always believed it," then it's really hard to get out of that cycle.

Peter McCormack: Satoshi is an entrepreneur and inventor.

Jeff Booth: Exactly!

Peter McCormack: An inventor more than an entrepreneur in some ways, because we don't know if he...

Jeff Booth: We don't know, yeah.

Peter McCormack: But certainly he's an inventor who's used technology because they saw where someone's going. I've got two other questions before we dive in. The first one you might not want to answer because it's a personal question, but politically, has it changed you? In that for me, I was certainly someone who just believed in the state. I would vote every four years in the elections. I didn't vote in the last election, I'm certainly moving towards becoming more libertarian in thinking, but I'm not a full libertarian yet.

There's things I struggle with, for example right now, this thing, the monopoly power Apple has in the app store, I really struggle with something like that. I'm not a full libertarian but I certainly appreciate a lot of the thoughts of the libertarians. My first question is, has going through the process of making this book, writing this book and studying for it, has it changed you politically? Are you libertarian in thinking? Are you a libertarian? The second question is, were you a Bitcoiner before you wrote the book or did you just discover Bitcoin during the process of writing the book and it made sense? I'm just trying to piece together the journey.

Jeff Booth: The first question is, I hate labels. I cannot stand being Libertarian, conservative, liberal, anything else, I cannot stand being put in a box. As an entrepreneur, Jeff is this technology entrepreneur, everything else. What I try to do is get out because I'm curious about a whole bunch of things. So when people label me, it's just labels are really easy way to say that you belong to this group, and I cannot stand that. It's actually a way that we try to aggregate power and we take these labels and it's because we care so much about belonging.

Peter McCormack: They become identity, right?

Jeff Booth: Exactly and we identify with these people. But what it does is it also creates us versus them because we wouldn't belong to a group unless it was the best group. Today in the world, what's happening is, is that power is so manipulative over you that you have no idea. Actually, most of the things you do are out of love and connection and belonging. You spend your time trying to belong to these groups and everything else. I would just say, it hasn't changed me to a label. What it's done has made me question a whole bunch of other things that I thought I knew.

When I see some of my friends, billionaires, everything else, that have accumulated their wealth, not through ingenuity, through having assets before somebody else. The money printer has been full blast and when that person looks over and says something like, "Those people should work harder," I want to strangle them. That's what it's made me do. It's also made me look at the entire system, all governments and they're fighting over the wrong thing. Now you're getting socialism, capitalism, capitalism that's distorting capitalism, and all these people are yelling at each other in the middle, dividing society further and further, and they all have it wrong.

They're fighting over an economic system that will not work anymore no matter what. They all have their different ways to try to revive that one, that economic system for political gain. So I'm going to give, I'm the socialist, "Don't worry, you don't have to work. I'm going to give you a whole bunch of UBI and money." Where does that money come from? It's insanity. The capitalist, "Don't worry, we need a strong thriving economy but we're going to bail out the creators of this, and we're going to create low interest rates and everything else." Where does that money come from?

Libertarians are probably closer, but here's the thing, on the way through, it's going to be ugly, because if you said next steps, there is a depression coming, a massive long-term depression, world global depression, because of deflation if the government stopped doing what they're doing. Or they keep doing what they're doing, and eventually you're going to have currency failures all over the globe and then depression.

Now if you go to... was Bitcoin first or... I'm insanely curious, I read about 50 books a year. I've known about Bitcoin, I looked deep when it came out and everything else, but I would say, I came to Bitcoin, a lot of people come into what's happening in the world through Bitcoin, I came in from the opposite direction. What's happening in the world through technology, what that means for our economic systems, Bitcoin is the best to me, the only thing that's going to protect your value.

Peter McCormack: Did it click straight away for you with Bitcoin? Were you like, "This is the answer."

Jeff Booth: Yeah, it did.

Peter McCormack: So do you class yourself a Bitcoiner now?

Jeff Booth: Yeah, it's the same thing when somebody puts a label on you. When I classify myself a Bitcoiner, I don't say... I'll use an example here. There's a whole bunch of gold bugs who the Bitcoin community is totally against and they both fundamentally care about the same thing sound like.

Peter McCormack: Exactly the same thing.

Jeff Booth: If instead of trying to divide those communities, if you actually united and say, "We both care about the same thing," we might have a different view of... That's just a bet.

Peter McCormack: I completely agree.

Jeff Booth: I have no idea why people are so mad about the other people who want sound money.

Peter McCormack: Do you know what it is? I think it's a fight for probably what they own the most of. I think a lot of the gold bugs are like, "I don't understand these technologies like Bitcoin. I don't understand these bytes these ones and zeros, I like my lump of gold and I've got it." I think the Bitcoiners are like, "Technology is going to outpace you, it's going to eventually be Bitcoin." Maybe it will be. But in this transition period, right now, I think both have value in different ways and that's why like... I don't know if you know Dan Tapiero?

Jeff Booth: Yeah, I do.

Peter McCormack: Dan's great because he's both. He understands the value of Bitcoin and understands the value of Gold. I don't own Gold but I've been talking recently about getting some. I'm so close, I'm literally teetering on the edge because I think with everything that's going happen, it'd be good to hedge with both.

Jeff Booth: Here's why I don't, but it's not anything against gold bugs. When I think about a bet, an asymmetric bet, where I want my capital, gold is a $10 trillion market cap, Bitcoin's $150 billion market cap. When I think about the upside versus downside, the only reason gold is a $10 trillion market cap, I'm not arguing it can't go higher to $30 trillion or something like that, I'm arguing that it's $10 trillion because it was used to be pegged to money. It's no longer pegged to money.

It's not a $10 trillion market cap because of jewellery, it's no longer pegged to money. If you believe that it's going to be pegged to money again, then it'll hold that value and go higher. If you don't, then Bitcoin will go from $150 billion to that or higher, and one of those will collapse. When I look at the asymmetric bet, that's why I believe in Bitcoin. I think the power of technology is better, I think there's a whole bunch of everything else. The reserve currency of the future is more likely Bitcoin than Gold. But that's just a bet and I have nothing against somebody who wants to make a different bet.

Peter McCormack: Alright, let's get into the detail now, let's get into the book. You talk a lot about technology being deflationary. One of the arguments against deflation that you'll hear from economists or political leaders is that, if we go into a period of deflation, people will buy less. They'll be like, "I'm not going to buy that because it's going to be cheaper in two months." The only time I've ever thought that really, really holds value to me is something like a house, because I feel like I genuinely believe there'll be house deflation this year of 10%.

If I wanted to move house, you're talking about significant amount of money. But you talk about things like TVs, I'm not going to put off buying a TV because I think in two months there's a small chance it might be worth £50 less. That argument doesn't work for me. But you talk about technology being deflationary yet we have inflationary money, can you just go into the detail of that?

Jeff Booth: First, let's define deflation and inflation, because I think that's important, because again, people don't look deep enough. What is deflation? It's really quite simple, when goods and services go down in price versus your money. Is that a bad thing? If that happened, people would save more money and if you had more money, if you had more savings, and you saw an opportunity you'd buy. It's that simple! Inflation is the opposite, when your currency was worth less in real terms because your goods and services are always going up.

So if instead of government saying, "We have these inflation targets that we can't hit," if they said, "We're trying to destroy your currency and we're having a real trouble doing it." You kind of go "What?" But nobody asks that question. Deflation isn't a bad thing. It's just that system was designed for inflation. Let's use the house example. Now if a system is designed for inflation, then you know the house is going to go up in value over and over and over, because the currency underneath it is going to be worth less. That means if you take on a whole bunch of debts, later on you're paying that debt back with cheaper dollars tomorrow, because those dollars are worth less and hopefully you get paid more and more through your life.

That happens and now you connect the entire world to this gain and everybody has their own currency. So everyone in China knows that they have to devalue their currency again because they're going to try to protect their jobs, so their currency value is going to come down. Russia today dropped interest rates staggering amounts and their currencies are coming down. Anybody that is in that local currency before it happened says, "I got to get my currency out of here because it's going to be worthless. Where am I going to put it? I'm going to put it in real estate because it'll store value as countries destroy their currencies."

Real estate raises in price, up A and the people with that real estate, because it's designed to do that, they keep winning, winning, winning, and taking more of the pie while the people that are on a treadmill trying to capture that, are getting their dollars are worth less and less than they never catch up. That's why real estate's going up, it's a simple question. In the last 20 years, this is before COVID, there has been $185 trillion of new money created to produce $46 trillion of economic gain.

Say that again, $4 for every $1 of growth and that's to try to stop this deflationary impact. If you just ask the opposite question, what would real estate look like without $185 trillion of new money? You would see that those prices would be coming down as well.

Peter McCormack: Yeah and more people could afford to get on a ladder.

Jeff Booth: More people could afford, exactly. That's what I mean, that technology would mean that if central bank stopped fighting gravity, you'd have broad distribution of the benefits of the technology. By fighting it, you're concentrating the wealth, you're concentrating the monopolies, you're concentrating everything.

Peter McCormack: Listen, I've been doing a deep dive into Steven Mnuchin. It's a four part series on my other show, but in the second part it covered OneWest. What happened with OneWest Bank and the foreclosure machine they created. The fascinating part of that story that I didn't know, that I didn't find out until we'd deep dive, wasn't so much the fact that he bought the bank and created the foreclosure machine, which itself was terrible. But look, there's an argument he tried to turn around the bank, it looks like he did it with practices that were illegal.

But the really interesting part of this is that, I don't know how much you know about this, but there was a similar incident during The Great Depression, and instead of the government offloading the banks like the FDIC did to anyone who would buy them, Roosevelt put in a plan whereby the government would just take on the properties and they would give people about a year to turn themselves around if they really couldn't pay their mortgages back, then eventually they would foreclose on them and sell their homes. What the FDIC did say, for example, with OneWest is they sold the bank on the cheap to them for like $1.6 billion, themselves taking a $13 billion loss.

But when OneWest started selling the properties, foreclosing, the FDIC came to an agreement with them that they would cover the majority loss on the property. Say if it's a $300,000 mortgage, they could auction the property off for a $100,000, no incentive to maximize the value, because the FDIC would provide the $200,000 difference. But the really interesting thing was, is that all these properties were bought by venture capital...

Jeff Booth: Hedge funds, Blackstone, exactly.

Peter McCormack: Hedge funds, yes. Colony first and then Blackstone and they ended up with tens of thousands, I think it was 88,000 properties. This concentration of wealth, you're totally right, I think this is what a lot of people don't see, this cheap debt that they're able to buy up all these properties. What it ended up meaning is there's a concentration of homes owned by a hedge fund who can then raise the prices with predatory rental prices and predatory rental treatment, because it's not only do they control the properties, control the prices, they actually can't put in the practices to act like a decent landlord.

Like if I'm a landlord or you're a landlord, they fit the problem when somebody phones up. When you've got managing 80,000, 90,000, 100,000 properties, actually having those procedures in place don't happen. So people ended up paying higher rent for a lower quality service and made it harder for them to get on the ladder. This to me was the most disgusting example of where capitalism's lost control.

Jeff Booth: When I said before, that you're protecting things from failing and you're gifting the architects of this failure more of the wealth, that's what's happening. Now, prices are artificially high because governments have created that artificially high price in the first place and there's a whole bunch of people that can't pay their rents, fighting to try to keep up with those artificial... It's systemic. The way the system is architected around inflation, forces that to happen.

Peter McCormack: It's to privatize profits, socialize losses.

Jeff Booth: The big theme of the book, the underlying theme, beyond technology, when that happens is political parties divide us, you have to create an internal enemy first to get elected. It's not your fault, it's those people's fault and then after that, you need a bigger external enemy, that's how revolutions in the world start.

Peter McCormack: Before we jump to that one, because I've got that, you said you know what's coming and I think we all know what's coming. The signs are everywhere, not even just in the US or the UK, but Lebanon right now, I was in Chile recently to see the protests there, it's all the same everywhere. But just before we get to that, have you looked at the why?

Jeff Booth: What?

Peter McCormack: The why, why this is happening? Does this really just come down to politicians politicking and wanting to stay in power, therefore kicking the can down the road when really they... Because we are in this globalized world, that for one country to stand back and step back and say, "We're not going to play this stupid game anymore," actually just makes them anti-competitive and makes the situation much worse for us. Have you looked at why this is happening?

Jeff Booth: That's a great question. That question is a bridge building question. It's not that there are some people are manipulating the system, most people have no idea how fast technology is moving and that there's another way and they're trapped. Let's think about designing our way out of here. How do you as a politician say, "We're going to cause a depression. We're going to stop doing this. By the way, if we stop doing this and we cause a depression and we let everything reset, and people can't eat, people don't have jobs, everything else, we also make our economy uncompetitive because other governments are going to keep granting money."

In that world, you keep kicking the can down the road and trying to make it worse, unaware that you're causing the very thing you hate the most to happen, that you're causing society to break, completely oblivious to it. I don't think it's a whole bunch of bad people. I think it's a bad system without... That's actually why I use the business examples. Kodak created the digital camera and went bankrupt because they didn't use it. For a 100 years, Kodak was the name in cameras and they went bankrupt because they didn't use it.

It's a normal course that businesses don't see what's coming and those businesses are filled with some of the smartest people and everything else but they get caught in their rot. If a business with all these great people in it can't see it, why would anybody else not be able to, like in government or what have you not see it? So they're just caught in a system and that loop just keeps on accelerating.

Peter McCormack: Or they are caught in the system and they know the way out, but they don't want to be a fore guy?

Jeff Booth: No, I don't think so. I don't think most people... I wrote the book because for over 10 years, I've been talking to people about this and seeing and predicting the second order consequences and watching those ramp up. Watching 2008 happen, watching everything else ramping up predictably against deflationary technology, deflationary path and I'm thinking, why isn't anybody else talking about this? It's actually super surprising, that when this book came out and a whole bunch of people started talking about it, people they were saying, "That's the thing that's happening that's driving everything else."

Once you see it, it's impossible to unsee it. If you understood how fast technology is moving, if you're actually in kind of how fast it's actually moving, and sitting in some of the companies and seeing what's happening, it's impossible to unsee what I'm saying. What I love about the traction on the book and what's happening, and I never expected this, is a whole bunch of people are now putting their finger on it. I was invited House of Commons in Canada to speak to at the House of Commons.

Now at least there's an awareness and I don't think that awareness is global. I don't think mainstream media has picked this up at all yet, but it's coming. Once there's an awareness, and you said it already, the Bitcoin crowd has known this for a long time. They might not have known its technology but they knew the system was rigged against currency. The system was rigged.

Peter McCormack: Yeah, it's so obvious right now. It couldn't even be clear. It's the matrix moment, once you see and then it all becomes obvious. Look, I'm more of a creative than a technologist or an economist but even I see what's going on right now and it was quite interesting actually, when I was talking to Preston, because he recommended the Ray Dalio video, was it the economic machine?

Jeff Booth: Yeah.

Peter McCormack:  I watched that. I've been aware of boom and bust cycles because of economics at school, but he talked about this bigger cycle, this bigger 70 year cycle and I was like, "Shit. We're at the end of this!"

Jeff Booth: Yeah Ray Dalio misses the technology piece. Ray Dalio right now, whether he believes or not, I think he's a proponent of MMT or maybe not even a proponent but I think he believes that's going to happen. Actually it might happen, more and more it happens. He knows a cycle, but that cycle has all looking back without what's happening with technology today. It's not that we haven't always had technology.

In the 30s actually, a lot of what created the industrial revolution before in their past cycles is electrification and then after electrification, you had a whole bunch of new jobs, new industries that sat on top of that and they were more efficient and they created better markets and more jobs. Economists say that that's what we're going through today, electrification. We are not going through electrification. There is no one in technology that thinks AI is like electricity. Nobody used to say, electricity is going to be smarter than us. The AI is a completely different game. The deflation we're going to experience because of the tools today is going to stagger.

Peter McCormack: There's this great book, I don't know if you've read it? It's called Engines That Move Markets.

Jeff Booth: I haven't read that one.

Peter McCormack: I think you'd like it. There's about seven or eight chapters. It covers electricity, the telephone, railroads, I think the last one in it it's the internet. It's the key significant changes that happened, that moved the world one step forward. The technology advancements that changed everything and I keep thinking actually, there is a chance that if that book was reissued in the future, that something like Bitcoin might be part of that. I personally believe that Bitcoin is one of those things that can save us from...

Jeff Booth: I agree with you. I completely agree with you.

Peter McCormack: But I'm not utopian about it yet, but I think it's a chance.

Jeff Booth: If you actually had a currency like Bitcoin, and I think governments will eventually be forced to peg to it because the... By the way, Satoshi was brilliant in the game theory and designing it and everything else. If it grew too fast, governments would have shut it down a long time ago. But then the network growth of what it is and what I think is going to happen next, it means the on ramps are slower and slower and slower and then they're faster and it spreads to more people. You ask somebody from Venezuela who had Bitcoin and it saved their family and they could feed themselves, are they ever going to trust a currency again? Lebanon and more and more countries, and more and more people are making that choice.

Now hedge funds are making that choice, Paul Tudor Jones making that choice which will drive tons of other people into this. It's going to be really hard at some point because Bitcoin works on a network effect, everybody's going to race in at the same time. I suspect that after that happens, governments are going to be forced to peg to it and then you have a common currency, you have a hard currency that's forces... If the path of technology allows deflation then there's less jobs and some people say there'll be more jobs, if there'll be more jobs, Bitcoin will work too. But if there's less jobs, you force a natural order to things and prices come down and less people are left out. You have wide distribution of the gains of technology instead of narrow ones, it's a forcing function. I tend to agree with you, I think Bitcoin is that or could be that.

Peter McCormack: Let's talk about these next steps then, because you've talked about revolutions and we're starting to see kind of like the early steps of revolutions building some of it around some weird politics and identity stuff. But at the same time, everywhere you go, it's the same. I've travelled the world a lot and I've been really fortunate with this podcast to travel the world, a lot of South America, Asia etc. As I said to you, look, the pattern's the same. Once you get the concentrations of wealth, you get financial inequality and whether it's government corruption or just people at the bottom of the wrong blaming corruption. 

Somebody said this brilliant thing about this protester he saw in Chile, and he had this sign he said, "We're not for the left or the right, we're from below." It doesn't matter what you think about how government should be run, once you have social inequality, you get uprisings, you get social unrest, you get people fed up. They're paying into a system and most of the wealth is going to other people and they can't afford basics. We're starting to see that in a lot of different places, like you said, Lebanon and I said Lebanon, and parts of the world. So talk me through how you see this playing out.

Jeff Booth: If I'm talking about how I see this playing out, I'm going to talk about how I see it playing out, but not what I want to happen. Okay, so the probability...

Peter McCormack: Let's do both.

Jeff Booth: Okay, the high probability that how this plays out is governments keep doing what they're doing and they force more concentration of wealth. In the US billionaires gained in the last two months, $545 billion more while everybody else lost. It's a staggering stat! But it's just the nature of money, you're forcing that wealth into the hands of the people that by protecting those asset prices and making them going higher, because you're destroying the value of the currency. That is happening today and it's happening on steroids everywhere. If you thought that the last cycle created the marches and everything else, and what's happening today, the next cycle is unfathomable.

People right now aren't rising up because right now they're being gifted money from the government to stay home. But their jobs aren't coming back and when the government can't pay them any more money to stay home, what are they going to do? You'll have homelessness at all-time highs. The next cycle of this, because of what's happening, it's a hotbed. People that have no hope for their future, they are sitting on the street or a paycheck away from not being able to make it and their kitty has medical bills that they can't pay for. If somebody tells them, it's not your fault, it's that person's fault over there.

See, the person on the ivory tower that has billions of dollars, qt some point they take their pitchforks out, run up the hill and take it all back. What do you think happened in Germany in 30s with the election of Hitler? Who was the enemy? It's not your fault, it's those people's fault with all the money and we're going to take it back. That's what happens to society. It's scary, scary, scary. That's what's happening.

Peter McCormack: We're seeing the rise of populism. This is why we had Brexit, this is why we had Trump, this is why Venezuela had Chavez years ago. It's the rise of populism.

Jeff Booth: It's on both sides. What I love what you did, you've travelled a lot. Even when you asked me the labelling question, everything else, you go through these cycles, and I think overall, humanity would have died out a long time if we didn't have a biased for cooperation. But anytime there's a lot of cooperation, it creates an incentive to cheat. Does it make sense? Game theory. If you looked at game theory, use the fast lane, driving in the fast lane.

Peter McCormack: I've got it here. One of my questions for you is, how do we deal with the human nature for greed?

Jeff Booth: You have to design into this. It's a simple example but if everybody's driving in the slow lane and you're a single occupant vehicle and you decide to drive in the fast lane and you get away with it, your commute time is way less and you gain more of incentive. If everybody follows your lead and fills the fast lane, everybody loses. That's a simple equation and everything else, but the same thing as in society broadly. As more and more people cheat, it creates exposures and then there's an incentive for cooperation, again.

Today, I think we're actually... US going off the Gold reserve because they couldn't pay for the Vietnam war and exporting that problem to other countries was the first change in economic rules now with the other global currency that was the US dollar. It was the first cheat. The response to that, little at first, people didn't see it because it was so minor, little at first, expand, expand, expand, expand, expand, and now you have every country manipulating its trade by manipulating their currencies.

You have full cheat everywhere and the system is just terrible. Bitcoin is the opposite, that's what's happening. I believe that their cooperation, people who unite, you can win short-term power by dividing because it's so powerful when somebody is left out of society to say, "It's not your fault, it's theirs and you can aggregate power." You can aggregate power and if you're good at that, you can aggregate a lot of power. Those leaders who divide are always short-lived.

Peter McCormack: Single term.

Jeff Booth: Sometimes they consolidate so much power that is more but they don't look... History does not judge them well.

Peter McCormack: Also, we have a history of those leaders tending to change constitutions or...

Jeff Booth: Totally, but that's what I mean, that's the reason. That's why they stay in power longer because they change the constitution and everything else. That's why I say, eventually those leaders do not do well. History does not treat them well.

Peter McCormack:  I just went out to Bolivia as well, which went through that exact same process. I was also having a conversation with somebody yesterday and we were talking about, in any other country in the world, Donald Trump would probably be the type of person who would change the constitution to retain power. If a Trump supporter listens to this, it's probably going to trigger them but I see some of his patterns... I'm not one of these people who has like Trump derangement syndrome.

I think he's done some good things and some bad things. I think he's got some things about him I like, some things about him I dislike, but I certainly think he shares a lot of characteristics with someone like Erdoğan. I could see him wanting to wrestle more control and more power.

Jeff Booth: Yeah, it's happening today.

Peter McCormack: He's the president of the one country where he wouldn't be able to change and wrestle a third term. I don't think he'll win the second term, but I think he's... I don't even think Republicans would let him do that.

Jeff Booth: It's hard to say right now. It's hard to look at what's happening and say, "Wow, this is not okay." Go back to first principles and 2008. 2008, long before he was elected, long before he decided to run, 2008, you allow what should have happened, to happen. That was a coin flip. It wasn't housing, it was debt. Too much debt! The bubble was housing because of too much debt. Global markets were stopping, trade globally was stopping, instead of fixing that problem, they gifted the architects of that problem insane money and socialized all the losses.

Trump was one of the biggest beneficiaries of that because most of its real estate holdings and massive leverage against that. If they didn't, he would have been wiped out to zero, complete zero. People holding cash they got destroyed because they destroyed the currency value. People holding cash would have bought up those assets for pennies on the dollars and they would have been the new leaders. A manipulation way back here that nobody even talks about. He gets elected because he's a really smart business guy, has nothing to do with smart business guise, it has nothing to do with it. He was gifted a whole bunch of money because you warped capitalism and the leader of the US is the leader because of that, because a whole bunch of people believe he's a smart business guy. It's just luck.

Peter McCormack: Ironic, really. Alright Jeff, you've talked about what you think will happen, but you also were very clear it's not what you want to happen. What do you want to happen?

Jeff Booth: Because this is Bitcoin podcast, people might get mad at this thing.

Peter McCormack: No, don't.

Jeff Booth: But this is... If governments got together and created a Bitcoin like currency that said, "This is going to have all the same properties of Bitcoin and we can agree on the terms of this," and then build the transition path so society could get through this next transition, I would take zero on my Bitcoin and be happy with that path, because it would kill Bitcoin's value and you could have currency that followed rules like Bitcoin, that would permeate society.

Peter McCormack: You know I'm going to have questions here.

Jeff Booth: Yeah, exactly.

Peter McCormack: Who creates those rules?

Jeff Booth: What I'm saying is, that same rules of Bitcoin, the same rules, let's say governments instead of fighting and everyone having their own digital currency, they agree on a common standard and do something like that, move that out. Then maybe that's the way that you could bridge through this. Keynes argued, not the US currency, he said it needs to be the Bank corps instead of US currency to be pegged to, because a government will change the rules and they'll drop Gold and if you had a different agreement on a currency by a whole bunch of countries that wouldn't be allowed. He predicted that.

Peter McCormack: But why get a bunch of countries together to agree on a currency technology like Bitcoin when we already have Bitcoin? Why not just agree with what we already have? Why don't you make that leap?

Jeff Booth: That's what's going to happen. They won't do that. If they did it, then you could probably, because they would hold a bunch of the wealth in it, as they distributed that out, same rules, instead of going through a massive depression, you might be able to have an easier bridge for the world. I don't know if that's true, I certainly don't. I'm just thinking out loud. I certainly don't believe there's any chance of that happening.

Peter McCormack: Yeah, no, I agree. I think if anything, they will fight.

Jeff Booth: They're going to fight, they're going to fight it with everything else. So then, I hope it's Bitcoin and just the natural way the Bitcoin's built, it will be distributed to more and more people, and more people will gain through that. Obviously the early people will have more of the gains and everything else. But imagine, just let's play this scenario forward. Tomorrow, currencies let loose and the people who have Bitcoin have all the power. Most people don't have Bitcoin, think of the destruction to society if this happened fast. What happens when people can't eat? When trade stops.

Peter McCormack: I've seen it.

Jeff Booth: Yeah I know, because you've travelled. I've travelled extensively and...

Peter McCormack: I went out to Venezuela. I'm trying to remember, it was I think the end of last year, start of this year, that's how messed up this year is. I actually can't remember when I went there. But I personally went to the border town of Cucuta in Columbia and saw all the people every day flooding over the border to buy things. Then I went into Venezuela, into Caracas and I just saw all the weird things that have come out of this. But also in preparation, I studied and I'd seen what's happening with the paramilitaries running the gold mines, I'd seen what's happening with Maduro and the proper... I've seen it all.

I've got a real clear picture of what happens. Look, this whatever transitionary period we go through, if something painful is coming... I just want to get back to the Bitcoin thing though, because I think it's an important point and I understand what you're saying and perhaps if Bitcoin hadn't been invented and countries had got together and try to agree on a Bitcoin technology, I don't think they ever would have because it's not within their interest. Actually, it becomes politicized and then how do you distribute it? It's like these carbon negotiations and these global warming negotiations where third world countries say, "You have the head-start, why should we pay for that?" Blah, blah, blah.

I think the beautiful thing about Bitcoin it's like, we have it, it is there. Once we have incentives ourselves of risks, Jeff, you decide how much Bitcoin you want to put in. Is it 10% of your wealth, 3%, 50%, I know some people got a 100%. In some ways countries have a similar decision. Will they adopt Bitcoin? Will any? If they do, where's the snowball effect.

What would be really interesting is when one country has... I keep talking about it and I know a lot of people talk about this, but imagine it's like, I don't know, next week, Sweden announces they're using Bitcoin as our reserve currency. Firstly, the price goes crazy and secondly, other countries suddenly go, "Hold on, we have to look at that." I've actually got no doubt there are some countries who are looking into this anyway.

Jeff Booth: I totally agree that's what's going to happen. That is what's going to happen. If you are a smart government right now, you're accumulating this in the background. A lot of Amazon kind of monopoly power today, it's actually not the existing companies, the existing power brokers that start using it, it's all the people left out. Amazon was created by a whole bunch of people who couldn't get access into, besides books, but couldn't get access into Walmart. Here's a distribution channel I can use and then the tail drives so fast then everybody is forced to adopt it. You could have tail countries that are getting killed by this whiplash of US currency and everything else, start to adopt it in the same way.

So I actually totally agree with you and what's happening. You ask some of the second order consequences of that. Today, we rely on lights for our street, we rely on roads, we rely on all those things. If this happens so fast that it breaks down governments because people have the power, what are you going to do with that? It needs to have systems built around it. We need to have a social safety net for people left out of society, otherwise it's chaos everywhere and it's not that I don't... I totally agree where this is going, but what about the other things and how fast those come, because you've seen societies that just have a total collapse and breakdown. It's ugly!

Peter McCormack: And we don't think it will come to us.

Jeff Booth: Yeah, I know, we don't and yes, you have a bunch of Bitcoin, I have a bunch of Bitcoin, we'll be somewhat protected, but I don't want to live in that society.

Peter McCormack: No, I'm not one of these people who goes on about the citadels. I'm from the UK, I don't really want to arm myself with an AR-15. I'm not complete so anti-state, I actually like some of the civilized parts of it that we do have. But the transition is the thing that I don't understand and I don't know how painful it will be and how scary it'll be.

That's the bit I'm really intrigued by and wondering how it happened because you are right, we could lose street lights or we could have complete breakdowns as society. We could have even bigger inequality when it happens. I'm more into the idea of a painless, slow transition than this scary thought of a currency collapse. But we could face a currency collapse, that's the thing Jeff, the pound could collapse, the dollar could collapse.

Jeff Booth: It has become more likely all the time, like what's happening. What scares me, when I said what I want to happen, I want the slow transition as well. If it's slow, then we actually have time to do all the other things. But the more the governments are printing against this problem, the more likely it is we have a sudden collapse and that's what really scares me.

Peter McCormack: Let me ask you a final question because... This has been brilliant, it's exactly what I wanted to talk about with you. But as somebody who's studied this, read a lot about it, written a book about it, and then also is interested in Bitcoin, study Bitcoin, do you think in this Bitcoin world that there are any very obvious blind spots that you think proponents of Bitcoin have?

Jeff Booth: I don't actually think they're very obvious blind spots. I think the connection to technology, I think was underestimated before I wrote the book and a lot of Bitcoin community really now understands that. But I don't think blind spots. If I said a blind spot, the blind spot is what we just talked about. The blind spot is, if you want Bitcoin to go to million dollars next year then you're actually cheering for chaos.

Peter McCormack: I think some people do want it though.

Jeff Booth: Exactly, but I don't think they've asked the next question, about what the world looks like when they have that wealth and nobody else does. It looks just as ugly. It just inverts, because how does the rest of their things work? How do they get the basic needs that they want and everything else and what does society look like? That, I think is being underestimated and so I would love...

There's a bunch of people in the Bitcoin community that do this and I'm very aligned to those people, they want it for the sake of humanity. I think those types of questions, how do we build it so that the most people benefit on the way through, instead of it's just a transfer of wealth to different faces.

Peter McCormack: One of the good thing about a lot of the people I know in Bitcoin, there is a lot of paying it forward. A lot of the wealthier Bitcoiners I know, actually, they like funding developers, they like distributing money, I don't know why that is, but I tend to see that a lot. Whereas I tend to look at the billionaires in the world, the Blackstones and the Mnuchins or people like that, they don't give a fuck about anyone but themselves and their buddies.

Jeff Booth: Here's the thing. I actually believed that too before I knew a bunch of people that had that and it's not true. We believe it's true because we see the media and everything else. It's true for some of them, and it's just like it's true for some Bitcoiners. By and large, people they're generally good, they're thinking about their own families and everything else and what am I going to do to... It's so easy, it's so addictive to get caught up into that us versus them.

Peter McCormack: That's a strong point.

Jeff Booth: Again, no people that are billionaires, I know them really well and see how they act and see how they're really great community people and they give back and everything else, they don't want this to happen either. There are some that are just useless, but there's bad eggs everywhere. There's some in the Bitcoin community. I've been by and large in all of these communities, but in the Bitcoin community, I've been blown away by how great most of the people are. If I had one message, I would say, "Unite the camps, unite the camps for humanity."

Peter McCormack: It depends which camps you mean. If you're talking about Bitcoin versus other cryptocurrencies...

Jeff Booth: No, I'm not saying that. I'm saying sound money advocates.

Peter McCormack: Okay, Bitcoin and Gold.

Jeff Booth: Bitcoin and Gold. Instead of getting into what's so easy to do, it's those people, those faceless nameless people, they are the problem. Look deeper and say, "It's the system that's the problem. It's not those faceless nameless people, it's the system that's the problem" and if you do that, instead of fighting a system, instead of fighting those people who are part of the system, you'll be able to build bridges to actually help a transition.

So if I say I had one message for this community, it would be that. It's so important for humanity. We are in a structural change that most people don't see, and we're in the middle of it. There's a whole bunch of potential nasty solutions or situations on the way through and there is way more important to find unite us that.

Peter McCormack: I think that's a brilliant way to end it Jeff. This has been fantastic, love this and really enjoyed doing this. I'm going to recommend your book to everyone. I think people should read it, I'm going to finish it. I've got a long drive now. I've got a two hour drive so I'm going to listen to most of the rest of it. Just before we go, tell people how to find your book, how to find you and how to follow what you're doing.

Jeff Booth: The book is "The Price of Tomorrow."

Peter McCormack: Which I think is a great title itself.

Jeff Booth: You can follow me @JeffBooth on Twitter or jeffreybooth.com is my personal website address.

Peter McCormack: Awesome, well this was great, really enjoyed this Jeff and really appreciate your time. Good luck with everything you do. I wonder, do you have a second book in you?

Jeff Booth: I don't think so!

Peter McCormack: You don't think so.

Jeff Booth: Again, I'm a technology entrepreneur. I love working with technology companies. Never say never, but I didn't think I had a first book in me.

Peter McCormack: It's a great first book. Listen, good luck with everything you do. Hopefully someday we'll meet in person and anything you ever need from me, you can reach out to me. Again, I really appreciate having your time today.

Jeff Booth: Right back at you. I'd love to get together in person too.