WBD651 Audio Transcription

Why Deflation is the Key to Abundance with Jeff Booth

Release date: Saturday 29th April

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.

Jeff Booth is the Author of The Price of Tomorrow and CEO/Chairman of Ego Death Capital. In this interview, we discuss the effects of prices falling to the marginal cost of production, Bitcoin and its role in a deflationary economy, how inflation and debt distribute wealth unfairly, and the deflationary influence of AI and its impact on the future.

“Everything in the world has counterparty risk to that debt except for Bitcoin… if you’re measuring from Bitcoin then you’re seeing prices falling to the marginal cost of production everywhere.”

— Jeff Booth

Interview Transcription

Peter McCormack: Jeff, how are you?

Jeff Booth: I'm good, buddy, how are you?

Peter McCormack: Well, do you know what, I never thought I'd see Jeff Booth in Bedford!

Danny Knowles: Me neither, not at 4.00am!

Peter McCormack: Well, we didn't see him at 4.00am!

Jeff Booth: It was a late night.

Peter McCormack: It was a late night.  Well, welcome to Bedford.  Thank you for coming all this way, it's a real honour to have you here for this, for tonight and for the football.

Jeff Booth: Yeah, it's going to be a blast; it's already fun.

Peter McCormack: You're going to see us getting the trophy; that will be a late night!  So, listen, we've made a bunch of shows before and I have an observation about your book.  My observation is that of all the Bitcoin books, it takes people I think the longest to fully understand, because I think you have to see what's playing out in society to really understand your thesis.  And I think it's a bit like the Matrix.  You observe the world, you see the world, you see the markets, you see what's happening, and you see it through the Jeff Booth lens, The Price of Tomorrow; whereas, I think people like me and Danny are still seeing it for what it is, for what we're being told.  I hope that makes sense.

I think you even said last night, you spoke to Luke Gromen, and it clicked for him during a call.  And so, we want to get back into the thesis, want to go back to the start, and we want to try and see the world how you see it.

Jeff Booth: Are you sure?!

Peter McCormack: No, I do, because I think I nearly got it last night, and I said to Danny, I think what it is is you are fully pricing everything in Bitcoin and seeing everything under Bitcoin terms in a way that I think I am, but I'm not, and I want to get to that point where I really understand what you are seeing.  So, let's go back.  Can you outline your deflation thesis, the one you talk about in the book?

Jeff Booth: So, wherever you start here, it's that starting point is really hard, because we're measuring our existing system from the system, and so it's hard to start in an entirely new paradigm unconnected from that.  So, what I try to do is I say, what are the economic rules in life; what would that look like?  One of those rules is prices fall to the marginal cost of production.  If you start there, and nobody has ever challenged me on that; some people say, "Not if you regulate an industry".

Peter McCormack: Explain to people what you mean by the "marginal cost of production", because some people might not even understand that.

Jeff Booth: Yeah, so let's dig deeper, but start with prices period; prices fall to the marginal cost of production over a long enough time horizon.  You can regulate an industry to stop it, and that technology keeps moving and it moves outside of your area that you've regulated to a different domain that hasn't regulated, and then that attacks the incumbent, or the regulated industry.  But over a long enough time horizon, prices fall to the marginal cost of production.

What does that look like in real life and why?  So, now let's take the calculator app when it came on, the first calculator app on the iPhone; you paid for it, or they monetised it through advertising, or they were making money from it, otherwise no entrepreneur would have created the calculator app.  So, they were creating a business.  The next entrepreneur, "I can create a better calculator app", and they price it down to be able to win the market.  Next entrepreneur, more and more and better and better until there's no money left in calculator apps.

Now, if you go to the App Store, you'll see 50 calculator apps competing for your attention; they're all free.  It's ludicrous if somebody said to you, two things; if somebody said, "I have a calculator app, it's going to cost $30 a month", you'd laugh them out of your house, it would be ludicrous.  On the other side, if somebody came to me as an investor in the ecosystem and said, "I have this great idea for a calculator app", I wouldn't take the call.

So, we can see it happening, we can see it happening all around us, and it's because what ends up happening is when there is money in the economic incentive in a market that allows you to rewrite the rules to create more value for people, the market moves there no matter what and it attacks those margins until they're free.

Peter McCormack: Are there exceptions to the rule, for example luxury products?

Jeff Booth: So again, I don't think over a long enough time horizon, there's any exceptions to that rule.  Now, today if you're measuring, in a world where the measurement itself is all unmanipulated money, then people want to matter so much, they want to look good to society so much, that they'll pay almost anything to stand out from the crowd, and that's in the existing system.  So, yes, will people with money pay more for certain things or more for value?  What they're actually doing, no matter what that economic calculation is, in their head they're saying, "This has value to me".

Peter McCormack: I guess I want to phrase that slightly differently.  There's a luxury car and a luxury car won't go to the marginal cost of production because it's a £200,000, £300,000 car, but there will be other cars in the market which will hit that marginal.  Is that what we're saying?

Jeff Booth: So, play this on a long enough time horizon, even on a car, or food.  So, what are the inputs for that?  And once all of the inputs, or essentially robotics and AI merge in to be able to drive cost way down, can that value keep climbing?  If it kept climbing unnaturally -- because, it's climbing today because you're making up more monetary units to make it climb.  Abundance and money equals scarcity everywhere else; that's the paradigm we live in today -- then it will keep rising in those terms.

But what's actually happening and it's actually happening on Bitcoin because it's out of that system, is it's actually not going up, it's staying stable.  Yes, it's going up in fiat terms, but it's a better way to look at it that everything in price forever will fall against Bitcoin.

Peter McCormack: That's what I said to you this morning.  Okay, but in that environment, you will still have companies compete and some are going to compete on price.  But also, there are scenarios where people compete on service so they can maintain their own margins.

Jeff Booth: And now play that forward.  So, all prices are falling and some people are able to offer more value for free.  What would happen to the people that are charging more for their service?

Peter McCormack: Well, I think it depends on how better the service is and who the people are who are buying from them.

Jeff Booth: Exactly, just like it does today.

Peter McCormack: Yeah.

Jeff Booth: So, each person is making a decision that you can't see before -- again, we're measuring the world from this system and we're carrying our baggage from the one we live in into the new one, and it works exactly opposite.

Peter McCormack: So, how do you see the world?  You obviously see the world that we're not living, you can visualise it.  What are you seeing that I don't see?

Jeff Booth: That's why I said prices fall to the marginal cost of production.  So, if you know that that's going to happen over a long enough time horizon, and if you said that -- so, two things.  Prices fall to the marginal cost of production; the marginal cost of production everywhere is falling exponentially because of AI, robotics, and it's going to fall faster and faster.

What's happening, it's actually chicken and egg, what came first; the debt is a response and a manipulation of money is a response to that massive productivity gain that should be flowing to society in the form of lower prices, being stolen and concentrated at the top through the manipulation of money because it has to stop that deflation.  Because, if that deflation was allowed to happen, all of the banks would fail, all of everything would fail, your way of life would fail tomorrow.

Peter McCormack: Talk me through why they would fail.

Jeff Booth: Because what that deflation would mean, and that's where people conflate the difference about deflation, that debt deflation -- the debt in the world is already insolvent.

Peter McCormack: So the debt needs to inflate?

Jeff Booth: Exactly.  So, we live in a world, effectively a make-believe world, where that debt is already insolvent and we pretend it's solvent; everybody, we pretend it's solvent.

Peter McCormack: Do you mean the debt as a whole, rather than individual debts, because some debts aren't insolvent?

Jeff Booth: So, you live in a system where the entire system is insolvent, and you're supposed to try to remain solvent.  So, you're playing by different rules than the system players.  And at the top of that system, if you're too big to fail, you get bailed out by the taxpayer over and over again.  So, what ends up happening is everybody races to try to be too big to fail.  It creates the very incentive to make essentially theft the base layer in the economy.

What would the mirror reflection of society look like if you had theft as a base layer of every trade, because that's what it looks like?  Who would win in that environment?  And theft is a harsh word, so people go, "Oh, no, it's not theft".  Well, tell me what it is.  If it's not theft, you don't vote for it, you don't vote for inflation, you don't have a say that more monetary units are created, and you think what's happening is -- maybe a simple way to do it is this.

Imagine, well you don't have to imagine, there's 8 billion people in the world and let's say there's 8 billion monetary units.  And 8 billion is not too hard for your mind to understand.  Once you get to trillions, your brain just breaks.  So, 400 trillion is a lot; your mind just can't comprehend that.  But 8 billion people, 8 billion monetary units.  Of those monetary units in the world, you have two of them, I have one of them, Danny has half of one.  If magically the next day there are 16 billion monetary units, did wealth go up in the world?

Peter McCormack: No.

Jeff Booth: It's just a different measurement; abundance and money creates scarcity everywhere else.  So, what ends up happening is that you think it did because your two, if it didn't go to four, then you got your pocket picked.

Peter McCormack: So, if the distribution was equal, everything would remain the same.

Jeff Booth: Exactly.  But what ends up happening is the rich get more of that because the rich have  more of the assets that don't move, more of the stocks that take that value; and the poor, inflation is wage deflation.  So, if you don't have access to all of the stocks, land, everything else, the things that are holding value better than others, they're all losing value, but some are holding value better than others, then your two going to four, if it went to three, you would think you were winning because you weren't measuring this.  And the person that 50 cents went to 55 cents and got a raise, or half a monetary unit, they think they're getting a raise, they're getting their pocket picked like crazy, because they're measuring that system from the system that's being manipulated.

Peter McCormack: So, there is an incentive therefore to hold debts, especially at the right interest rates.  So, this house I've bought, I've got a 2% mortgage in an environment where we're living with 11% inflation in the UK.  Luke Gromen said to me just this week, which we'll get into, that he expects high double-digit inflation, perhaps even triple-digit inflation.  I'm actually a beneficiary of that scenario.

Jeff Booth: Yeah, and if you had 20 houses, you're more of a beneficiary.  If you're BlackRock and you can't lose because you know that you're too big to fail, then you can lever up like crazy, and you can buy effectively everything.  And then rents go up and again, it's picking the pocket of any working-class, any productive member of society.  It favours the rent-seekers.  And then we call those rent-seekers the elite, and it's all based on theft.

Peter McCormack: Okay.  So, the theft itself for me implies a conscious act of theft.  So, I really want to understand who are the thieves?  I don't consider myself a thief, but I'm benefiting from this.  So, I've always tried to understand, is this an organic system of incentives, or are there people actively involved in this who understand the benefits?

Jeff Booth: So, would some people understand the benefits and turn a blind eye?  Absolutely.  The majority, it's a system reinforcing and people telling themselves that they have to keep this going, because if they don't keep it going, the world collapses. 

Peter McCormack: And it does!

Jeff Booth: It does.  So, you could easily tell yourself, if you're Bernie Sanders or Elizabeth Warren and your base is telling you how much they love you because you're attacking big interests, and you're going to redistribute that, their whole feedback mechanism, they will disconfirm evidence that we're talking about, because they're feedback mechanism from their base that has hurt the worst tells them how great they are.  And for them to unwind their belief system to face the truth means that a lot of the people that they say they're helping, they're hurting the most.  And that would be a really hard thing.  That's actually why these things just feed back.  It would have to tear down their entire belief system, rebuild it on something that actually helps their base, and people don't want to hear that; it tears them down.

Peter McCormack: It's too big a shift.

Jeff Booth: It's too big a shift, it's just too hard to believe.  So, it's easier just to say, "I'm doing the best I can in the system", and be a cog in that wheel, and that whole system gets more and more unstable, and other things start to happen.  That's actually why, that Greatest Game article I wrote, it was written in November 2020.  You could look at it right now and see exactly where we are in the system change.  You could see exactly what step-by-step has to happen in the existing system.  I talked about proxy wars coming and what had to happen; I talked about CBDCs long before people were talking about it, and that's just starting; I talked about eventually why the banks will move to Bitcoin because they have to, because otherwise their power is going to be taken away through the government, because if you have a direct distribution…

So, all of these things, if you just look at that article, you can see exactly where we are in this transition from systems, and that's why I don't give the existing system a lot of energy.  When all of these things that I know are going to happen and all of the next things I know are going to happen, okay, it's just noise.

Peter McCormack: It's Booth-stradamus!

Danny Knowles: I now get Ego Death Capital as well.  That's the perfect name!

Peter McCormack: Okay.  So, I spoke to Luke and Luke said to me, very casually, that he sees 100% inflation coming, and we know that Argentina's just gone back over 100% inflation, Bitcoin has just hit an all-time high; I'm not sure if you saw Preston's incredible tweet that said, "Try and stop Argentinians seeing this"?

Jeff Booth: Yeah.

Peter McCormack: But in my mind, I know the country I live in has had high inflation before.  But when I see 100% inflation, I think of Lebanon, Turkey, Argentina; I do not think of the US or the UK or Europe.  And Luke's explanation is that there is so much debt in the system, there's only two answers.  There's two forms of default: there's a hard default and a soft default.  A hard default's unpalatable, so it has to be a soft default, and it has to be through inflation.  And he said, "You could do multiple years of 10%, 20% inflation, but that would take a long time" and he said, "The best thing is a short, sharp shock, two to three years of 100% inflation, like Israel, and bring down the debt-to-GDP back to 50% and then the party starts again.

Jeff Booth: So, he's right.  We talked about this probably on our first podcast, or certainly the second, the exact same thing.  There's two doors, there's always been two doors.  Hard default, $400 trillion of hard default, and all the black pools of money, everything collapsing.  That day would look like this.  Three days later, you'd walk to your grocery store, which would be closed.  You'd try to get food off the shelf, it would be closed.  It would be complete chaos everywhere.  And if you look at countries that go through that, it looks dystopian.

Peter McCormack: Okay, so it's not just unpalatable politically, it's also dangerous?

Jeff Booth: It's dangerous, and here's the thing; you wouldn't vote for it.  We believe, like if you live in the Twitter universe, or Bitcoin Twitter, you believe, because a lot of people would say, "How dare the Fed do that, how dare the government do that", while they at the same time would vote for more of it, because if their way of life collapsed, they think what everyone else should do, yet not themselves as a cog in that system and what that would look like.  That would look like, you go back to the Stone Ages and you're bartering for everything.  And Bitcoin would do really well in that environment, because it would be the only thing that would retain value.

But there's a whole bunch of unintended consequences.  It would be ugly, it would be really ugly, and you can see what that looks like for countries that don't have their currency, don't have the reserve currency, because it looks like that and how do they get out of it?  Now, why that has implications for Bitcoin or why this is going to take a long time to play out is, if those people knew, Venezuela, Lebanon, Turkey, then you would think Bitcoin would have 100% penetration there, but it doesn't, it probably doesn't have 5% penetration. 

So why, at 100% inflation, do people not change?  And that's a clue for you wouldn't change either.  Well, you would, I would, but most people -- what Luke's talking about is they get the rug pull, and what would that look like in Venezuela, for example?  Comparatively to the rest of the world, they just got their currency devalued.  And now, given that it was a decent government infrastructure, businesses go back and invest in there, because they're cheaper than the world.  So, everybody that's just got destroyed, wiped out, decides to play the game again because they think they're winning, because now you have this economic advantage, and it actually strengthens the US dollar.  What ends up happening is the US essentially is strip mining the world.

Peter McCormack: Well, that's what we spoke about with Alex Gladstein, really.

Jeff Booth: But that function, and all of those people there think that now they're winning.  Now, take that into the BRICS and what the BRICS are doing.  Do you believe, is it reasonable to believe that with China's debt-to-GDP, without the black pools of money, without what's not known, you have 350% debt-to-GDP, which no country in the world has ever created more debt faster?  So, China's miracle, growth miracle, is a debt miracle that is coming due.  25% of their economy, about 25%, was housing, which is coming due.  It's not productive assets, it's store of value and it's coming due; there's no way to grow out of that, especially when that growth, remember, prices fall to the marginal cost -- growth should be making debt more expensive, because growth is deflationary in our world; does that make sense?

Peter McCormack: Yeah.

Jeff Booth: So, when people talk about growth, what they should be saying is, "Prices should be falling faster", because most of that growth is on rails that bring prices down.

Peter McCormack: So, what would a true measure of growth be, because you can't just measure prices, you have to have consumption alongside those prices to know?

Jeff Booth: A true measure of growth is productivity.

Peter McCormack: How do you measure productivity; is that hours worked?

Jeff Booth: Productivity is prices falling.  So, you have a mismeasure of growth.  So, as you take more things out of the GDP calculation, photos, calculator apps, all of these things, videos, Zoom, all of these things, as automation does that work and those jobs are replaced by automation, then prices should fall, and that's net negative GDP.  So then, what makes up the difference in GDP?  There's less things to be able to manipulate up in price.

Peter McCormack: So, the GDP figures that are quoted, I even heard it this morning, I'll come back to that, but the quotational use of GDP figures is part of the gaslighting?

Jeff Booth: Well, it's not part of the gaslighting, they actually believe it.

Peter McCormack: Oh, they believe it?

Jeff Booth: They believe it, because this concept, what you started with, prices falling to the marginal cost of production, effectively my book could have had one line, "Technology is deflationary; deal with it!"  If that's true, then an inflationary system must steal that productivity gain that should flow to society and it must concentrate it up into some people's hands to be able to make that work.

Peter McCormack: So, why have they been able to steal it from some parts of the economy, but things like TVs, they just haven't been able to steal that; why is that the case?

Jeff Booth: So again, you're mismeasuring.  You know that chart when you say --

Peter McCormack: Some things go up, some -- yeah.

Jeff Booth: All things would start at zero and fall in price, all things.  What you're seeing, some things falling in price and some things rising, is relative to the system.  And so all of those things, so TVs would have fallen a lot faster, computers would have fallen a lot faster, phones would have fallen a lot faster, but houses would have fallen too, energy would have fallen too.  There's been productivity gains in all of those industries.  All of those industries would have seen falling prices.

Peter McCormack: Right, so what really is happening is, with the mass increase in debt, it's causing a redistribution of income unfairly to the haves against the have-nots, and when everything reprices there'll be some proportionality to it, but the poorest will come out worse and the richest will survive it.

Jeff Booth: From the existing system.

Peter McCormack: Because the pie is still one size.

Jeff Booth: Exactly.

Peter McCormack: All we're doing is, we're using debt to redistribute the pie unfairly.

Jeff Booth: Exactly, the debt's already insolvent, so who are you going to let win, who are you going to let lose?  The debt's insolvent, so if people have leveraged up that debt that's already insolvent and you make the money cheaper, they pay back the debt in cheaper terms.  But if they lever at the wrong time and you have deflation, then they get wiped out too.  So, you're playing a really scary game at this kind of end of days; it's not end of days on a financial system, but lots of events could happen to flip it one way, and if you don't have enough time in that, if you're all in on a system and it doesn't go your way, you're wiped out.

Peter McCormack: So, you really should have some debt, some credit?

Jeff Booth: Well, I think about it as a barbell strategy.  So, play the probabilities of different events.  Let's use Balaji's bet.  I believe Balaji's bet is essentially just a marketing ploy to be able to come back and be all in Bitcoin and kind of wash his hands of all the --

Peter McCormack: He's Bitcoin washing, orange washing!

Jeff Booth: I think so.  Now, he might actually now get it, but these are the same things.  Like that bet is the same thing that bitcoiners have been talking about for a long, long time.  And the probability of him winning the bet is to me so infinitesimally small, I can't assign a zero probability.  But what that actually means if he wins a bet is you had a non-linear collapse of the exact entire financial system.  What we already talked about is in some nations, because it's going to happen in the US last, in some nations, as their currencies break down, they make that system stronger.  So, I don't think he's right at all, and in those countries, if you measured what did those people do, they don't all move to Bitcoin, they stay in the system, they get killed and then they believe --

Peter McCormack: They go to the dollar first sometimes.

Jeff Booth: So, a friend of mine, who climbs mountains for hospitals and kids with cancer, he was flying into McKinley and as he's flying in, I think they had to land on an uphill ice slope, or something like that; I might be getting it wrong, it might have been Nepal, but it was either McKinley --

Peter McCormack: Scary either way!

Jeff Booth: Scary either way.  They're flying in and he sees this plane rolled over and he's talking to the pilot and everything else as they're flying in and he says, "I guess that airline's out of business?" and the pilot goes, "No, that's this airline"!  And he goes, "Everyone died and everything else", and the guy goes, "People forget"!  But again, what you're talking about, Argentina, the system has so much power over them and they're measuring the system by the system and they're just, okay, people forget.

What Luke's talking about is when Israel would quickly devalue their currency and then everything's good again; people forget.  And each wave of that is going to create more bitcoiners, and each wave of that is going to harden Bitcoin more and more.  And at some point, there's this transition.  But if you're living in Bitcoin, if you're actually measuring from Bitcoin, the only thing without counterparty risk to that debt, everything in the world has counterparty risk to that debt, except for Bitcoin.

Peter McCormack: Hence Choke Point 2.0.

Jeff Booth: Exactly.  But if you're measuring from Bitcoin, then you're seeing prices falling to the marginal cost of production everywhere.

Peter McCormack: And that was the point I was trying to make, is I think that's what you're doing, and I think I get it now, I think it's clicked, because units are increasing all the time; Bitcoin, there is a fixed number of units.  So, even when I talked about the luxury car, it's cheaper in Bitcoin terms now that it was four years ago.

Jeff Booth: Bingo, and it will keep being.  In four years, it will be way cheaper in Bitcoin terms.

Peter McCormack: I get it, I see exactly what you're saying. 

Jeff Booth: And the existing system has to try to stop that.  And if we think Operation Choke Point is something, you haven't even seen the half of what's going to come to try to stop that.  Now remember, the existing system that everybody believes in, if this just clicked for you, imagine how many times we've talked about this.  That's why when you look at my book, it's going to predict all of these things and you can see the next steps out of the actions that have to happen from the existing unsustainable system.

Peter McCormack: Even if there's an inflationary period and Bitcoin's value in dollars goes up, but the purchasing power of dollars drops, that's irrelevant because at some point they have to still devalue the currency, because you can't end up with $1 trillion notes.  But at that point, so many people have moved into Bitcoin anyway, it's still trended towards the marginal cost of production.  So either way, they cannot do anything about it.

Jeff Booth: That's exactly it; you're measuring the world differently.  You're measuring the world in something that can't be manipulated.  You're measuring the accurate -- if prices fall to the marginal cost of production over time, and the marginal cost of production is falling exponentially because of technology and it's everywhere, then the only way you could measure that is through a fixed monetary unit that couldn't be manipulated.  Everything else would be a mismeasurement, but we live in the mismeasurement, all of our jobs are in the mismeasurement, or most people, and more and more people are moving into the right measurement, and they're starting to see what I'm saying.

Peter McCormack: So, proxy wars, are they used as a distraction, "Look over here, don't see here"; hence, is this why China is posturing against Taiwan?  Is that for productivity gains; is that a distraction?  I can't remember why you wrote, "There'll be proxy wars".

Jeff Booth: Yeah, so I wrote that in the book and I wrote it in that Greatest Game article, because you could see.  How do you get elected in that cycle?  First, let's take our own individual actions first, and let's say today, a politician says, "Okay, Jeff's right, the prices fall to the marginal cost of production, and this is what we're going to do.  We're going to let them fall.  That means next year, voters, you're actually going to make less money, but in real terms your income is going to go up, because prices are going to go faster than your wages decline".

Peter McCormack: No one will understand it, they'd think you're a madman.

Jeff Booth: They'd think you're a madman, there's no way you'd elect that person.  So the point is, you can't change the system from inside the system, no one can, we wouldn't allow it to happen.  You'd have to have something so strong, decentralised, secure to stop our self-interest from stopping it.  You have to take that out of our hands, because we want to.  We pretend we don't want to vote for somebody who will say, "It's okay, we're going to give you more money", but we all do too.  You'd think that person's a madman.

Peter McCormack: Well, do you think Bukele gets it and this is his plan, or do you think he doesn't get it and it's more -- do you think he's like a loose Bitcoin, or do you think he fully sees this?

Jeff Booth: I don't know.

Peter McCormack: Okay, because if he does, what a genius, because he's done it in a very subtle way; he's done it without telling them.

Jeff Booth: So, if you'd listened to his stuff far before he was elected, he was a bitcoiner before he was elected, and this gave El Salvador a massive way to get out of the existing system they were trapped in.  And all of the crime in El Salvador, just like Africa, just like all of these countries, they're trapped, and this vortex gets worse and worse; they have no way out.  He knew about Bitcoin before he was elected and if you look at the interviews of him talking about it, there's a chance he does know this.

Peter McCormack: Wow.

Jeff Booth: There's a chance that he is actually building everything towards this.  Now even if he wasn't though, that's actually why I try not to get into the personalities, every actor makes Bitcoin stronger, whether you hate them or like them.  If he's not doing it in the best interests of his population, it actually doesn't matter, because his population is winning and it removes dictator powers over time.  It gives the power to the people.  So, whether he's doing it for the right reasons or the wrong reasons, it actually doesn't matter, but he could be a genius.

Peter McCormack: And he doesn't need to be.

Jeff Booth: He doesn't need to be.

Peter McCormack: The second-order effects of a global reserve currency that has a fixed limit, a true fixed limit, even better than gold, it's truly unreal.  If it games out exactly as you say, which has been pretty good so far, it's truly unreal.

Jeff Booth: So, why would this be so hard to see?  All of our history books, every single -- when we actually say reserve currency, what we actually mean is something to make a debt-based system work.  It carries with it all the baggage of all the other things, and that's why, if I'm the new reserve currency tied to gold, now I can create more monetary units and I'm winning and others are losing by that same thing.  For a while, it looks like everybody's winning because of Triffin dilemma.  Then, even if you looked at the US right now, their entire industrial military complex is being outsourced to other nations and they have no way to bring it back because if you brought it back, the cost is too high to bring it back.

So, to be able to restart their industry, they have to have lower labour rates compared to the world, and the way the world works today, they have higher labour rates and it's all based on debt; they're the only purchaser of the world.  So, if you got all the BRICS countries together and there's nobody to buy the stuff, and most of their drivers are raw materials to purchase things to be able to sell to the US and there's no buyer, the whole thing doesn't work.  So, why people get caught in that, they're anchored to a system and all the history books and everything else always looked like this system, restarting wars, reset the currency, winner of the war, resets the rules, starts again.

If you'd never seen something that could be decentralised and secure that didn't have to have that, then you have a base layer that doesn't need an institution for it's reserve.  You have a bearer instrument asset in the base layer that nobody can change the rules.  Through history, we've never had that, so it would be an invention, it would be a discovery that would change forward.  And all of the other models looking backwards would have some sort of distortion in them; is that fair?

Peter McCormack: Yeah.

Jeff Booth: Now, if on layer two, you added unlimited velocity to that money, because it acts as a network instead of gold and you didn't have to replace a debt-based system on top of this, because you had unlimited velocity with a bearer instrument in it, then the debt which was needed to drive those economies isn't needed to be able to drive the future economies.  And that network growing and growing is what we're talking about.  All of the existing system is going to be repriced into that network.

Peter McCormack: Did you see all of this before you saw Bitcoin; had you recognised this?

Jeff Booth: I recognised this before I saw Bitcoin.  Bitcoin became for me, and I think I told you this before, I was a holder of Bitcoin but a small holder, and almost a test, trying to see what it was.  But I hadn't actually done the work to be able to defend, could this win against what was coming; could this remain decentralised secure when you aggregate a system that's 10,000 times bigger than Bitcoin, that everyone operates in and makes stronger and stronger?  Every time they're yelling at that system, every time they're marching on the streets and breaking windows, every time they go to war against another country, they're strengthening that system, they're giving more power to that system.

Peter McCormack: Everything's good for Bitcoin!  That's what Harry Sudock said.

Jeff Booth: But they're literally making that -- again, think about those wars and think about the broken windows and think about where does the come to replace that?  And those people will go home after they march on the street and then all of a sudden, magically, all of the windows get fixed.  Where did the money come from?  It comes from more robbing people.

Peter McCormack: What was the number we saw this morning?

Danny Knowles: Which number?

Peter McCormack: The debt, deficit.

Danny Knowles: I can't remember.  Let me pull up the debt clock.

Jeff Booth: Even that --

Peter McCormack: But it's accelerating.

Jeff Booth: -- it has to accelerate.  So, remember in my book I even talked about this debt that had grown?  You had $185 trillion of new debt in the preceding 20 years for $46 trillion of global economic growth, so there was essentially a 4:1 debt for growth.  If you ran your personal finances like that and it had to grow 4:1 for every productive --

Peter McCormack: I'd be screwed.

Jeff Booth: You'd kind of be screwed.  It's the same thing here.  Because technology's driving one way faster and faster, the debt has to grow the manipulation of money now because the debt's already solvent and has to grow at an offsetting pace.  It's just an exponential pattern that is a mirror image of the other exponential pattern.

Peter McCormack: What is it, $1.4 trillion for the year so far?

Danny Knowles: Yeah.  Is that total deficit?

Peter McCormack: Budget deficit for the year.

Jeff Booth: So, that's going to be way worse because what they're doing in the US, they're looking at a lagging indicator of tax receipts from the stimulus, which is about to collapse.  And as jobs collapse too, there's going to need to be way more money from government, because people are going to say otherwise they're going to be out on the street.  So, as those jobs collapse and those people have mortgages and everything else, if that were to happen, instead of having, as I think they're projecting, a $1.5 trillion deficit this year, it will be a $4 trillion deficit.

Peter McCormack: Well, I mean it's $1.4 trillion now four months in.

Jeff Booth: Yeah.  And if you allowed things to roll over, and when I say roll over, if you tightened to the point that the debt starts unwinding, it will be way worse than that, order of magnitude worse.

Peter McCormack: But that's like 75% debt-to-GDP in a single year.

Jeff Booth: But it's been that for a long time; it's just an exponential pattern.  People keep talking about it like it's a surprise.

Peter McCormack: This is why a reset is required.

Jeff Booth: It's no surprise, it has to. 

Peter McCormack: It has to happen.

Jeff Booth: All of this stuff, it has to resolve itself one way or the other.  And you talked about Operation Choke Point.

Peter McCormack: Well, can I come to that, because I've got one question before that that leads up to that.  You said you were nominally invested in Bitcoin.  I assume you're a bit deeper now, I won't ask how much, but I assume like me, just irresponsibly long.  But are you a gold bug as well?  The reason I ask this is I have cash now that at the moment, following the Luke conversation, I'm like, "I don't want to hold this cash".  But I don't want to go all in Bitcoin because of Choke Point, I have some fears around that, but I don't fear a Choke Point around gold. 

So, I've been thinking, and I say this for the listeners as well who may be questioning the same, I was thinking, "I should probably have some property, I should probably have some cash, I should probably have some gold, and I should probably have a lot of Bitcoin".

Jeff Booth: That's probably a decent strategy.  Am I a gold bug?  No.  Do I understand the gold bug argument; and could it resolve itself in the short term to gold; could enough countries agree to a new gold standard, or force that through pricing oil and gold like the BRICS nations are trying to do; could that happen and could it be one way to resolve some of this?  Potentially.  I see it as unlikely in the long term.

Peter McCormack: For me it's more like, the short-term cash savings which I hold, I'm now thinking of just holding that in gold rather than cash.

Jeff Booth: So, I would suspect, and that's why I said this barbell strategy, you want some cash.

Peter McCormack: I've got some cash.

Jeff Booth: And you want to keep some cash because, just play the probabilities out.  I think what's happening today is the backdoor window for the funding mechanism for what the US is doing is essentially choosing who they're going to save in Europe and otherwise, because China's using that currency as a weapon against the US too, and so they're cutting people off from that system and choosing who to save.  So, the whole "saving Credit Suisse", or brokering that deal is a backdoor funding mechanism to which institutions they're going to save, which ones they're going to let fail.

Peter McCormack: Hold on, that makes me think Nord Stream was cutting somebody out of that system?

Jeff Booth: This game is a geopolitical game now, and it has been for a long time.

Peter McCormack: Okay, can we talk about AI?

Jeff Booth: Yeah.

Peter McCormack: That's a lot to take in.  I see the world differently from 45 minutes to an hour ago, I get it a lot more.  Are you going to say, "Yeah, I already got that"!  Danny always gets everything!  Okay, let's talk about AI.  I find AI fascinating.  Danny every day is showing me new cool stuff.  Today he showed me something.  You know how when a rapper releases a new album, if they have a guest appearance from a famous rapper, that can be career-making?

Jeff Booth: Yeah.

Peter McCormack: He showed me a thing this morning where a guy's used AI to have Jay-Z as a guest rapper on his video.  It's not Jay-Z, it's just AI doing it.  And so every day, we're just seeing all this cool stuff, and maybe it's not really artificial intelligence, it's just a super-smart programme; but either way, it's a new boom that we're starting to see.  There's a lot of investment, a lot of interest, a lot of cool things happening, debates about when we get AGI; all this is happening.  But just generally, this obviously really relates to your work, your observations of the future.  What is your general take on AI first?

Jeff Booth: So, general take, and I wrote two chapters on AI, the general purpose technology that is going to be smarter than us, and people get scared of it or excited by, "It's going to take all jobs tomorrow, or it's going to make me more efficient".  Both of those, it's eventually going to take all jobs.  And because marginal cost of production falls to zero, it's going to be better at things.  Then it's going to merge with robots, and not just the robot humanoids that you think it would look like, every version of types of robots that can do different things that we could imagine today --

Peter McCormack: And then it will kill us!

Jeff Booth: No, I see us actually being -- shall we go here or not?

Danny Knowles: Definitely go here!

Peter McCormack: We definitely go here!  We've been having some pretty existential chats about this.

Jeff Booth: Okay, so let's just play it forward, because that's what I talked about in the book.  I talked about, all human intelligence is is error correction.  Human intelligence is error correction.  We stand on the shoulders of other people who have gone before us and those models, we're constantly trying to correct and make better in service of humanity, in service of our own needs, making life better.  And when we create things that are better for other people, we win more of the economic pie; that's what the world looks like, it's always looked like that.

We forget all of the things we're living on top of.  We don't have to think about relativity today, where a couple of hundred years ago, people had to figure out all of these things.  We don't have to figure out Maxwell's equations or Faraday lines of blood to Maxwell's equations to drive our telecommunications systems, we just all rely on them; we don't think of those things because they're now models that are so proven and our world just works.  They weren't always proven and we used to have to think really hard and life didn't look like it looks like today, because people couldn't figure that out and those insights.  Then we moved to those models, and we error correct on top of those models.  Fair; that's all we do?

Peter McCormack: Totally, yeah.

Jeff Booth: And so, human intelligence is literally error correction and a global kind of driving that.  And effectively what that means is, or a different way to look at that is, all we are on an evolutionary scale is one rung in a ladder.  We're limited energy, we ourselves are limited energy, limited storage and limited compute.  We're connected through trust and division of labour to do certain things, micro things, better than others, and we trade our time for somebody else's time that does that other thing better, right?

Peter McCormack: Yeah.

Jeff Booth: And so, we create a super-computer of us, all of those limited energy, limited storage and limited brains compute; we create a super-computer.

Peter McCormack: Unlimited.

Jeff Booth: Almost an unlimited super-computer that we actually project.  We think about what the world could look like, and we're constantly doing that altogether to try to make that world better, and it's connected through trust and money.  And then, what ends up happening in that is, for a long time, the bigger the cities, the bigger the super-compute.  So, more people race to the cities, and you could see a power war in a smaller town that had less super-compute and a tiny town had very little compute, so not much happened there.  And you could see that create that power war.  And if you ran a counterfactual to that, what about where there's broken money in a big city, what does it look like in Mexico City?  Do you have that same type of innovation coming out of that, or do people not trust each other as much?  Or take a different city that has had currency failure and there's not that trust, you break the bonds of the super-computer. 

So, you can see that now, when I say limited energy, limited storage and limited compute, now take giant waves of prosperity for humanity, or phased transitions for humanity.  Phased transitions came when one of those three or two of those three changed.  Printing press was a massive change in storage.  So, we're searching for more storage because we have limited, and before that we had to tell stories and those stories lost fidelity over time, and now our stories could be put into books, all our thoughts could run into storage.  And when there's more storage and more brains connected to that storage, you have more compute, and you have this massive innovation that happens as a result of it.

Look at the UK, against that same thing, or the British Empire, which was created by a higher form of energy, coal, against that storage and compute.  The US was a higher form of energy than the coal, in oil, against that storage.  And that function has essentially made us and driven limited energy, limited storage, limited compute; that is who we are on a never-ending journey to find more energy, more storage, more compute.  And when we find more energy, more storage, more compute, society expands.

What's happening right now is that storage is now moving into the computer, which is far more effective than an analogue version of a book, and it's now computing on its own and it's learning on its own.  And now you have AutoGPT that is actually just referencing other layers of information and creating more learning and getting faster and faster, that's overtaking our ability.  And eventually what's going to end -- we're constantly searching for more energy to be able to feed that, which we'll do.  Eventually what it will look like is not the AI against us, I don't suspect.

Peter McCormack: We hope!

Jeff Booth: It will look like we will merge with machines.

Danny Knowles: It's the next evolution?

Jeff Booth: The next evolution.

Peter McCormack: Is that the Elon Musk scenario?

Jeff Booth: From the existing system, that AI will be used against you; you will be a slave in the system, because it will be consolidated up to whether it's government, whether it's Elon Musk.  In fact, anybody who is not in favour of prices falling to the marginal cost of production kind of driving Bitcoin, anybody who's in favour of essentially stopping prices from falling is essentially saying, "I'm voting to centralise all power in somebody's hands".

Peter McCormack: Right, okay.

Jeff Booth: That's what they're doing, unintentionally maybe, but they're voting, "I believe that we should steal money at an increasing rate to be able to transfer it to somebody's hands".  Even if you just said, think about the system.  You have financial regulation to protect you from a system designed to steal your money!

Peter McCormack: Yeah!

Jeff Booth: How could that go wrong?!

Peter McCormack: I mean, the thing I can't picture, Jeff, though is what this all looks like; that's the difficulty.  In a world where AI does start replacing a lot of jobs significantly and at an accelerated rate, but even if we had a fall in the marginal cost of production, how does society function; what do people do with their time; how do they have enough?

Jeff Booth: So, I think it was in 1923 that Keynes wrote Economic Possibilities for our Grandchildren, whenever that was, and maybe, Danny, take a look at what date that was written.

Peter McCormack: He's going to ask ChatGPT.

Jeff Booth: But in writing that, and this is where he got this thing totally wrong, he predicted the trend properly about where technology was going, but he didn't predict what human nature would do to money.  So, he predicted the global average working week would be ten hours a week in 2020.  What's happened, and what would happen if you let prices fall, people would have more than they have today without the time and the jobs.  It's just such a paradigm shift, it's so hard to believe, because you can't prove that; you have to infer it from what the trend would do, because we haven't lived in that world. 

But what does the world look like?  Some people, because they're sitting on top of rent-seeking, it's not being a productive form of value for other people, they're sitting on top of that system, they're getting wealth gain at the expense of other people in the world.  So, some people are working 80 hours, 100 hours, trying to keep up and it's getting harder and harder.  It used to be, if you were in the 1%, it was really great.  Now you need to be in the 0.1% to be really great.

Peter McCormack: Because you'll need to work less to gain more.

Jeff Booth: Exactly.

Peter McCormack: It's a complete flip.

Jeff Booth: And that paradigm flip is so hard to fathom, because we don't live in it.  But if you follow the rules of economic value, follow the rules laid out, how would that look?  Because it works exactly the opposite, if you just said, "Wages are sticky", so people think, "It's just a transfer of wealth to these new people and it's going to look exactly the same", no it isn't.  Wages are sticky.  So, what that means is, if wages are sticky and that's why inflation works going the other way, and wages are sticky, people won't give a wage decrease as fast as prices are falling. 

So, it will be a massive transfer of wealth back to productive members of society.  And as jobs are lost, the people that are going to be able to live on less and less forever -- why don't you pay for the oxygen you're breathing right now?  It's ludicrous.  It would be ludicrous to have somebody walk in here and say, "Here's your oxygen mask".  But it's not ludicrous in space and it's not ludicrous underwater, where the marginal cost of production is higher for oxygen.  But we can't see that that is exactly the same thing, that we're artificially creating that scarcity in everything else, where the natural order of things would drive more and more things to abundance.

Peter McCormack: Amazing.  Jeff, I think we're going to save the rest for this evening when we do our event, but thank you.  That's really clicked today in a way it hasn't before.  Thank you, thank you, appreciate you, man.