Jeff Booth — entrepreneur, technology leader and author of the 2020 book, The Price of Tomorrow: Why Deflation is Key to an Abundant Future — joins Opto Sessions to discuss why central bank money-printing and unsustainable levels of debt mean bitcoin could be the most viable pathway to a more stable, and fairer, economic system.
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Jeff Booth is a technology entrepreneur, general partner of bitcoin-only venture fund egodeath.capital, and author of the book The Price of Tomorrow: Why Deflation is Key to an Abundant Future.
Booth started out by co-founding BuildDirect [BILD.V], an online marketplace for home improvement products. He is currently on the board of NocNoc, a marketplace for home living and construction in Thailand and southeast Asia, which he also helped found, and is co-founder and chairman of the board of Addy, a platform that enables people to invest in real estate for as little as $1.
The Price of Tomorrow outlines two key arguments that underpin Booth’s outlook: firstly, that technology and deflation will lead to widespread unemployment; secondly, that an unsustainable amount of debt currently underpins the global economy.
The economic system and currency manipulation
“You need inflation in a debt-based economy,” Booth tells Opto Sessions.
He argues that valuable assets — gold, for example — are traded and eventually become concentrated; credit is an inevitable consequence of this concentration. “People build a credit-based model on top of that model, and then that gets away on itself.”
Eventually, he says, this credit cannot be paid back.
“You start manipulating the currency because you can’t pay that [credit] back. Throughout time… there’s a cycle to how long a reserve currency lasts.” This time period is inversely correlated with the pace of technological change: during classical times, reserve currencies sometimes lasted for hundreds of years, because the pace of technological change was relatively slow, but today rapid change accelerates the cycle.
“The force of technology trying to drive prices down overcomes the debt really quickly, because when prices go down, the debt gets more expensive, and then can’t be paid back. So policymakers choose to manipulate currencies to essentially fool the public into saying ‘we can pay this back with cheaper dollars tomorrow, that we’re making up out of thin air.’
“In a credit-based economy, you must have inflation, or you have a credit collapse.”
The consequences of inflation are unevenly distributed. Those who own assets tend to see their assets’ value rise proportionately to inflation, whereas those who don’t “get their pocket picked, because inflation is wage deflation”.
“In a credit-based economy, you must have inflation, or you have a credit collapse.”
Bitcoin and the path to another world
The only way to break the cycle of continual inflation in a debt-based economy with a reserve fiat currency is, Booth argues, through deflation on a scale that would, practically speaking, be catastrophic.
He points out that there is $400trn of debt globally, which is effectively insolvent because of the dynamic of currency manipulation to repay debt-fuelling inflation. The consequences of deflation would be widespread business closures, job losses, mortgage defaults and bank failures.
“It just capitulates really fast and starts to unwind,” Booth says.
With a reserve currency, such deflation is politically unfeasible. If it happened, even an independent central bank would be taken over by the government, “because the political narrative is the people will vote for more manipulation” in order to avoid (or end) the deflationary chaos.
Bitcoin, however, offers a potential off-ramp for this inflationary cycle because it exists outside the system of money manipulation. Booth calls it “a transition mechanism from a system that can’t change to a system that provides, essentially, truth, hope and abundance going through the future.”
Looking at historical bitcoin prices through a systematic inflationary lens clarifies Booth’s hypothesis.
“Bitcoin’s price isn’t actually going up,” he explains: because the number of bitcoins is fixed at 21 million, it can’t be manipulated in the way fiat currencies are when central banks create more currency. Instead, bitcoin is “measuring prices falling every year.
“Five years ago, it would cost me 50 bitcoin to buy a house. Now it costs me 10. Two years from now, it will probably cost me two, or one, and it’ll keep falling.”
Bitcoin, Booth feels, is “the only path to the other side” — that is, out of the cycle of perpetual inflation — “without complete destruction and the winner of a war resetting currency on their rules”.
No rise of China, no other blockchain
Booth also discusses China, which he believes is in a debt trap. The country has a debt-to-GDP ratio of 279.7%, youth unemployment is over 20%, and 25% of the economy is in the real estate industry. “People thought ‘I can store my wealth in housing and it can’t be stolen’.
“For a while, it works,” Booth says, but with such a high proportion of the economy in housing and the debt-to-GDP ratio what it is, “that can’t be paid back, and people start losing their jobs; housing collapses without massive stimulus.”
For this reason, Booth believes that Ray Dallio’s recent warning about the rise of China is somewhat misplaced. “There is not a chance, not a hope that China is going to be the new nation that rules them all.”
Additionally, Booth is not bullish about cryptocurrencies in general — just bitcoin in particular: “There is not a blockchain that will work other than bitcoin”. All others, he asserts, will go to zero.
On this episode of Opto Sessions, he doesn’t go into detail regarding his reasons for believing this, but refers to his blog post, Finding Signal in a Noisy World. Here, Booth makes the argument that bitcoin is both secure and decentralised. This comes at the expense of its scalability, the third part of the blockchain trilemma, but this is preferable, in Booth’s view, to any other formulation. A blockchain that compromised either on security or on decentralisation would, ultimately, under-compete against secure, decentralised bitcoin.
"There is not a blockchain that will work other than bitcoin.”
Besides acting as a transitional asset between economic systems, Booth also argues that Bitcoin is, currently a “pricing mechanism chasing abundant energy”. In the artificial intelligence-driven, decentralised economy of the future that he envisages, not only will food be free, but energy could be too.
“The reason we’re capped in energy right now is the capital projects needed to be able to centralise energy. But when you have a mechanism like Bitcoin that's chasing abundant energy, it decentralises. Now you have a way to build to abundant energy.”
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