In the 21st century, technology is the gift that keeps on giving. Each month, prices of the latest gadgets and gizmos depreciate rapidly, supporting the biggest economic expansion on record. Ten years ago, a 50-inch plasma T.V. set you back $2,999. Today, you can buy the same one for just over $500. These deflationary forces show how capitalism is supposed to work. Companies battle it out to build the next revolutionary product, driving down prices, creating jobs, prosperity, and innovation in society.
But if technology delivers impressive results, why have we failed to embrace its model elsewhere? Why does the price of everything else, from food to housing, rise each year? Sadly, we’ve fallen for propaganda that states we need inflation to achieve economic growth and prosperity. Using clever perception management, western world governments have been able to repeat this myth so often that it’s become part of our subconscious. We now believe inflation is healthy and deflation is simply a miracle byproduct of technology.
In both cases, however, the opposite is true. We know this because everytime central banks and governments turn off the liquidity taps, assets such as stocks, real estate, and corporate bonds, tumble sharply. And in the small period of time between the elites realizing their “mistake” and them turning the money printer back on, we witness the real economic forces at play, the real market screaming out for a return to sanity.
Why? Well, if you think about it, wanting inflation is insane. As a society, why would we want house prices, food prices, and consumer goods prices to rise, not fall? Why would we want to lower our standard of living? Yet, this is the system we breathe, support, and accept as normal, the system that, over the last few decades, has benefited only a few while leaving the rest out in the cold. With asset prices reaching new all-time highs each year, is it any surprise that even before COVID-19 rates of depression have kept rising. Is it any surprise that after inflationary forces have shipped our entire manufacturing industry overseas we now have a job shortage? Our inflationary world makes it hard for most citizens to make ends meet, let alone achieve their goals and dreams.
To understand how we got to this strange place, for a moment, forget that the ugliest sound in the world is a man talking about economics, and remember the simple rule of supply and demand we all had to learn back in school. When the government intervenes in the economy, say, by handing out free stuff, setting price controls, and bailing out failing institutions, the demand part of the curve rises while supply stays the same. Consequently, prices must soar, and we must become unwilling participants in a flawed economic experiment.
Over the last century, politicians have grown obsessed with committing economic suicide, but since they have convinced us inflation is the answer, we don’t fight or question the obvious undesirable outcome. When a crisis hits, they do more of the same and tell us it's for the greater good. This is nothing more than plain old economic propaganda, and the ultimate financial gaslighting of citizens.
For decades, we’ve seen blatant gaslighting across the western world, but the prize for biggest gaslighter goes to the U.K. government. Back in 2013, they established the “Help to Buy” scheme, awarding “home buyers” £3,000 when they put down a deposit. Sweet, right? But the reason Brits can’t afford a mortgage — let alone a home — is because of the rampant inflationary policies U.K. politicians kept implementing over the past half-century. By guaranteeing mortgages, bailing out banks, and printing money, they have created the worst moral hazard, turning homes into speculative assets — a model all western world economies have adopted. Their policies didn’t fix anything. Instead, they helped citizens grow more reliant on a flawed system. We become bigger slaves to debt, not because we want to, but because we have no choice.
To reverse this, we must realize government intervention is the cause of all this economic absurdity, and we must start craving the opposite economic regime: deflation. Imagine a society where house prices, food prices, consumer goods prices fall each year. Imagine being able to buy a home, not to speculate on, but to live in. Imagine a society where mortgages are the last resort, where we don’t become debt slaves, where the endless conveyor belt of payments doesn’t dominate our lives. Imagine being spoilt for choice when trying to find a job as many thriving manufacturing industries present us with various career paths. Imagine a society where wealth inequality is a non-issue. No class wars. No emphasis on rich versus poor. We’ll see Jeff Bezos-style figures as innovators, not wealthy businessmen exploiting the poor.
First, to even come close to this kind of society, we must rip the bandaid off and experience an unprecedented economic purge to restore the balance. It won’t be pretty, but the only path to success starts with the biggest debt-unwind in human history, greater than the fall of Rome. We’ll undergo the great detox, a period that will be rough on us all, snatching the moniker from past great depressions.
As crony capitalism collapses, zombie companies, businesses that exist only because of cheap money, will disappear, and capital will work its way into efficient areas of the economy. Asset prices will plunge. Stocks will fall 80 to 90%, bonds will lose roughly all their value, and currencies will crash, but in the end, it won’t matter. In a deflationary world, we won’t need to get rich via speculation. Instead, we’ll be able to afford everything we need to live. We’ll re-embrace basic stock market strategies like buying and selling companies based on dividend yields, not based on crazy growth expectations and valuations that inflationary bubbles produce. This scenario, of course, sounds a little crazy, almost incomprehensible, but this is the only way to see sense in a crazy world.
When economic balance restores, the real hard work begins. In so-called past economic resets such as the Great Depression, the 1844 Railway Mania, and the Tech Boom, we have enabled those who create bubbles to blow up the next one. This time, we must finally learn from the mistakes of our predecessors and let deflationary forces play the leading role. We must reject free stuff and cheap money. We must regain our responsibility, stop outsourcing our intelligence to the government, and recognize real entrepreneurship, exposing bad actors who have profited from crony-capitalist schemes.
Linguistic and financial alchemy has helped the elites justify crazy economic policies to citizens, to change the definition of inflation from the expansion of the money supply to rising consumer prices, and to create the greatest wealth transfer tool in history. For us to have any chance of overriding this psychological and financial warfare, we must realize that it's no longer economic policy, but a way for elites to assume and maintain their financial dominance.
The return to a prosperous economy will only happen once we realize that inflationary policies have failed us, that they cause more harm than good, and that the elites who implement them don’t deserve authority over the economy. Only when we allow natural economic forces to unfold will we witness a resurgence in shared affluence and equality. But what will it take for those in power to realize that deflation, the art of not intervening, is the antidote to the economic chaos we've had to endure? Simply, a miracle at this stage. All we can do now is hope one arrives sooner rather than later.
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This article is for educational purposes only, not financial advice.