People saying that deflation is bad or that inflation is necessary are truly uneducated on the topic. It may sound strange but it’s true. Deflation in today’s world brings no benefits. Sure, in the past, the inflationary system helped economies grow in the short term and gave many job opportunities by indebting its future self. Inflation in small amounts might give good results. But as with many other things, governments got greedy and put their countries in massive debt that the public would eventually have to pay for.
It may sound wrong to say inflation is bad and deflation is the proper system of the future. We have been told our entire lives that inflation is natural and that for an economy to work it is necessary to “stimulate” the market. But it’s not true. Things that worked before do not work anymore and the rules of the market have changed. This post will challenge your beliefs and change your perception of the economy and the world. If you want to live in a comfortable bubble of lies, there is no shame in that. But if that is the case, you should go read something that does not challenge your belief system.
If you are still reading. Congratulations, you have now begun your journey to have more knowledge about the world than 99% of the population. After this post, I encourage you to read my other pieces about similar topics to see how far the rabbit hole goes.
The Deflationary Phenominen Of Technology
The first mobile phone was released in 1983 and was called the Motorola DynaTAC 8000X. It was a bulky device that weighed around 1kg. The price tag on the device was 3,995 USD. Adjusted for inflation this would be roughly equivalent to $10,000 today.
It had only one function and it was to call. It had no apps or anything that a modern mobile phone is expected to have. The calling quality and experience were also poor. Yet with all these downsides it still costs ten times more than the newest iPhone costs today.
This phenomenon is due to the deflationary nature of technology. Technological advancements and automation make work easier. Imagine if you didn’t have a modern means of transport to get to work and had to ride a horse or walk. Imagine if you could not call or email anyone and had to rely only on meeting people and talking to them. Thanks to technology, our lives have become more efficient and therefore we should have more free time.
imagine if you only had to work 3 hours a week and still get the same value from it. It might sound strange but with a deflationary economics structure, it is very possible.
The Evil Circle Of Investing
If you are somewhat economically knowledgable you know that saving money means that you lose money because of inflation. One dollar in 1930 would be worth about 18 dollars today. This means that if you saved dollars in 1930 and used them today you could only buy 1/14 of what you could back then.
Governments lobbied by big companies and corrupt politicians keep printing money and as a result, the rich get massive financial gains at the expense of regular people. But how? This article is a deep dive into this topic, but essentially if you earn the same salary while more money is in the economy, you lose value and can get less with the same amount of work. But value, just like energy is never lost, it just moves. Someone always profits from your loss. Who would that be you might ask? It’s the politicians who give themselves fat checks from the printed money. Remember, It’s never about how much money you have, it’s about how big of a share of all the money you own. This is nothing short of theft and should be looked at as such.
forced investing to avoid inflation
If you want to avoid this loss of money you have to invest it. The safest and most common investments are mutual funds. These funds are a collection of many stocks that you can buy a share of. Many varieties of mutual funds can focus on different sectors and often include the top companies in that sector. For example technology or the energy sector. Another strategy is to buy stock from individual companies. If the company is large like for example Meta or Microsoft, they usually keep up with inflation or even beat it. These big companies win against inflation because of lobbying and corruption.
If you’re a regular person who just wants to save some money. To not lose out, you have to feed the very system that takes away your money. You have no other option. You invest in big companies, they get more lobbying power, inflation increases and you invest more in the companies. This is what I call modern-day slavery. it’s no longer about being responsible, but instead about who can abuse the system the most.
To me, this seems wrong. How can it be that people who provide stability to the economy by saving money lose? By some twisted way, practicing the virtue of temperance is being punished, and we are all fine with that? I say no. Saving money should be rewarding.
The Coming Failure Of The System
Technology grows exponentially. Every day new inventions are created and extraordinary discoveries are being researched. This is a force no one can stop. The only way for the inflationary system to continue working is by printing and increasing inflation at the same exponential rate as technology. This means that the global debt will also increase at that rate. It will simply not work. Sooner or later the system will fail and a completely new and hopefully more virtuous system will take its place.
If a business keeps taking loans and is never able to have bigger returns than the cost of having those loans, it will inevitably fail. The world works the same. This system we live in is not sustainable.
When and how will it crash?
So how and when will this take place? If you want to know the exact date or how exactly it will happen I cannot answer this. But we can learn from previous economic failures and estimate. Historically world reserve currencies last on average 98 years. The US Dollar is at 102 Years as of 2024. So we can guess that it’s going to happen very soon. If you look at how the economy looks you can clearly see that it is coming to an end.
Just as we don’t know the exact time, we also don’t know exactly how it’s going to happen. But if you look at history, we can take France for example. The French Frank ended its domination as the world reserve currency with a revolution. So we can suspect that something similar is going to happen to the US economy. But how? Well, the regular people in France got less and less money due to inflation while the rich lived their best lives. At some point, people had enough and took to the extremes. If you want to know more about livecycles of global reserve currencies, i would recoment reading this post that goes in depth about how these lifecycles look.
The Unique situation of Today’s modern world
All of these things have happened before, but two huge factors differentiate the coming crisis from all the other economic crises. These two factors keep me extremely optimistic about the future because I see an opportunity for the world to change instead of just finding a new global reserve currency and repeating this evil circle.
The first reason is that we are more global than ever before. For a deflationary system to work everybody needs to be in an agreement. If just one nation is deflationary the others will take advantage of it by for example cheap imports. But with globalization, there might be a solution. If the US economy crashes, basically most of the world will crash because most nations have huge dollar reserves in their banks. This could force everyone to adopt the new deflationary system. I hope for not just a nationwide crash but for a global crash. Something that forces everyone to hop aboard the deflation train simultaneously.
The other aspect of my optimism is that there already is a great solution set in place for a deflationary system. Its Bitcoin! Bitcoin is deflationary by nature. It has a maximum cap of 21 million. This means that no more Bitcoin can be created after all of them have been mined. There also is a halving event. very 210,000 blocks — roughly every four years — the block reward is reduced by half, making the coins you have more scarce. Bitcoin goes up in value while all other currencies go down. It is also decentralized. This means that no one can decide to change its rules unless everyone agrees.
Of course, if a worldwide economic crisis occurs we will face bigger challenges than ever before. It will be one of the toughest times in human history. But after the hardships are over we will enter a new age of humanity. An age with completely different rules. A more equal and happy world.
This may seem unlikely, but I honestly believe that out of all the time humanity has existed, this will be one of the few times the whole world will actually change. We truly live in an historical age. This era will be taught in universities for centuries to come.
An optimistic view
You should be excited but also ready. Prepare yourself, because this transition will be hard. You need to acquire economic knowledge and survival skills. You will have to be physically and mentally strong. The strong will thrive in the new environment that is coming. Be vigilant and most of all, keep learning. Stay strong, because on the other side of the coming crisis, is a world so beautiful, you could not even imagine it.