I grew up studying Keynesian economics at school, for me, inflationary economics is a core theory that I’ve never questioned. The thinking goes like this:
Moderate inflation is needed so that people are incentivised to spend instead of save, more spending creates more jobs, more jobs lead to a better economy and a bigger GDP.
There are many more reasons that are taught in school why moderate inflation is good and the alternative is a disaster. So much that I have never heard of or tried to look into deflationary theories, or Austrian economics.
Recently, I listened to a podcast from Jeff Booth, author of “The Price of Tomorrow” and baffled by a totally different way of thinking:
Technology is deflationary by nature: technology combined with economy of scale mean people produce more stuff for cheaper over time. As human automate more, the logical result is less jobs, not more jobs, or shorter working hours, not longer working hours.
In order to push “more jobs” using an inflationary theory, to go against the natural course of technological advancements, there are two things that must be done: - People must be encouraged to consume more and more, this could lead to consumerism and environmental wreckage - Currency must inflate almost as fast if not faster than the deflationary speed of automation. As only government can print money (inflate a currency), the money printed naturally cause a concentration of power around entities funded by/ benefited from the government. Unless there is close to perfect redistribution of value, the wealth gap gets bigger over time.
🤯 Mind blown
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