The Price of Tomorrow

The other day my niece shared with me how disappointed she was to only receive £2 from the 'Tooth Fairy' on the evacuation of a tooth.

I then shared with her how her mum and I used to pop down to the local shop as kids and buy sweets for 1 penny–and even half pennies. If you're old enough you may remember the Gobstoppers, Fruit Salad Chews and Liquorice Torpedoes?

That was a lot of sweets you could get for £2. Think what little you can get today for the same amount. Not quite as many! 

The process of production and distribution is constantly improving through technological efficiencies which naturally reduces costs. This has an impact on jobs though even that leads to less staff overhead which is also a cost reduction. More on job losses later.

Why do prices keep rising?
So the question is, why, when we see technology impacting our lives in such ways to make things cheaper, are things actually more expensive?

That's the premise of Jeff Booth's book The Price of Tomorrow–Why Deflation is the Key to an Abundant Future, which, even though it was published in 2020, was written before the current lockdown situation. So what he says in the book is even more prevalent now as the rate of change is happening faster than ever.

So, what does he say? "Technology provides efficiencies and that efficiency is deflationary." Basically, prices go down which should mean "abundance to society." We get more for less. 

Think of all the recent advances in technology. He covers areas like AI, energy, self-driving cars, virtual and augmented reality. All these areas have the potential to have a deflationary effect on prices, and some of course already are.

This brings with it the immediately negative prospect of the loss of jobs. When all cars are self driving, what will the taxi and lorry drivers do? What about the bus drivers and couriers? All of these people are set to lose their jobs. But rather than this be viewed negatively, this is an opportunity to reframe the way we view jobs and employment.

Of course it's never as easy as that and there's no escaping the fact that many will and do suffer due to radical changes like these. But from the ashes of Blockbusters arises the phoenix of Netflix. With the death of Kodak, arises GoPro. Where one company fails to adapt to the new environment, another replaces it. There is nothing wrong with this. It's natural.

But still we haven't answered the question of why it is that technology drives prices down, yet most things seem to be more expensive. 

An epic battle
Jeff describes this as a battle between two systems. One is inflationary, the other deflationary. The governments are living in the old system, a relic of the industrial age. Their decision making is all about inflation. They want people to spend money–even if it means taking on debt. It's really 'spend money at all costs'. 

Within their economic framework, they desire inflation–rising prices. Think the way house prices have skyrocketed over the years. They never seem to go down for any considerable length of time, hence the phrase 'safe as houses'. 

This does not mean a house is actually worth more than it was 20 years ago, as again technology within the construction industry has meant that it's far cheaper to build a house today than in the past. It costs more to you and me because it's not a natural pricing structure.

What causes these price rises is in no small part due to governments ‘printing money’. Of course they don’t actually print money these days. as Booth describes, “–it can just be given as balance sheet credits by a central bank.” Whenever you hear phrases like 'stimulus package,' 'quantitative easing' you know this essentially means governments creating money out of thin air.

It's like going into your business accounts, editing it to add a few zeros to your balance sheet. If you did it, you'd go to jail for fraud. When the government does it, it's called 'economic policy.' And every time they do it, it reduces the value of the pound or dollar in your pocket.

The first two sections of The Price of Tomorrow cover 'How the Economy Works' including the printing of money and the effect on society. Very informative.

Winners and losers
The winner of this epic battle between these two opposing forces; the deflationary effect of technology and the inflationary manipulation of currency is anyone's guess. The sad thing is, this fight is the cause of so many of the problems we see today.

Think about a hot topic these days, that of 'wealth inequality.' This is not increasing because of the greed of a few rich people. It's because of the aforementioned system. Every time money is printed those with high net worth who have investments in the stock market or property, gain. It's not their choice. They are not all forcing the system to create more wealth for themselves. And many of them are not even trying to gain more money. It's a by-product of their businesses and investments. 

Take one of the richest men in the world–Elon Musk, CEO of Tesla, Space-X and others. I loved his comments when someone tweeted him that he'd become the richest man in the world (he’s since dropped back to number 2...). He simply said, "How strange." "well, back to work…"

This does not mean there aren't many bad actors trying to manipulate the markets due to pure greed. That is unfortunately part of our sinful nature. There will always be greed.

The natural order of things
But Jeff asks, "What if the natural order of things was permitted? What if, instead of trying to stop deflation at all costs, we embrace it? As technology spreads, deflation happens at the rate it should. Deflation becomes something celebrated because it means we are getting more for less."

That principle does mean the loss of jobs, but with currencies not artificially being manipulated by governments, then people will "no longer have to be on an endless treadmill to pay for things that are constantly rising in price." It could mean the end of the 9-5 for many people, not needing to trade their most precious commodity–that of time–for money.

However, this is scary. Just as some people at retirement have an internal crisis not knowing what to do with all their time, so it will be with many others. "Our careers are far more important to us than just the income they bring," says Jeff. 

Even in the bible we are instructed to work. This is part of who we are. That does not mean it has to always be for money–in terms of currency, but ‘if you don’t work, you don’t eat’. It is a vital activity for us as humans.

But the ‘natural order of things' I can't see happening without incredible loss to many people–especially some of the poorest. This is a key area where more questions need to be asked and solutions provided.

Ask the big questions
We are living in incredibly fascinating times. The rate of technological progress is astounding. We have the opportunity to use this time to the best of our abilities. Jeff Booth doesn't pretend to have all the answers. In fact I like the way he says, "I wrote this book to get us all talking and thinking–and asking the big questions. Asking big questions is sometimes more powerful than the solution itself..."

I think he achieves that. 

I hope that the world my niece grows up in is one where money has a realism about it. Where currencies aren't unnaturally inflated and perhaps even 2 pennies (or their equivalent) would be valued higher than she currently values £2.

But talking of realism, another question to ask is will currencies exist in the same way in the not too distant future? The constant printing of money and devaluation is leading to the rise of other forms of payment. Bitcoin anyone? But that'll be for another post...

I recommend you get hold of The Price of Tomorrow, today...before the price increases.

These can be worrying times if you don’t have clarity on your values around money and finance. If you want help in reframing how you think about these issues, book a no obligation enquiry call.