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I’m sure many of us have read Jeff Booth’s The Price Of Tomorrow, which describes how new technologies are deflationary. He discusses artificial intelligence as an example, and of course bitcoin.
I have no doubt that his vision of the future will come to pass, and bitcoin will be the money of that future. In the meantime, though, I am wondering if the incredible growth of generative artificial intelligence might help to prop up the fiat system for a while, buying time for central banks to kick the can down the road.
This article lays out what I’m talking about:
There’s no doubt that the U.S. Government needs inflation to monetize the incredible amount of debt it has built up. Without technological advancements improving efficiency, that inflation would likely spiral out of control quickly. AI might in fact keep inflation in check just enough to allow this house of cards to remain standing for a while.
I’m wondering what other stackers think?
One could argue potential productivity gains from AI is the only hope the fiat system has left besides outright debt monetization. Personally, I think debt to gdp is a stupid measurement to use but everyone uses it so that gives it some value. Theoretically, if AI can increase productivity in excess of the rate the debt is increasing, debt to gdp will continuously decline and all the participants in the fiat system will likely think everything is fine and play the record all night long.
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Exactly. Productivity can prolong the show for a while.
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Maybe. I don't spend energy on understanding these things much. I focus on what I want to build. We all know where we are headed and that's all that matters to me.
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I can certainly understand that. I enjoy the hell out of thinking about this stuff for some perverse reason.
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It's super interesting. I like watching in a sense from afar. I think technology is awesome when it works for us. I just can't get into the weeds.
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Oh, I don't have much interest in AI. I meant I'm interested in the economics of it, and how it might affect bitcoin adoption.
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Yeah, I get it. I imagine it has an impact short term.
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I think it might help, but it's not a definitive solution. It can help detect fraud and improve efficiency, but the problem is structural and that's harder to solve. The economy needs inflation, say 2%, but with the massive printing of money, it's difficult to keep it at acceptable levels. Only time will tell.
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US needs to stabilize its dollar debt empire for sometime, imo. If it doesn't it risks being insolvent, not today, not tomorrow but within the next decade.
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It's an interesting dynamic for sure. The scenario you're describing would likely have enormous economic volatility.
Offsetting the deflationary pressure from a major technological advancement will require extremely artificially low interest rates. That's going to cause wild misallocations throughout the economy.
At the same time, the technology itself will be causing major disruptions throughout the economy, so the search for equilibrium will likely involve wild swings.
One of the things that the past few years of supply chain disruptions has made clear is that the enormous regulatory burden on our economy has made it very rigid, so it's not going to be able to smoothly adjust to new conditions.
That's a recipe for shortages, bankruptcies, mass layoffs, etc.
Ultimately, that kind of volatility in the underlying economy is not great for the fiat currency residing on top of it.
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There’s no doubt that the U.S. Government needs inflation to monetize the incredible amount of debt it has built up.
Exactly, you're correct 💯
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