Technology is Deflationary

Have you ever noticed that despite technological advancements, the cost of goods and services seems to be increasing? One might expect that as technology improves and makes our lives more efficient, the need for labor would decrease and the price of goods and services would decrease as well. However, it seems that people are working more hours and some are even taking on multiple jobs. This raises the question of why this discrepancy exists.

The industrial revolution brought about the use of machinery and automation, which greatly increased human productivity, particularly in agriculture. For example, farming tasks such as land preparation, planting, and harvesting used to be labor-intensive and time-consuming. However, with the advent of machinery, these tasks can now be completed more efficiently and at a lower cost. Despite these improvements, the cost of living has not decreased and has risen over time.

Technology has the potential to drive down prices due to its ability to increase efficiency and productivity. In a capitalist society, competition and technological advancements should lead to lower costs for goods and services, as well as fewer working hours for people. However, this has not been the case. Some speculate that the reason for this is that we are operating within a flawed economic system, characterized by fiat currency, credit, and quantitative easing, which can lead to the depreciation of money over time. This could be seen as a hidden tax on consumers.

One strategy to potentially mitigate the impact of inflation is to accumulate assets, as their value tends to increase when there is an increase in the money supply. However, this idea is not widely understood by the general public. Additionally, the Cantillon effect theory suggests that individuals who have access to new money before it is widely circulated in the economy may be able to purchase goods and services at a lower cost before prices are adjusted for inflation, giving them more purchasing power. On the other hand, those who receive the new money later, typically non-asset or business owners, may see prices rise as the new money is circulated throughout the economy.

“Working exponentially harder, for a currency growing exponentially weaker” – Michael Saylor

Given the current economic system, it is important to understand its limitations and work within it. The potential impact of inflation and the value of money may vary depending on the country in which a person lives, with the outlook potentially being different for those in Latin America, Asia, Europe, and North America (especially the US, as the issuer of the world reserve currency). Some believe that technology, such as Bitcoin, artificial intelligence, and other innovations, may provide a way to gracefully coexist or even exit the current system. Nevertheless, many variables can influence the direction of economic development, including macroeconomic policies and geopolitical factors.