Thank you.
I want to thank the finance committee for inviting me to speak to you again.
On my last invite to this committee, I explained that, as outlined in my book, an economic policy that requires inflation is incompatible with exponentially advancing technology. They are opposite forces. Entrepreneurs using technology are trying to deliver more value for less to society, which equals deflation, whilst inflation is moving in the opposite direction. While it is easy to get fooled looking backwards, most of the technology gains are in front of us, which means getting more for less—deflation—is a completely natural process that embraces human innovation in the free market.
In other words, policy that is unmanipulated allows an abundance gain from technological progress to be broadly distributed to society instead of concentrated. By failing to recognize the root problem and instead dealing with symptoms, policy-makers become unknowing participants in a game that will have disastrous consequences for us all. I'll try to illustrate what's happening through a simple game.
In the game of Monopoly, once enough properties are owned by a single player, renters can't afford to pay their rents and are therefore forced into bankruptcy. The game ends. For those of you who have played, you will notice how systems work. Once you have an early advantage, the game becomes easier. You have the rents to acquire more properties and add more houses and hotels. A positive feedback loop is created, concentrating wealth. You might also notice that the wealth in the game might be due to luck. Landing on the right squares early in the game gives you a massive advantage—right place, right time. Conversely, missing out on acquiring those assets early creates a negative feedback loop, which also reinforces itself. The poor become poorer until they become insolvent, as they move around the game board paying higher and higher rents.
Fortunately, it's just a game. The game ends. Somebody gets bragging rights. All are given a fresh chance to win when the game begins anew, with everyone being equal. But what would happen if the same positive and negative feedback loops happened in life, with the winners acquiring more because they had the assets first, concentrating their wealth and enjoying privileged access to the best of education, medical and other services?
For the sake of argument, let's imagine in this life game that there was this giant force—let's call it a central bank—that required inflation and therefore wouldn't let prices fall, which only concentrated wealth faster and wouldn't allow a reset of the game where new players had a chance. How long would the losers of the game play the game when they realize that the game was rigged against them? What if they couldn't pay their rent, education or food with the game continuing to get worse? What if the game wouldn't end for them? What would those people do? More importantly, if you were them, what would you do?
I would suggest you might do one of three things. Number one, you might listen to and elect leaders who tell you they will give you free money. The irony of that free money is that it comes at a huge cost in perpetuating the system of inequality. The debt is too big to ever be paid back with higher taxes. That free money must come through the printing of money and higher inflation. Inflation is the worst tax of all for society. It's a hidden tax. It's levied upon society's most vulnerable because they don't have the assets that rise with inflation and they don't know better. Inflation is a process by which the purchasing power of their real wages and savings gets destroyed.
Two, you might rise up against the winners and burn the game to the ground. I think you're seeing this all over the world.
Three, you might play a new game, one where your money couldn't be confiscated by inflationary policies. That's what you're seeing with the rise of Bitcoin today.
The societal consequence of changing the rules of the game to stop the natural clearing function of markets and lock new players out is concentrating wealth and power, and in doing so it is making the world ever more dangerous. The consequences are very predictable. The crazy thing is that the same thing the central banks and governments are trying so hard to prevent—prices falling naturally because of exponentially advancing technology—might be the best game we ever played.
My message is non-partisan. I fully comprehend the severity of the choices the policy-makers on both sides of the aisle are grappling with in trying to save the system while only making the problem worse. These are difficult choices with no easy answers, but instead of platitudes, I do believe Canadians deserve the truth with respect to something so important as their money: where it comes from and why the manipulation of money is a requirement of the existing system.
Manipulation of money has consequences. Those consequences are far more severe than the monetary theorist policy-makers seem to realize. Technology's progress has changed the rules. Ignoring that structural change by printing money is coming at a great cost to our society, our environment and our children. On the current path, it will get much worse.
For the sake of all Canadians, I encourage the government to investigate this more deeply. There is a much better path, one that's congruent with where human innovation and technological progress are taking us, a path that will lead to broad-based abundance.
Thank you.