Trial investment thesis: deflation is here to stay, get used to it. Of course we’re used to that in high tech and communication because of Moore’s Law. we don’t model price increases in our business plans. But the rest of the modern economy and the goals of various central banks assume inflation is normal and desirable.
I’ll leave aside whether it’s desirable because I’m positing that deflation is going to happen (except in terms of certain debased currencies).
Energy prices are going relentlessly down. They drive costs, of course, through the economy. Moore’s law has had an effect on these prices both in the more efficient use of energy and more effective ways to extract or even generate it it and manage it in grids. But historically, if you measure by manhours required to generate a BTU, energy costs HAVE gone way down since the first fire was intentionally lit in dry sticks.
Moore’s law will eventually even drive the price of health care down (see Andy Kessler).
Food costs are arguable but energy has much effect here as does genetic engineering and computerized farming.
Currency devaluation as an instrument of national financing becomes more difficult with globalization and perhaps nation-independent currencies.
Obvious losers from deflation are the current banking system (built for inflation), debtors with non-productive assets, and governments both because they are debtors and because they lose the taxes on inflationary portion of interest is there is not interest.
The winners are? That’s the investment question I’m thinking about.
- More Here
I’ll leave aside whether it’s desirable because I’m positing that deflation is going to happen (except in terms of certain debased currencies).
Energy prices are going relentlessly down. They drive costs, of course, through the economy. Moore’s law has had an effect on these prices both in the more efficient use of energy and more effective ways to extract or even generate it it and manage it in grids. But historically, if you measure by manhours required to generate a BTU, energy costs HAVE gone way down since the first fire was intentionally lit in dry sticks.
Moore’s law will eventually even drive the price of health care down (see Andy Kessler).
Food costs are arguable but energy has much effect here as does genetic engineering and computerized farming.
Currency devaluation as an instrument of national financing becomes more difficult with globalization and perhaps nation-independent currencies.
Obvious losers from deflation are the current banking system (built for inflation), debtors with non-productive assets, and governments both because they are debtors and because they lose the taxes on inflationary portion of interest is there is not interest.
The winners are? That’s the investment question I’m thinking about.
- More Here
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