For generations, prosperity rested on a simple idea: produce more than you consume, save the difference, and leave something behind for those who come next.
Jeff Deist argues that today’s monetary system has steadily reversed those incentives, rewarding debt and consumption while making ordinary thrift increasingly difficult. The consequences, he argues, extend far beyond purchasing power.
When an economy begins consuming accumulated wealth rather than building upon it, inflation becomes more than an economic problem. It becomes a question of:
What kind of society will our generation leave to the next?
Read the transcript below.
Transcript
How did The West get so rich?
Jeff Deist
Good afternoon, everybody. Great to see you. I would ask all of you, when you’re speaking to normies in your friends and families group, in your business world, when you meet people on airplanes, whatever it might be, there’s really two questions that all of us in this room have probably already thought about, but there are two questions we need to be asking the broader world and forcing people to think about. They’re very simple questions, but they’re also profound questions. The first question is, not just for America, but for the West more generally is, how did we get so rich?
Do we ever really think about that? The second question is, and what if it all went away? We are so soft, so comfortable in our Western material lives that we don’t think about these things anymore, but we ought to think about ’em. And they’re not just academic or rhetorical questions for, let’s say, the younger generations, the millennials and the Zoomers coming up, not academic or rhetorical at all. They’re struggling.
They’re struggling with paying for college, with college loan debt. They’re struggling to get a mortgage. They’re struggling with affordable apartments. They’re struggling with romantic prospects and family formation. And most of all, they are struggling to find a sense of optimism.
And that, folks, is really, really different. That is un-American. In this country, we expect things to get better. And if an entire generation or two profoundly is convinced that Things are not going to get better. We got a problem and we better address it.
I can’t speak for you, but speaking for me as a young guy, high school and college in the ’80s, I had a huge sense of optimism. I thought I was going to have a pretty good life. I was going to maybe do better than my parents. So this is something that really is different. It really has changed.
This isn’t just the typical get off my lawn, older generations looking at younger. So I just want to make that point. So when I say, how did we get so rich? I mean, we know it was deflation, right? It was productivity.
But what I mean by rich is this almost unbelievable amount of comfort and wealth that’s just at our fingertips, that’s available to average people. I mean, I’m talking about things we don’t think about: hot and cold running water at our fingertips, electricity at our fingertips, internet flawless at our fingertips, air conditioning—never think about it—unbelievable cars that are extraordinarily safe and durable compared to, you know, your dad’s Dodge Dart in 1975, air and space travel.
You go to the grocery store, we have a grocery store, my goodness, full of meat and produce, fresh stuff all year round. Tech that would have been considered sci-fi even 50 years ago. We’ve got access literally to all the world’s sum total of knowledge and history in this little device in our pockets the size of a deck of cards.
We have a Starbucks on every corner. We have a Starbucks in our hotel. We have Walmarts and Amazons. They have hundreds of millions of SKUs, of little things you can buy. We have medical drugs and procedures that promise health and longevity beyond anything ever known.
We have instantaneous free communication around the world with things like Zoom and Signal, and perhaps the greatest democratizing lever the world has ever known, which is namely the sum total of all human history and knowledge in this device. For every generation before us, especially let’s say our grandparents and earlier, the challenge was just access to information, right? You had to go to a library, you had to get the book, you had to go listen to the professor’s lecture. It was all about access to information. Now it’s about sifting through too much information and not being paralyzed by all this white noise that surrounds us.
What happens when prosperity disappears?
Jeff Deist
We live in this world of unbelievable material wealth and comfort, but yet as Americans and as Westerners, we can’t even be bothered to think about how it all came about. We take it for granted. And if you think we’re at each other’s throats politically now, imagine just, let’s say, a 2008-type crisis, right, with the way the country is now. Imagine a Great Depression, like the 1930s, when people were unbelievably tougher than us, far more self-sufficient, lived on farms, produced a lot of the things they needed themselves. These were tough, self-sufficient people the last time we had a real depression in this country.
We like to think it can’t happen here. Of course, we certainly hope it doesn’t, but I’m gonna make a recommendation to you, a book recommendation. You can find it on Amazon. It’s called Blockade The Diary of an Austrian Middle-Class Woman1914 to 1924. It’s a book my friend got me. It’s about the German hyperinflation during the Weimar period.
It’s about a woman named Anna Eisenmenger, and she sees in just a few short years her beloved Germany, which is one of the most prosperous educated, sophisticated countries on the globe in 1914, full of PhDs, full of brilliant technology.
She sees not only her country but her family—she sees her family fall into shame and starvation and disease and blindness and loss of limbs and prostitution, all because of this German hyperinflation. So it can happen here, and things that we can’t even begin to imagine occur in that book. And that’s why I suggest it as a very profound read, a very humanizing experience. So my message today, what I’d like you to take away from this talk, is very, very simple.
We should be thinking about investing and monetary policy and fiscal policy in moral and cultural terms. It’s not just about numbers. Our current monetary and fiscal policies, in my view, they’re immoral. They have profoundly negative cultural effects. And so when we get caught up, and I’m guilty of this, as anybody.
When we get caught up in following the Fed’s every move and the minutia of what they’re doing and chasing charts and graphs and worrying about which investment we have and how we should tweak it and looking at our Vanguard account or our E-Trade account, we lose sight of the big picture.
And the big picture is that if we, America and the West, continue on this path, we risk something far worse than just the loss of wealth, and that’s plenty bad. We risk the loss of this cultural inheritance that’s been bequeathed to us, and that which I very certainly think we owe to future generations. And that’s not something I wanna hold on my conscience or be responsible for generationally or personally. So I’d like to begin with a story about my grandfather.
The “Grandfather Index” explained
Jeff Deist
My grandfather lived with us for a time when I was a little boy. My grandmother had suffered a fall and gone into a home, and he was sort of too old to live by himself, and so my parents worried about him. They brought him into our house. He smoked cigars. Which my mom was having none of it.
And so she forced him to go, you know, walk outside to smoke cigars. And I got to walk with him as a little boy. And when you think about how our memories betray us, I think I was maybe 30 years old, he was long gone, and my mom asked me, “What do you remember about him?” And I remembered the walks with his cigars. And I said, “Well, I just remember he was really tall. He was a very tall guy.” She said, “He wasn’t tall at all.” That’s how our memories betray us.
And so he had lived through the Depression, of course, And he had obtained an electrician certificate by, get this, a correspondence course. This is something you find in the back of a magazine, learn how to be an electrician. And then he filled out the little card and sent it in by mail with probably some physical currency in the mail. And he got the course back and he would read the things and he would take the tests and send them in by mail and someone would grade them and he’d get them back. And that’s how he became an electrician.
And that’s how he made a living for his family. And like a lot of Depression-era folks, he didn’t throw anything away. And one of my fondest memories is his garage, which smelled like cigars, and, uh, he kept all those beautiful cigar boxes. Do you remember those? And each one of ’em was full of nuts and bolts or things he thought he might need someday because you just didn’t throw that stuff away.
And he was a tinkerer. And so it was just, you know, someone to whom I’m personally connected. Think how far away, how different that life was that he lived versus ours. And what’s so amazing about it, of course, is he didn’t have to go out there in his life and chase yield. Right?
He didn’t have to think about, well, should I buy Nvidia or should I buy some Tesla stock or should I buy Bitcoin? He didn’t have to short stocks and use options or margin trading. He didn’t have to hedge against some commodities position. The other thing that’s interesting is he didn’t need a credit score or a Social Security number to get a mortgage. His job and his reputation was enough with his local bank to get a mortgage.
And one of the things that influenced interest rates with his mortgage at his local bank was how much people in his town had saved and put into that bank. There was actually a connection between savings and lending, not that long ago, just in the lifetime of my own grandfather. So he earned a modest paycheck as an electrician, but what he did was he saved money. He saved money. It’s simple.
It’s not easy, but it’s very, very simple. It’s simple thrift. It’s spending less than you make and saving the difference and relying on good old-fashioned compounding interest. So like I said, it’s a very different time. So what we need today, I think, as a measure of a just and a healthy economy is something that I would call the grandfather Grandfather Index.
And the Grandfather Index is basically the measure of how healthy an economy is. It’s the difference between the simple savings rate available to average people without much risk in, let’s say, bank savings accounts, in short-term CDs and money market funds, minus the real rate of consumer inflation. So what’s the savings rate? More or less risky, you’ve got some bank risk, etc. But the savings rate less real inflation, I think, is a very, very important index.
And it’s not something you hear people people discuss very often. So the bigger the delta, the better, right? Especially for people of modest income like my grandfather. And a negative number— if the real rate of inflation is larger than simple savings rate, a negative number means average people are getting poorer. And unfortunately, I think the Grandfather Index is in decidedly negative territory today, depending on what measure of consumer inflation you wish to use.
There’s a lot of different ones. There’s PCE, there’s CPI, which I think is absolute nonsense. I tend more towards the, uh, fever swamp of shadow stats and zero hedge in my own thinking. So I would say that I think real price inflation, when we consider all the things people actually have to buy, like college educations and healthcare, I think it’s way in the higher, in the single digits, perhaps approaching double digits. And of course, the typical savings rate you can go out and obtain today from your bank, even a high yield savings might might get a little over 4%, but generally we’re talking about 2.5% to about 4% on a demand deposit simple savings rate.
So I would argue that right now we are several points negative in the grandfather index, and that is very bad news, very, very bad news, because average people shouldn’t have to worry about chasing yield. They should not have to time the market. They should not have to be stock market experts. They shouldn’t have to sit around and watch CNBC all day and try to figure out how to beat these quants and these algorithms who do it 60 hours a week professionally, and they still lose their shirts half the time. We really expect average people to do that?
So the grandfather index is a proxy. It’s a proxy for an inflationary versus a deflationary economy, which is a proxy for capital accumulation, which we want, versus capital depletion, which is really a proxy for civilization versus de-civilization. And that’s really where I think we are.
Why saving no longer works
Jeff Deist
And when fiscal and monetary policy, when politics are all intentionally and openly designed to thwart deflation, to basically upend the grandfather index, then we got a real problem. It’s awfully hard to conclude anything other than our own government wants us poorer.
So when in the good old days, when lots and lots of people like my grandfather saved and invested, when they consumed less than they made, we call it thrift, we call it savings. But what it really is across society, across whole swathes of society, across countries, is capital accumulation. That’s the term for it. It’s not just economic, it’s civilizational, and it’s cultural. Thrifty people like my grandparents, generation after generation, bequeathed all this wealth to us.
And they didn’t just do it out of love and sacrifice, although that was part—they did it because the monetary system rewarded saving. That was how you got ahead. You multiply that over time, over millions and billions of people, that’s how you get a Starbucks on every corner.
And that’s why it’s so important that when we talk about capital, when we think about it in our personal lives, in our investing lives, we We have to reject this narrow thinking, this sort of homo economicus, neoclassical definition of capital. You know, capital’s the factors of production that help us make money, or they generate value by producing goods or services, but there’s really a far broader, a more accurate definition, and that is the sum total of our cultural, social, and economic inheritance.
And that starts to feel pretty heavy. You know, we’re talking about knowledge and wisdom and know-how, and so there’s lots of ways to burn capital. It’s not just when, let’s say, an Enron collapses and all that market cap and all those shareholders, you know, their wealth goes poof. We think, well, that’s capital destruction. It is, but there are cultural capital that we can lose too.
And I would argue that when we can’t recreate certain elements of the Notre Dame Cathedral in rebuilding it, we simply don’t have the tradecraft or tradespeople today with the know-how to do that. The craftsmanship hasn’t survived. When nobody speaks Latin, when nobody writes cursive, when our attention spans and capacity for deep thought and focus are lost and eroded by these dopamine screens that we all have, that’s cultural capital that we’re losing. And that’s something I think we gotta be worrying about. So this is the real culture war.
The real culture war is fought over these two profoundly different competing views of humanity. And I would argue that they can’t coexist, or at least not for long. And capital accumulation is really at the heart of it. It’s at the core of it, and it’s a cultural and moral thing. So one worldview, we can call it Keynesianism.
It’s courtesy of our friend John Maynard Keynes. The other is Jean-Baptiste Say. Some of you have probably heard of Say’s Law, the 18th century French economist. Be pretty cool to have a law named after you. Say’s Law.
So Say’s Law of Markets, just, it’s just a fundamental reality of all economics. It’s something that all government policy and really all economics today is designed to ignore. But Say’s Law basically says that production production precedes consumption. You gotta make stuff before you consume stuff. And only by producing stuff can you create demand because that’s how we all get an income, right?
We all go out and at least in our working lives, maybe in our investing lives as well, we, we produce a good or a service that someone pays us for. And that’s what gives us the ability to have a home and cars and all the stuff we buy. So production precedes consumption. And now this seems like kindergarten, important stuff. But yet we spent the entire 20th century basically with wartime economies and otherwise trying to disprove this, trying to say no, no, no, it’s all about consumption.
Keynesianism vs. capital accumulation
Jeff Deist
If we just have a lot of people who want a lot of stuff, we’ll get richer. The problem of course is you can’t have Keynesian stimulus if there’s nothing to buy, if nobody’s making anything. More money and credit by themselves don’t make us any wealthier. And we all know this, I think, on some level, but we’ve just ignored it. We’ve evaded it societally.
Monetary Metals
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Jeff Deist
And so organizing society around consumption and living for today at the expense of tomorrow, it’s not only immoral—and I don’t think you need religion, theology to understand this or accept this. You really just need history.
It’s not something that would have been familiar to our grandparents and great-grandparents. So we’ve lost sight of this, and how we lost sight of it is complex, to be sure. But in a sense, we don’t even really know what money is anymore. We talk a lot about money, but what is money? Is it just that paper currency?
Is—there’s lots of things that have moneyness qualities, including U.S. Treasury debt at this point. So we can learn a lot from history of course. And there’s been some discussion, I know, this weekend about interest rates and where they’re headed and what that means. I would really recommend reading James Grant and Grant’s Interest Rate Observer to get a really good view of the history behind interest rates. But James Grant tells us that interest rates are totally unique in economics in that they rise and fall in these sort of generational length intervals.
You can’t really say that about stocks and real estate and other investments. Investments, but it’s really uncanny. So after the Civil War period where there was a lot of spending in both the North and the Southern governments, interest rates basically fell from the Civil War till about the turn of the century. They rose again in a relatively happy golden age from 1900 to 1920. They fell dramatically from 1920 till about 1946 in the period of the Second World War, and then they rose from ’46 after the war till 1981, roughly which is the era of Paul Volcker and the end of Jimmy Carter’s time in office.
And so it’s this period, especially this later part of 1946 to 1981, where rates really, really rose for many, many, many years. And that’s where my grandfather’s thrift really paid off bigly, as they say. That’s the period where his money made money. But we’ve now entered a period where interest rates are rising again. They fell, of course, up until from 1981 till about the beginning of the COVID era, 1921.
And they fell to the point where we not only had negative real rates on some European debt, we had nominal negative rates on some European debt, if you can remember that. Imagine having negative interest rates, nominal negative interest rates. That goes against everything we’ve ever learned about interest rates, right? I mean, people will pay you more tomorrow for something today, but you wouldn’t take less tomorrow to give somebody something today. It just doesn’t make sense.
Negative interest rates are clearly crazy. They’re crazy on their face. And so when that sort of thing happens, we have to start asking questions. So for the last 4 decades, with these falling interest rates, even in the negative territory, savings, like my grandfather, has been for chumps, right? Why save money?
40 years of falling interest rates
Jeff Deist
Money’s cheap and it’s falling, and I can borrow lots of it cheaply. So we’ve all been chasing yield because saving has been for chumps. And that’s for 40 years. That’s a long time. That’s more than a Wall Street banker career.
And so as a result of that, we have a whole industry of economists and analysts and bankers and talking heads on the financial shows who have basically never seen, until now, a bear market in rates. So they don’t really know how to deal with this. These quants, these Ivy League people, these Wharton people, these Stanford people at investment houses, they don’t understand history. And why should they? It’s been working great until recently.
The baseline cost of capital has been less than 3% throughout their careers. So cheap credit and rising stock markets is all they know and all they’ve ever known. And as I’m sure a lot of people in this room have experienced, you know, lots of projects make sense when they’re funded with cheap debt rather than equity, or as we might say, with other people’s money. And when these projects go public, the number go up and everybody’s very, very happy until number go down. And that’s what I fear is about to happen in spades.
And so when these under-50-year-old or under-40-year-old old bankers and investment financiers don’t have any understanding of the basic function of interest rates, that they’re supposed to be prices, that they have a historical component to them, that they have a cyclical component, that they’re supposed to help us price capital and allocate capital, allocate resources their best and highest uses, we’ve got a real problem.
Because the investment class doesn’t know anything about interest rates or understand interest rates. So that means you, everyone in this room, is on you’re on your own. People don’t know anything more than you. They might know less, and what they do know might hurt you. So interest rates now are viewed not as prices, they’re viewed as policy tools.
They’re something that technocratic bankers, Treasury managers can get together and fiddle with when the economy either overheats or it chills. And it’s all very Soviet, this idea that we can adjust interest rates and fine-tune things. This is a lot like a Soviet planner saying, well, how much wheat should be produced this year, what should be the hourly pay of an auto worker, right? It’s not something we, we think of as part of the free market, but yet the Fed and other central banks are in fact a big part of the unfree market. They try to set interest rates, which is a perverse goal in a supposedly free economy.
It’s also, I think, impossible in the long run. You’ve heard this expression, pushing on a string. Well, that’s where central bankers are right now. They’re trying to do things, but interest rates are going to rise. They’re going to rise no matter what they do.
It may not be fast, it may not be today, it may not be tomorrow, but they’re going to rise. And they’re not—we’re not going to have another 4 decades of falling interest rates and negative rates. Money is going to return to its natural rate by hook or by crook. And so these people don’t understand money is money, and they certainly can’t imagine a world without monetary policy, right? We talk all day about the dollar, and we think a lot about the the quality of, let’s say, the goods and services we want to buy.
We go out and research a car before we buy it, but people don’t think nearly as much about the quality of the dollar that they receive for that good or service. And I used to think, well, surely, as an aside, markets take care of this, and these big companies, they understand dollar devaluation and credit risk and all these other things, and so they bake this into the price, right? When you go buy a Honda, Honda’s already figured out what Uncle Sam’s doing to the dollar, and so they price that. Today, I’m not so sure that’s true. I’m not sure that big corporations understand monetary policy at all.
So in fiat land, unfortunately, and in low interest rate land, that quality, not, of the dollar goes down and down and down and down. And that’s what we found in our lifetimes, that everything political gets worse. And why should we expect money to be any exception to this? It’s not like my grandfather’s dollar. It’s a different thing today, and we got to protect ourselves against that.
How cheap money financialized America
Jeff Deist
And of course, one of the big casualties of this experiment, but 4 decades-long experiment, in juicing the economy with artificially low interest rates. There’s been this phenomenon we can call the financialization of the economy. I’m sure you’ve heard that term. And this just adds fuel to these populist concerns. That’s what gave us Trump.
That’s what gave us this Mondame guy in New York City. The loss of working-class manufacturing jobs, money flowing into Silicon Valley, and Wall Street but not into Main Street America or manufacturing jobs. I mean, I think that’s all entirely true. And so when the left wants to tell us about the undeserving rich, there is some truth to that when those people got rich by moving money around instead of actually producing a good or service that benefits us and that the market demands and that helps society.
So I know this concept of financialization, a lot of purist libertarians reject it that capital allocation is always this noble market function and that investment bankers produce things that—they’re not as tangible as a farm or a factory, but nonetheless they are producing things that we need.
But I have to disagree. I think financialization is about distortions and malinvestment. It’s not about whether America should be an information service economy or a factory and farm economy. It should be both. But financialization is real.
It’s definable. It’s is described as making money by using money, by moving money around instead of producing stuff. And so we have these ordinary non-financial firms. You could say that MicroStrategy is one of them. It’s supposed to be a software company.
They’re spending all their time speculating on Bitcoin and investing in Bitcoin rather than innovating the actual tech that MicroStrategy is supposed to produce. So when firms start to focus on managing the money they’ve got, debt and even selling shares to get more instead of innovating better and cheaper ways to bring us goods and services. I think that is a nasty symptom of this financialization that is happening in an inflationary world that we live in. So you have firms, they, they change their whole capital structure, their mix of debt and equity that funds them. They spend all their time worrying about taxes and government and financial markets instead of worrying about their own business or industry.
Whatever they’re in, and they contort themselves. They become sidetracked by this, and they start making sense only when viewed through this lens of financialization. They engage in stock buybacks. I’m sure you’ve heard a lot about this. They do all this sort of listless M&A activity that doesn’t really add anything.
It’s often leveraged when they do it, and they’re not really growing their market share organically. They’re just flailing around trying to do something with their cash. They borrow a lot of money to finance operations because interest payments up until recently, interest payments at a low rate, and also they’re deductible unlike dividend payments. And so shareholders just have to suck it up and hope that number go up and that someone buys that share from them, because there’s not going to be a dividend, folks. As a matter of fact, Amazon, which has been a public company since I believe 1998, has never paid a dividend.
And a lot of people think that that’s great, that that’s a-okay, because they’re pouring it all back into CapEx and they’re coming out with new things and that Amazon is this wonderful example of why dividends are this obsolete concept and we should just, you know, expect number to go up and have capital gains. Well, at some point that becomes a Ponzi scheme. If a company never pays a dividend, what does it mean to own a company that never pays a dividend? It means the only way you get out is number go up. And imagine any other kind of business.
America’s growing debt problem
Jeff Deist
Imagine opening a chain of dry cleaners in your town or a pizza restaurant or some, you know, small business you could understand. And saying, okay, we’re gonna just operate this restaurant for the next 30 or 40 years, and we’re not gonna pull any money out of it to pay our mortgage or put our kids through college, and we’re just gonna put it all back into the business, and someday we’re gonna sell that pizza restaurant for 10x, you know, or 100x, whatever it might be.
I mean, that would be a pretty strange mentality, but somehow with these mega corporations, we think that that’s a-okay. And so I’m very distrustful of Amazon. They’ve never really made money outside of their web services, their cloud.
Prime still loses money. You say, like, oh my gosh, I went on—you know, I ordered something yesterday, it showed up at my house today, and it’s right here. This is unbelievable, this is great. Yeah, it’s great. It’s too great to be true.
It loses money. So we’ve got this combination—I call it monetary hedonism. It’s this combination of low rates and ever-growing money supply, and it’s given us this illusion of wealth, right? It’s made us just assume that we’re just rich and we’re going to be rich. It’s an arrangement by which our entire society, top to bottom, is encouraged to live beyond its means using monetary policy instead of, you know, directly taxing us and spending the money.
And so it benefits the Beltway and the banking classes who love all this political privilege they get because their proximity to this new cheap money. And of course, politicians love deficit spending because that makes them popular back home. And it was all easy, wasn’t it? It was simple. The world would take our debt forever.
At low interest rates. And up until just a couple years ago, when the debt was only $30 trillion, uh, Congress could service this. The weighted average of that debt, the weighted average cost of that debt, was only about 1.6%, which meant that the total annual congressional spend was only about $300 billion on $30 trillion. Now it’s about $39 trillion, but the weighted average is about 3.2% and rising. So now that annual payment is $1.2 trillion just in interest.
Soon to be the single biggest annual expenditure in Congress’s budget. And you think about inflationism, you think about debt—I mean, nothing good has happened since the global financial crisis. Every problem that I’ve discussed today has just been kicked down the road, right? None of it has been solved. Total global debt at all levels—sovereign, corporate, household, individual—is about $143 trillion at the time of that great financial financial crisis.
Today it’s $250 trillion. So what happens to all of this debt? Double-digit interest rates. It becomes unpayable. There’s always a price to be paid, you know.
The hangover is going to follow the party, and we all sense it, don’t we? We all sense that there is a reckoning coming for this inflationary US dollar, for entitlements, for congressional spending, for this deranged US foreign policy, for all of it. And at some point, for Treasury holders who ought to be demanding junk bond rates as far as I’m concerned, given the profligacy of the federal government that backs that debt. So my parents could benefit from compound interest rates. They could save maybe 10% of their income at 10% a year, and their nest egg doubled every 7 years or so—the law of 72.
They could get ahead simply, if not easily, through sheer thrift. They could leave something for future generations as a result. And when we compare this to the experience of, let’s say—I hate to say it—but a hapless young person today attempting to to give up a 20% down payment on a modest $300,000 house in 2026 with inflation running well above simple savings rates. I think this seems like a pipe dream to a lot of young people. This is the perversity of our times.
With inflation rates higher than savings rates, the overwhelming incentive is to spend and borrow instead of produce and save. It’s the opposite of my grandfather’s experience. And anecdotally, young people tell us this. Right? They say, well, you know, I’m just going to go on that trip.
I’m never going to buy a house. You know, we’re just going to go to that steak restaurant we heard of and experience it. We’re, you know, why save? It’s a good question. Why indeed?
Why younger generations are falling behind
Jeff Deist
I mean, it’s a fair question. And I just think that if there’s going to be pain, I want it to be borne by Gen X and the baby boom generation. I don’t want it to be borne by millennials and zoomers. I think we owe it to them. Those of us who basically, by the luck of when we were born, tend to have a lot more assets than they do.
Well, if there’s going to be, you know, a deflationary correction to those assets, let it be. I’m willing to live with that so that my children can have a better life and hopefully their grandchildren as well. So I want to conclude with this. Does anybody remember when Ben Stein’s Money—that used to be a show featuring this actor, his name’s Ben Stein, and he was in Ferris Bueller’s Day Off. He was the famous teacher in that movie, so he’s kind of an interesting famous guy.
So his father was actually Herb Stein. He was a very prominent economist back in the day, and he was chairman of the Council of Economic Advisers. If you’ve heard of that, it’s kind of like this cheerleading squad for the, whoever is president’s policies. So he was head of the CEA under Nixon and Ford. His big pronouncement, which I guess is probably on his tombstone, is called Stein’s Law, and it’s simple: if something cannot go on forever, it will stop.
This was something—I guess it took him 5 decades as an economist to figure this out, but it’s so true. We imagine that the geopolitical reality of today will be the same tomorrow, or 5 years hence, or 10 years hence, or 50 years hence, and it just won’t be. We have to accept that. So we know we have a problem, and the question for us in this room is, what fixes it? What do we do?
How do we resolve this? How do we move forward? And you’ve probably all heard the expression Bitcoin fixes this, right? People use that liberally. And I hope that’s true.
I’m not sure that that’s true. Gold—people talk a lot about gold and precious metals as the solution to our monetary ills, to all this inflationism, that that, that’ll fix things. Maybe political action—if we just vote in the right guy or gal, they’ll start to do the right thing. We need an austerity candidate who’s going to tell us the truth about all this debt and the dollar, and it’s going to say, well, we’re going to have We’re gonna have to cut Social Security. We’re gonna have to cut Medicare, and we’re gonna have to have fewer wars.
Well, on it, let’s just say on a national level, those candidates tend not to fare very well, to put it mildly. So that’s a tough one. What about a crash of some kind? You know, let’s say there’s a big stock market crash that dwarfs that of 2008. And let’s remember, all asset classes, even gold for a while dropped, real estate, everything dropped for a while there.
There’s this idea of diversification doesn’t save you. Necessarily in a crash, although there are certainly some assets that are going to perform better than others. What about some sort of dollar hyperinflation or collapse? I mean, we’re seeing that in Turkey. The Turks are really suffering.
Their currency has dropped dramatically relative to the dollar and the euro. We’ve seen it in Argentina around the turn of the 21st century. They were having a very, very hard time there. And I think what we see generally is that when things get tougher economically, people tend to blame blame and point fingers rather than really seek out the underlying truth. So I think, generally speaking, this idea of accelerationism—let’s have some big crash that we can get on with it—generally doesn’t yield greater political or economic freedom.
I think it generally yields the opposite. People start to clamor for more government protection. And we could always, of course, try to fix this through education, through appealing to young people and saying, well, we need to teach people about sound money and delayed gratification and lowering time preference, and we need to teach this, this mindset that my grandfather just had naturally, just came to him naturally, I suppose, of capital accumulation and forgoing consumption today so that you have more money tomorrow.
You know, this educational program, we say, look guys, what we don’t need is we don’t need any fiscal policy, we don’t need any monetary policy. What we need is governments and central banks getting the hell out of the way and letting things happen naturally.
We’d all love that, but I’m not sure any of this fixes this. I don’t think think the powers that be will just allow gold or Bitcoin to go to the moon. And you might not want to live in a world where Bitcoin and gold go to the moon, even if you own a lot of both. Might not be a very happy world at that point. So ultimately, I think everybody in this room knows on some level—we know it in our gut, we can feel it—we know what fixes this.
The crash is the cure
Jeff Deist
What fixes this is a massive and sustained deflationary event, a period of serious deflation on every level. Reality asserts itself. The gods of economics cannot be fooled forever. And it comes along in this analog, this corporeal world that we actually inhabit as opposed to AI and tech. This future, if we’re going to have a prosperous one, has to be deflationary.
There’s no other choice. Everything that’s been talked about this weekend, everything you hear about in podcasts, everything you read about in newsletters, on Substack, when you’re watching CNBC, if you’re reading something even even like Barron’s or Wall Street Journal or the Financial Times, everything there screams at us big blinking red lights that this can’t go on, which means we have to have a deflationary crash of some kind. And the crash, call it a recession, call it a depression, call it what you will, the crash is the cure. It’s not the, the episode to be avoided. The crash is the cure.
Read economics, read Austrian Economics 101. The deflationary event is the cure. We have to override our own governments and monetary and fiscal policy if we ever hope to rebuild the economy on firm foundations again. It’s the only way forward, folks. We know that a great reset has to happen for our kids and for our grandkids.
We understand this. And in my view, a crash is not the worst thing that could happen. I’d rather have that than to keep on fooling ourselves indefinitely in the future and thinking that we can kick the can down the road. And gee whiz, that’s fine as long as I’m dead. Well, that’s not how my grandfather thought, and that’s not how the generations before him thought.
That’s not how you get pyramids. That’s not how you get Starbucks on every corner, by saying, ‘Well, it doesn’t matter because I’ll be dead.’ So we can even look at the Bible. The Bible has a debt jubilee. You can look at the book of Leviticus, and they talk about 7 cycles of 7 years. 50 years was a longer time back then, more than a lifetime.
But every 50 years, the debts are extinguished, the slaves are freed, and land goes back to its original owners. Not the easiest thing to engineer in these decidedly non-biblical times, perhaps, but nonetheless instructive.
And so let’s not forget that the last time there was a serious crash in this country, the Great Depression, a lot of people who were prepared for it came out of it far wealthier than they went in because they had cash and they had liquidity and they were able to buy assets on the cheap. So I will say, in my own opinion, speaking only for myself, that I really like commodities and I really like cash overall. I think real-world assets, RWA, have you heard this?
It’s so funny. Real-world assets. We used to call those assets. Now we call them in the age of AI, real-world assets. And I think big AI companies are radically overvalued in terms of their share price relative to their top-line revenue, to put it mildly.
But real stuff in the real world, like energy, food production, metals and commodities, infrastructure, transport education, communication, health services for an aging population. This is where I intend to put my money. You know, AI might support all this, and that’s great, but that’s all it’s going to do in my view. That’s the often forgotten point. AI exists to serve us, not the other way around.
It’s not here to threaten us. And just because we can do something doesn’t mean that we should. And so this might mean some serious pain on our balance sheets. It might for baby boomers and Gen X, especially if we hold a lot equities and real estate. All these probably suffer in a deflationary scenario, but that’s okay because time is really it, and time is running short.
We can’t do this forever. This monetary hedonism in the form of low interest rates and endless fiscal stimulus—it’s been fun, it’s been nice. We all got our Social Security or Medicare if you’re old enough. We could all buy that BMW maybe, and sit, you know, 0% interest instead of that Ford Focus. Hey, let’s go to Europe instead of just driving to Yosemite.
It was fun while it lasted, but it can’t last forever. Let us—let those of us in this room sacrifice for younger generations. Let us put our money where our mouth is, because the politicians and the bankers, they will sell us out forever and ever until we stop them. So I have to ask all of you, do we have the strength of character to care about the world after we’re gone, to plant that tree that’s little now that’s gonna provide some shade someday? I think we do.
And again, this isn’t economics, folks. It’s cultural and civilizational. And I hope that we all view the Rebel Capitalist Weekend in those terms. Thank you so much.
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