I think we're going to start talking about deflation more and more, and I believe interest rates are going to come down more than people expect until this productivity-driven boom is obvious. If we get deflationary forces or get actual deflation, is that bad for Bitcoin in the short term? All right. Let's start with inflation and deflation. One of the things that's interesting to me is I've been talking about, you know, deflation is a bigger risk. I see you tweeting about it. So you're, you know, in spirit we are locked in this together. What is your read on why deflation is a bigger risk?
So it's a risk and an opportunity. So there's bad deflation and good deflation. If you look at the traditional government measures, they will tell you today we're kind of stuck in this 2 to 3% range. If you look at a more modern indicator, Trueflation, I think you feature it as well. Anthony, I don't know if I should call you Pomp or Anthony, but anyway,
Oh, you're funny. Thank you. So Trueflation is down to 0.8%. And so it too was stuck in that 2 to 3% range. It is resolving to the downside and I think it's going to go negative. When I see Pepsi cutting the price of potato chips and Doritos by 15%, you know, I take note. And when I hear Coke saying, 'Yeah, it seems like there's a bit of a backlash against price increases,' I take note. Today, the existing home price inflation rate dropped to 0.9% on a year-over-year basis. And we think that's going to go negative. New home prices are already falling on a year-over-year basis. Gasoline prices falling. So and then the good deflation is associated with technologically enabled innovation and the AI boom is massively deflationary. The AI training costs are dropping 75% per year. AI inference costs, what it costs when you query ChatGPT or Grok, what it costs to answer that, that's dropping 85 to, if you believe DeepSeek, 98% per year. And I think the productivity gains that we are seeing accrue to enterprises, that is going to turn around in a number of ways. One of them could be price declines. So many people think, oh, these corporations are going to simply increase their margins. Well, you know, China is exporting deflation. I know with tariffs, we're countering it. But isn't it interesting that our inflation rate did not go accelerate with tariffs? It remained stuck. I think we're going to see a lot of price declines in the future.
When you think of the AI explosion, I think it is operating obviously in this complex environment. So you have deregulation, you have tax cuts, you have deportations, you have the AI boom, you have a global monetary reset where we are trying to weaken the US dollar. You have the tariffs. You kind of put all this together. How important do you think is it that the president, the treasury secretary and the Fed chair nominee all seem to be, you know, on the same team? Seems like they are going to go and implement this plan, which means that for investors, maybe it's going to be a little bit more of a complex environment to navigate in the coming years as we go through this kind of reset.
You know what's so interesting? Many people are asking, you know, is this just a hype cycle and should we pull away? I don't know if you've seen the markets in the last couple of days but now algorithms are assuming that AI is going to destroy industries wholesale. This is not what happened during the late 90s and I will get back to your question. In the late 90s when Jeff Bezos said, you know, we're going to invest so much more than we expected because this opportunity is so great and that means we are going to lose so much more money than you shareholders expected us to lose, the stock absolutely took off to the upside. Any company saying that today is getting hammered. So we are in a completely different environment. Your question was the various parts of the administration being united. You mean when Kevin Warsh comes on board right now? Of course, Powell is not at all aligned with Trump. You mentioned dollar devaluation. I don't think that's what's going to happen. And Treasury Secretary Bessent, who knows all about currency markets and knows how important they are, is saying a strong dollar is in the interests of the United States. Now many people look at what happened last year, the dollar went down quite significantly. But if you look at the dollar in a long-term context, just go back to the early '70s and see where we are now, you will see that the dollar, again, this is relative to other currencies, not relative to gold, the dollar is at closer to the upper end of the range with the exception of the '85 blowout of the dollar than it is to the lower end. And I think the policies of this administration suggest to us return on invested capital here in the United States should go up relative to that in the rest of the world. What do I mean by that? We've got massive deregulation. This government understands how much we have hurt ourselves relative to China with a thicket of regulation and they're trying to peel those away as quickly as possible. We got a tax cut where for the first time in our tax history, for the next three years, as long as the construction of a manufacturing facility starts by the end of 2025, during its first year of service, the company building that facility will be able to depreciate it not over 30 to 40 years but in the first year. So massive tax refunds coming back to reinvest. Where we are seeing tax cuts for the consumer to some extent, certainly at the margin, in tips and overtime, social security, and autos. So I think we're going to see massive refunds here in the first quarter. And I think that the rolling recession that we've been in for the last 3 years, PMI being down negative, manufacturing's been negative for the past 3 years. We've seen housing and got a terrible number today, 3.9 million. We're back to the lows in existing home sales. I think we are going to shift from that to a rolling recovery into a productivity-driven boom. And I think one of the things that is becoming obvious when you look at how they revised the employment numbers down by 860-something thousand over the last year, if in doing that what they effectively said was, okay, given this level of GDP, and we're more sure about GDP because of national income accounts and so forth, it must mean that productivity was higher last year if we revised employment down like that, which in turn means that real GDP growth was higher and inflation was lower. They got the mix wrong in the GDP accounts. I think we're going to start talking about deflation more and more and I believe interest rates are going to come down more than people expect until this productivity-driven boom is obvious. So I actually think the US from an investment point of view is going to do very well over the next few years. You wouldn't know it from the last few weeks. But I think that we're in the flip side of the bubble. We are absolutely in the flip side of the bubble. You know, investors just threw money at the bubble when the technologies were not ready and the costs were way too high. Now we're in an environment where we're ready for prime time with all of these technologies, robotics, energy storage, AI, blockchain technology, and multiomics technology. And so I think we're going to have a boom and the US is going to do very well.
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If we get deflationary forces or get actual deflation, is that bad for Bitcoin in the short term?
