And when it comes down to it, his argument basically is in line with Karl Marx’s argument for communism. Which suggested that communism would lead to ultra abundance of all kinds of stuff and everyone would be rich and would be in a Garden of Eden again. Did Marx say this explicitly? Maybe, maybe not. I never actually read his crap. But the communist revolution generally was trying to lead us to a Garden of Eden and the communist revolution of the 19th and 20th centuries was just another version of looking for the fountain of youth and looking for the actual Garden of Eden where nobody would have to do any work anymore.

But here I wanted to really attack Elon Musk’s fantasy from an Austrian school perspective. Let’s first read the tweet and then we’ll go into why it’s so fundamentally wrong. The tweet goes like this. You’ve probably seen it. It’s got 68 million views. Universal high income via checks issued by the federal government is the best way to deal with unemployment caused by AI. AI slash robotics will produce goods and services far in excess of the increase in the money supply so there will not be inflation. I wanted to take this from an Austrian positivist logical perspective and then back it up with some empirical data.

From a positivist logical perspective, logically this does not make sense. That doesn’t make sense. Because what Elon Musk is talking about is the effects of inflation about consumer prices. This is just the final order effect of increasing the credit supply over the money supply which is the gold supply and the silver supply. The final order effects of increasing credit which supercharges and lengthens the structure of production is that it falsifies price signals not just at the consumer level but all along the structure of production. If anywhere the prices in the structure of production are out of whack that messes up the entire production process so you end up producing things that people do not want or need and not producing enough of people want or need and the entire economy is messed up and warped.

If for example Elon Musk is right empirically that AI will increase abundance to such an extent that consumer prices will not increase well what about stock prices what about real estate prices what about all other prices that create speculative bubbles. Remember the 1920s 1921 to 1929 when consumer prices did not rise or fall much at all they stayed pretty stable but stock prices and prices went up like crazy and then there was a big correction and then consumer prices went way down but what happened people were poor anyway because all of their money and credit was stuck in the stock market and they lost everything so the effect on consumer prices really did not have much to do with anything regarding the great depression in fact they fell during the great depression and still people were poor and you know what more than that they were dumping food in the streets and milk in the streets and real estate was being demolished because the taxes couldn’t be paid but more than that logically fundamentally prices give signals for supply and demand of certain things above other things they tell entrepreneurs where the profits are and where the losses are what they should continue and to focus on producing and what they shouldn’t if the price structure is disturbed in any place along the structure of production then the wrong things are produced the wrong services are created and government gets in and directs the inflation that it causes and supercharges it into certain industries like medicine where we have a whole bunch of drugs that we don’t want that are making us sicker where we have a whole bunch of nutrition that is crap from the agriculture sector that the government incentivizes them to produce that make us even sicker because the natural price signals do not exist in these industries and you have immunity from liability from certain sectors of these industries make everything even worse and people die basically inflation is not an increase in consumer prices that is one possible effect of inflation inflation is a manipulation of the credit supply that warps price signals all along the entire structure of production and when those mistakes are made a bust happens and then it doesn’t matter how much productivity existed during the boom that productivity is wasted because what money does it divides the division of labor and helps distribute goods and services throughout the economy in accordance with where the money is and where the signals are if there is a whole bunch of abundance but there’s no way to divide goods and services because the money doesn’t work because the price signals are all messed up then the goods and services cannot be distributed through the economy at all this is exactly what happened under Mao’s great famine in China from 1958 to 1962 it’s not that they didn’t have an abundance it’s that they didn’t have any working monetary system in order to divide that abundance among the country among the people and 45 million people starved to death that is what would happen in a musk regime like this wouldn’t call it a musk regime but whatever he wants to call it where the government hands out a bunch of checks and fake credit in order to have a claim on certain products and services that AI produces eventually you end up in a world where nobody really has to do anything because AI can just process dead people into soil and green and you can just eat that and you don’t have to do anything and the government will provide the rest of your expenses where life will be death and there will be no point in living anymore but let’s go into the empirical argument why does this not make any sense and where have we seen it before obviously the numbers are not going to be the exact same as to what musk is presenting here but the concepts are identical and by the way if you enjoy this analysis then check out the endgame investor on substack where i wrote about this in detail and if you want some real money before everything goes to hell then go to miles franklin and mention the endgame investor link in the description below and get a dirty man safe so you can hide some of your real money some of your gold and silver somewhere on your property or off your property wherever you want and don’t tell anybody about it use the code endgame 10 at checkout for 10 percent off let’s go back to the 1920s and 1930s and see what happened then well elon musk wants to say that AI will increase productivity by so much more than the money supply that everyone will be rich anyway and it won’t even matter and government can just hand out a bunch of credit as claimants on the new products and services that AI produces well if we look in the 1920s from 1921 post world war one to 1929 there was a depression in 1919 1920 because the inflation of world war one so we’re just going to skip that part and go to industrial production from 1921 to 1929 these these numbers are more honest than industrial production numbers that we get now because money was gold back then it was 21 dollars an ounce or was it 2060 or let’s just say 21 dollars an ounce of gold so these numbers show more of what was actually being produced with the quantity rather than an inflated money supply so we have here april 1921 an index of 3.796 i don’t know exactly what this is measuring but we’re just using this as a heuristic here july 1929 7.9436 that’s a 2.1 times increase it’s about 110 percent increase in industrial production in the 1920s that is huge abundance throughout the whole country there was a lot of of wealth here being produced in the 1920s and what happened in 1929 well i think we all know what happened now musk also makes the argument that uh that production will outpace money supply growth therefore everyone will be wealthy and the government can hand out a bunch of checks uh but if you look at murray rothbard’s table for the calculation of the money supply from 1921 to 1929 same time period here this is from the book america’s great depression you can find it on mises.org free on a pdf so you see here the total money supply goes from 45.3 billion dollars to 73.26 billion dollars that’s less than a 110 increase in industrial production and other goods and that were being produced at the time so we see here that we have the exact same setup we’re not exact but we have basically the same qualitative setup as elon musk is proposing in his tweet that the money supply will grow less than the supplied goods and services back then in the 20s it was the industrial revolution or the industrial revolution really revving up and oil coming onto the scene and all that other stuff uh so we have here an increase a less than doubling of the money supply and a more than doubling of industrial production and still we had the worst depression ever in the history of the united states and what was happening to consumer prices in the 1920s what we see here this is also relatively honest money 1920 is about 21 dollars an ounce measured in gold and what what happened here is that consumer prices did not really change that much uh throughout the decade they’re going down this is relative to the world war one era and this is the effects of the after effects of the world war post world war one depression that ended in 1921 and the lingering effects were 1922 but if you look at these numbers generally uh above here above zero below zero above zero below zero consumer prices did not change much at all in the 1920s they were pretty stable and what was happening to consumer prices in the 1930s well this is less honest because uh FDR changed money or changed the dollar from 21 to 35 dollars an ounce and you can see the effect of that here from prices falling in the great depression to prices rising over here in the mid 1930s but that was mostly because of the inflation of the dollar from 21 to 35 so these bars are not honest we can just say generally they’re even so prices did not change that much at all in the 1930s either and here you have just one picture that i was able to find quickly of farmers dumping milk in the streets because there were too much production there was too much production in the 19 late 1920s early 1930s and they started dumping their products because the prices were too low because there was too much production the problem of inflation is not necessarily that consumer prices go up though that is a problem the problem is it messes up the entire structure of production it ends up producing things or signaling producers to produce things that people do not in the end really need or want and not producing things that they really do need or want and you end up with inflated industries producing garbage that make people sick and make people die and then in the end you have a soylent green community a soylent green society where nobody has to do anything it’s in nirvana it’s a garden of eden where people just sit around all day until they die eating soylent green when they die they turn into soylent green to feed the next round of people the answer is we need honest money and honest money allows entrepreneurs and everyone else in the structure of production to produce what people actually want it gives correct price signals which are not always listened to accurately and that’s why but eventually they filter through the economy so that goods and services can be provided equitably for as many people as possible that is the free market and it will not be improved by government checks being handed out in an era of ai it will only make it worse it’s not a question of how much is produced by ai but what is produced by ai and the only way that ai can get those signals is through prices and the only way you can have accurate prices is through honest money not credit being handed out by a corrupt government who hands it out to its cronies so they can create an education industrial complex and a medical industrial complex and a war industrial complex that just siphons off resources and makes people poor and ending up eating nothing but soylent green and dying a painless death and living an empty life and if you don’t want an empty life then check out the end game investor on substack 60% of the time it works every time that doesn’t make sense
[tr:trw].

See more of Rafi Farber on their Public Channel and the MPN Rafi Farber channel.