AI Summary
5 min readAllen Farrington and Sacha Meyers discuss their essay "Number go down," challenging the economic axiom that mild inflation, such as the arbitrary 2% target, is essential for growth. They trace this belief to Keynesian ideas post-1929 crash, arguing it conflates harmful deflation from credit collapses with beneficial deflation from innovation, which historically drove progress under gold standards.
The Myth of Necessary Inflation
The 2% inflation target originated as a throwaway remark in a 1980s TV interview by a New Zealand finance official, not rigorous analysis. Keynesian theory posits low, stable inflation spurs spending via the paradox of thrift: if people save amid falling prices, demand drops, leading to unemployment and stagnation. Proponents claim this creates a virtuous cycle of consumption, employment, and growth, peaking at an optimal rate before hyperinflation degrades signals.
Farrington and Meyers reject this as seductive but flawed, ignoring causality. They distinguish credit-crunch deflation—crumbling debt houses of cards—from productivity deflation, where innovation lowers prices. The former stems from systemic fragility; the latter signals progress, as seen in Western innovation under gold standards for centuries, where nominal prices fell naturally.
Continue reading the full summary in the app — free to try.
Read Full Summary →Free • No credit card required
Never miss an episode of What Bitcoin Did
Get every new episode summarized in your inbox — free, ~5 minutes to read.
No spam. Unsubscribe anytime.
What you'll learn
- 1 (00:42) **Guest Introductions** - Alan Farrington returns; Sacha Meyers introduced as co-author and investment manager
- 2 (02:55) **Essay and Book Update** - Standalone essay on deflation to slot into Bitcoin is Venice second edition
- 3 (03:49) **Myth of 2% Inflation Target** - Inflation presented as essential for healthy economy but axiom of Keynesian economics
- 4 (06:56) **Origins of 2% Figure** - Made-up in TV interview by New Zealand official, became lore amid Keynesianism
- 5 (12:47) **Keynesian Case Against Deflation** - Paradox of thrift: inflation spurs spending to create virtuous cycle of demand and employment
- 6 (16:36) **Why Deflation Doesn't Halt Spending** - Historical precedent under sound money; innovation deflation encourages saving/investment
- 7 (19:53) **Benefits of Innovation Deflation** - Delaying consumption frees capital for investment (e.g., AI/data centers enabling cheap translation)
+ Full timestamped outline available in the app
Show Notes
“If your system can’t survive without inflation, the problem isn’t deflation.”
Allen Farrington and Sacha Meyers return to the show to break down one of the most misunderstood ideas in economics: deflation.
Allen & Sacha are the authors of Bitcoin is Venice, in this episode they get into their latest essay, Number Go Down, where they challenge the core assumptions behind modern macroeconomics. They argue that the idea inflation is necessary for a healthy economy is not grounded in reality, but in flawed models, bad incentives, and a fundamental misunderstanding of how growth actually happens.
We get into why the 2% inflation target is arbitrary, how Keynesian economics confuses credit collapse with true deflation, and why falling prices driven by innovation might actually be the most important signal of a functioning economy. We also explore the paradox of thrift, malinvestment, and why distorted price signals lead to systemic fragility.
Allen and Sacha explain why saving is the foundation of real growth, how deflation can drive investment rather than kill it, and why trying to “manage” the economy through measurement and intervention is fundamentally misguided. We also get into debt, why inflation acts as a hidden bailout mechanism, and what a world built on sound money might actually look like.
THANKS TO OUR SPONSORS:
FOLLOW:
Danny Knowles: https://x.com/_DannyKnowles or https://primal.net/danny
Allen Farrington: https://x.com/allenf32
Sacha Meyers: https://x.com/sacha_meyers
More from this podcast
What Bitcoin Did →