Inflation Is NOT The Biggest Risk To Markets, DEFLATION Is

0:00Hello, everyone. People keep talking about inflation, but deflation is the much bigger risk. Apple just put a Google dagger into OpenAI's future plans. And I'm going to show you a concrete example of why GDP is going to explode higher. We're live today from the desk of Anthony Pompliano.

0:26Before we get into today's episode, I need your help. My goal is to get to 1 million subscribers on YouTube right now. Now, stop, hit that subscribe button, and let's get into today's show. For our first question today, you recently wrote that deflation is a much bigger risk than inflation. Can you explain? Well, if you think about what's going on in the U.S. economy right now, we've had people yelling and screaming since the tariffs got implemented last year that we were going to see sky-high inflation. We were going to see empty shelves. We were going to see a Great Depression. None of that stuff happened.

0:56Instead, what we've seen over the last couple of months is that the government measurement of inflation has actually come down. It is at 2.7 % in November. It's at 2.7 % in December. Core inflation was at 2.6%, which was lower than expectations. And so when you go and you see that the government data is coming down, then of course I run and I go look at Truflation, that real-time measurement. They're sitting at 1.7 % and it continues to fall more aggressively. And so ultimately that means that prices are not going up as fast as people thought they were going to go up. Now, if you go back and you look at this tweet from April of 2025, thought.

1:30I specifically called out that deflation was going to be a much bigger risk than inflation. Why? Well, as I pointed out, tariffs are actually deflationary. They're not inflationary. And that's exactly what we've seen. We continue to hear the Federal Reserve chairman and many other people say that the cost that is being passed on to the consumer is actually not nearly as high, if at all, than people expected. We are seeing the producers, the exporters and the importers, they are eating the cost of the tariffs, is driving revenue for the U.S. government, and we are not seeing the explosion of prices that was predicted.

2:03But the other thing is that we are seeing artificial intelligence smack into the U.S. economy. Simply, we're seeing companies produce more with less resources. And I'm not the only one who thinks this. If you go and you take a listen to Elon, who was recently on the Moonshots podcast with Peter Diamandis, he talks about the fact that he actually believes the Federal Reserve is going to have to print money faster rather than slower going into the future. Take a listen to his logic right here. My best guess for how this will manifest is that prices will become, prices will drop. So as the efficiency of production or the provision of services drops, prices will drop.

2:44I mean, you know, prices in dollar terms are the ratio between the output of goods and services and the money supply. Sure. So if your output of goods and services increases faster than the money supply, you will have deflation or vice versa. It's a good thing we're growing the money supply so quickly then. Right. Well, luck. Yes. That's why I came to like, let's not worry about growing the money supply, it won't matter. Because the output of goods and services actually will grow faster than the money supply. And I think we'll be in this, and this is a prediction I think some others have made, but I will add to it, which is that I think governments will actually be pushing to increase money supply.

3:30Like faster? Yes. They won't be able to waste the money fast enough, which is saying something for government. But isn't it crazy how close those timelines just randomly worked out? I mean, at the rate, because we're expanding the national debt, not because we're anticipating AI. We were going to do that no matter what. It's like right on the edge of becoming Argentina. But yeah, so productivity is going to improve dramatically. And it is improving dramatically. I think we'll see, I think we may see like high double digit output of goods and services. We have to be careful about how economists measure things.

4:08Yes. GDP sucks as a measure. And yeah. Yeah. I mean, it's like my favorite joke. I have a few economist jokes that I like, but maybe my favorite one economist joke is two economists are going for a walk in the forest and they come across a pile of shit. And one economist says, I'll pay you a hundred bucks to eat a pile of shit. I've heard this one. This is great. Go ahead. And so the guy takes a hundred bucks and eats the shit. Then they keep walking, they come across another pile of shit. And the other guy says, okay, I'll give you a hundred bucks to eat a pile of shit.

4:52So he gives them a hundred bucks. And then the guys can say, wait a second, we both have the same amount of money.

5:03Both ate a pile of shit. Oh my God, it sounds like we increased the economy by$200. Now, most people, if you went and you sat in an economics class, they're told that printing money at any high rate is actually a big problem. But instead, what we're talking about is that AI and robotics is going to lead to this productivity boom, which is going to be a deflationary force. And as Elon predicts, it is going to push prices down, not up. In that case, you actually can get into a really negative situation if prices are falling too fast. And so the Fed is going to have to print money. They're also going to have to cut interest rates.

5:36And so I predict that the Fed is going to look very silly later this year as we continue to see prices come down, inflation come down, and they are not aggressively cutting interest rates or printing money. Now, it's a very weird thing to talk about the Fed and the government having to print money. They've been pretty good about it for the last decade or so. But this idea of artificial intelligence is something that I cannot call enough attention to. It is not only happening on an individual company level, or an individual productivity level. The entire economy is seeing an economic boom. Atlanta Fed's GDP now is predicting 5.4 % GDP growth in Q4.

6:13That is going to continue to accelerate. Elon thinks that we could get to 10 % GDP growth annualized. Now, I don't know if we can get to 10 % or not, but what I do know is that this deflationary force is going to continue to push prices down. We're already seeing gas and home prices and food prices. And my guess is that we are only going to see this happen more and more. You are quite literally ripping inefficiency out of the production process of all of these goods, and you are simply going to automate the US economy. Automation is going to allow people to charge less. And that means that the Fed is going to have to change the way that they think about money supply, monetary policy, and interest rates, regardless of what the politics of all this is.

6:56I think that there's a lot of people who don't understand. Deflation is the big risk, not inflation. And the Fed is likely so far behind the curve that they're gonna panic. And when they panic, things are gonna get really nutty. For our second question today, Apple has decided to partner with Google instead of building their own AI models internally. What's your reaction? This is very interesting to me because if you really think about many of the companies, you can really put them in two different buckets. You've got the large incumbents. They usually are public companies, things like Apple, Google, Meta, Amazon, et cetera.

7:31Those companies are really big. They're very pervasive. They provide lots of different services to their customers and they're widely thought to have great technical teams. Obviously, if you go and you use an Apple product or the Apple ecosystem, it's very obvious that these people are good at building technology. But also you then have an entire group of challengers. These are the open AIs, the anthropics and many others that are simply trying to focus on artificial intelligence and build these foundation models or these general purpose models and their ideas that they can beat the incumbents to this business.

8:02So there's two big decisions that Apple made here. The first is, are they going to build this internally or are they gonna partner externally? The fact that Apple is basically throwing up their hands and saying, we can't do this internally, it's kind of a big deal. It's not because they don't have the technical talent. It may be because they feel like they're too far behind or maybe they feel like it's not a core part of their business. Or maybe they actually feel like Google is so far ahead of them that they can't catch them. I don't know, but the fact that Apple is saying they're not gonna build this internally seems like a big deal.

8:31The second decision that Apple had to make though is who do we partner with? Do we go with an incumbent or do we go with one of the challengers? Now, obviously OpenAI, they've been the big leader for a long time. They were kind of the shot heard around the world when they went and they launched ChatGPT. It's now grown to 800 million monthly active users. It has been a raging success. But Apple didn't choose to partner with OpenAI and use their models inside of the Apple ecosystem. Instead, they're partnering with Google. And it's funny because Google historically has been thought to be behind in the AI battle.

9:02Instead, now what we're seeing though is that Google has come out of nowhere. Gemini, Nano Banana, and many other models are insanely good. I use them on a daily basis. And what you're starting to realize is that Google is not only good at the technology, but Google is able to actually put these products or these models into all of their different services. They have distribution. When you go and Google something today, What are you getting? You not only get all the links that you would normally get, but at the top, you're getting an AI summary, no different than if you searched on OpenAI. And so obviously there's lots of people using Google's AI models.

9:36Why is that important? They're getting data and they're able to train and retrain all of their models. And so that iteration speed allows them to actually get better and better over time. But it's not just in search. I recently used Google's AI models on YouTube. They simply have a new ask button. And when you click it, you can ask the AI anything about the video. And it searches through the transcript and the timestamps and the description. And it's able to get you answers much quicker. All of this data is giving Google a really big data mode and should allow them to continue to accelerate the efficacy of their AI models.

10:08And so Apple not only decided not to build their stuff internally, but then they decided to partner up with Google. Some people usually would think of Apple iOS and Google Android as competitors. But here, Apple decided that Google actually is the best partner, which means that they have confidence in the AI models. They have confidence in the ability to distribute. And frankly, they've probably got confidence in the security of the AI and the ability to put it into the Apple ecosystem, which has put a much bigger emphasis on security in the last couple of years. And so seeing Apple partner with Google, I think it's a positive story for Google, but it's also kind of a negative story for all the challengers, the people who thought they had a head start, the people who maybe thought they had an angle on being the go-to AI model.

10:49This is a cutthroat competition, and the future of these companies might depend on who's got the best model, who's most accurate, and who can get distribution. Put this as a win in the Google category, OpenAI has probably got a little bit of panic inside their business today. For our third question today, can you give us an example of why GDP is going to accelerate and how it could impact individual people's jobs. I've got two great examples for you. First, we've got a company here that services clients. We recently sat down. We had one person who's really talented at artificial intelligence and building with these tools.

11:23And I gave them the task to reduce everyone on the team's job by 90 % for this one client. And they had one week to do it. Within the first three days, we've already reduced all of the work on this client by 50%. But it's not that the work isn't being done. Instead, it's that artificial intelligence is automating a lot of that work. And so it's freeing up human labor to go and work on other things while still being able to service the client. That is what we talk about when we talk about companies doing more with less. We are now able to provide the exact same service, but do it with only half of the human labor.

11:59That is an explosion of GDP. Now, the other example is kind of a fun one. I don't know if any of you have recently seen maybe this artificial intelligence monk on Instagram and TikTok. Or maybe you've seen the rise of grandparents giving life advice. Take a watch of the monk video first. Keep it private until it's permanent. Your success, your love life, your plans, your income, your happiness, your dreams. Not everything needs an audience while it is still forming. Seeds grow best in the dark, not under constant attention. Now, when you watch that video, it kind of looks a little AI. But remember, this is the worst the technology is ever going to be.

12:40That page has 2.5 million subscribers. The grandparents, they've got 100 ,000 subscribers on YouTube. These videos are becoming popular. But what I find most interesting about it is that historically, if you wanted to sit down with a bunch of different grandparents, you'd have to go find the grandparents. You would then have to get them into a physical location. You'd have to have a videographer. You'd have to have an editor. You'd have to have somebody that goes and publishes the content. Those are all different people's jobs. But now with artificial intelligence, one person can sit there. They can create synthetic content.

13:12They can post monks. They can post grandparents or anything else. And you've now taken all of those human jobs and you've eliminated the need for them, but you get the same productivity. That is why GDP can accelerate. You take that same idea of doing more with less human labor, which means that you're doing it for less cost and you're driving more profit and more productivity, and then apply it to every single industry. This is a trend that's been going on for a long time, but artificial intelligence allows us to do this in a way that previously wasn't possible. Whether it's Claude Code, Claude Cowork, if it's CFO Sylvia, or many other things, you are watching software compress the work that is being done.

13:55It is allowing humans to free up their time to go work on things that could be more productive or more valuable, but it is still providing the same or better service to the end user. Ultimately, in my opinion, artificial intelligence is the single most important technology in the world right now. It is making GDP accelerate. It is driving the cost down of producing products or delivering services. And what I think is probably the most important is it's making a lot of people question, is my job actually defendable? Do I have a moat here? Will I get replaced by software or robotics? These are important questions that you should be asking yourself.

14:30I think that a lot of people who thought they were safe are probably not safe. But the beauty is that it doesn't have to be a negative story. It can be a positive story. Go and use these tools. You can watch a tutorial online. It takes an hour or two. You can learn how to use these so that you can become more productive in your job. Or maybe even start your own company. Or go get a new job where you're the only person who understands these tools that can teach everybody. If you want job security in the 21st century, you're going to be able to do it. But you're going to have to be proficient at artificial intelligence.

14:59And when we look at these examples, there's somebody somewhere sitting with two and a half million subscribers on Instagram, simply creating synthetic content of a monk giving life advice or grandparents sitting on a couch giving advice as well. To me, the most interesting people are the people who have high agency and they're motivated to try to figure out how to use these tools, build products and services, whether as an entrepreneur or inside of a company. Those people in my mind, they're the people who are gonna get paid the most money moving forward. That's it for today's show. Thank you guys so much for watching.

15:29Please remember to subscribe on YouTube, and I'll see you guys live tomorrow from the desk of Anthony Pompliano.