Twitter CEO Jack Dorsey has warned that hyperinflation will change ‘everything’ and that it will be experienced in the United States soon, and ultimately across the entire world.
His warning comes following the Federal Reserve Charirman Jerome Powell’s admission that inflation pressures are on the rise and may last longer that initially expected. In essence, inflation is not under control.
Hyperinflation is a term used in economics wherein high and rapid increases in prices last for sometime. While inflation has increased over the years, hyperinflation is typically spoken of alongside failing or failed economies like Venezuela, Lebanon or Argentina. Despotic regimes like that in Turkey have tendency of running economies further into the ground due to failing institutions, corruption and a general downward spiral.
In a tweet, Dorsey said “hyperinflation is going to change everything. It’s happening.” Dorsey further responded to user comments on his tweet, noting that hyperinflation “will happen in the U.S. soon, and so the world.”
His comments come after Powell admitted that inflation pressures in the US “are likely to last longer than previously expected,” CNBC reported.
Powell further noted that inflation-related issues could last “well into next year.” Furthermore, consumer prices increased more than expected in September, as driven by surging food and furniture costs, as well as rent.
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Cathie Wood says deflation will overcome inflation
However, not everyone expects this dire scenario to unfold just yet. Ark Investment Manager Cathie Wood replied, saying that deflationary pressures will eclipse the supply-chain havoc.
“Three sources of deflation will overcome the supply chain-induced inflation that is wreaking havoc on the global economy,” Wood said in a thread Monday. She was replying to an Oct. 23 post from Twitter chief executive Dorsey proclaiming hyperinflation “is going to change everything” and is “happening.”
Wood flagged three sourced of deflation, namely:
- The impact of technological advances like artificial intelligence.
- Creative destruction from disruptive innovation that pushes down the price of obsolete goods.
- Cyclical factors due to the pandemic whereby firms ramped up orders to meet reviving demand and will eventually be left with excess supply and unwinding prices after the holiday season.
Still, the Ark Invest CEO is banking on a sustained impact of deflationary forces that may not materialise to a sufficient degree to offset inflation. In July 2020, the CEO spoke of a ‘secular decline’ for oil which traded at $38 at the time. It is now trading at $84, which is the direct opposite of a deflationary future.
The flagship Ark Innovation ETF is down 25% from its February peak.
Janet Yellen proposes Outlandish Tax on unrealised capital gains
Meanwhile, Treasury Secretary Janet Yellen has unveiled a proposal to tax unrealised capital gains in order to finance Biden’s quasi-communist “build back better” plans. The proposal is supposedly aimed at taxing the wealthy, but ultimately such a tax regime sets a precedent to affect any investors with open exposure to the market. Unrealised capital gains is simply the increase in the value of an asset that has yet to be sold. So Yellen’s outlandish policy is a major departure from normal tax policies, and would force investors to forfeit their profits on the go, which is certainly not the best investment strategy.
This also brings up the question of unrealised losses – who qualifies for refunds if the housing or stock market collapses, for instance?
Indeed, the supposed ‘billionaire tax’ regime appears to be a conscious attempt for the central bank to position itself for an asset grab in an environment of runaway inflation, which the Fed has admitted is not within its control.
In June, Yellen said inflation should be lower by the year end, while in October, Yellen is warning of high inflation throughout mid 2022 before pressures ease.
Bitcoin exchanges hands at $63,000 at the time of writing, up 3.5% on the day.
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