Square and Twitter founder Jack Dorsey’s recent warning that “hyperinflation” was around the corner is now getting some elite insider pushback, including getting a thorough rebuttal from top technology investor Cathie Wood.
Hyperinflation is going to change everything. It’s happening.
— jack⚡️ (@jack) October 23, 2021
In a tweet recently, Dorsey, who is the leader of Twitter and Square, warned that a devastating issue, defined as unrestrained and rapid price increases running around 50% per month or more, could “change everything” soon.
The tweet came as concerns about increasing inflation pressures have shaken debt markets, causing traders to push forward with expectations for interest-rate boosts and leading to fears that central banks, like the Federal Reserve, will get more aggressive than previously thought, risking an economic downturn.
High-profile stock investors, including hedge-fund insiders like David Einhorn and Paul Tudor Jones, have said that the Fed’s leaders are inflation creators instead of inflation fighters. But Dorsey’s use of the “H”-word seemed to take the debate further.
It also led to Wood posting a detailed Twitter message, rebutting Dorsey’s statements, while saying that she had in the past succumbed to the fears of inflation that did not show after the Fed started quantitative easing during the 2007-09 recession.
An increasing velocity of money — which is the rate at which money is moved between people in the economy — was the missing piece of the puzzle then and now, she said.
Wood, who is now known for large bets on cryptocurrencies and tech, then went on to reveal what she sees as much larger deflationary force at work and could be likely to outweigh short-term inflation that was created by supply-chain problems.
These include tech innovation, which is the “most potent” force for deflation, she said, using AI as one example:
Now we believe that three sources of deflation will overcome the supply chain-induced inflation that is wreaking havoc on the global economy. Two sources are secular, or long term, and one is cyclical. Technologically enabled innovation is deflationary and the most potent source.
— Cathie Wood (@CathieDWood) October 25, 2021
Another source of these deflationary pressure might come from “creative destruction,” she stated:
The second secular source of deflation could be creative destruction, thanks to disruptive innovation. Since the tech and telecom bust and the Global Financial Crisis in 2008-09, many companies have catered to short-term oriented shareholders who want profits/dividends now….
— Cathie Wood (@CathieDWood) October 25, 2021
And then there was the “cyclical” path of deflation that would be seen as supply bottlenecks are fixed:
The third and most controversial source of deflation is cyclical. Because businesses shut down and were caught flat-footed as goods consumption took off during the coronavirus crisis, they still are scrambling to catch up, probably double- and triple-ordering beyond their needs.
— Cathie Wood (@CathieDWood) October 25, 2021
Wood rode the rally to greater gains in 2020, with her popular ARK Innovation ETF ARKK, bringing in over 150% in profits. 2021 has proven a difficult ride, with the ETF now lower by over 20% from its Feb. high and down more than 2% ytd.
Author: Steven Sinclaire
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