Jack Dorsey says ‘hyperinflation’ will happen soon in the U.S. and the world

https://www.cnbc.com/2021/10/23/twitter-and-square-ceo-jack-dorsey-says-hyperinflation-will-happen-soon-in-the-us-and-the-world.html

by prostoalex • 5 years ago

45 91 5 years ago

cnbc.com

Kibranoz• 5 years ago

It would be catastrophic if it was the case

rhizome• 5 years ago

Jack Dorsey isn't an economist.

firecall• 5 years ago

No, but he does happen to be the CEO of a company that employs them!

I'd say he isn't just shooting off his mouth. He rarely makes inflammatory statements, unlike other public billionaires!

Dorsey has his faults, but talking shit in public hasn't been one of them AFAIK!

I guess we shall see!

Things are certainly getting interesting!

bpodgursky• 5 years ago

There are a lot of economists, you can find at least one to support pretty much any prediction you want... And this is not the wildest prediction of 2021 by far.

smallduck• 5 years ago

Pure B.S.

dd36• 5 years ago

I’ll take that bet.

ls15• 5 years ago

Ten if you win, a trillion if you lose.

pwinnski• 5 years ago

And we should care about Dorsey's prediction because... ?

The actual experts who study these things can't agree on much regarding the future, so I don't expect anything profound from any rich geek off the street.

SamReidHughes• 5 years ago

Because he's the CEO of Square.

curiousgal2• 5 years ago

Any headline that starts with the name of an SV billionaire reads like an The Onion headline to me.

Getting lucky and becoming rich doesn't make you an expert on anything.

kushan2020• 5 years ago

Couldn't agree more! Yet our tribal brains are hardwired to listen and follow the people who have a lot of clout.

mgamache• 5 years ago

It’s a proxy for adaptive success. He accumulated lots of resources so we pay attention and emulate him because his strategy has paid off. Not saying it makes sense in a modern context.

Waterluvian2• 5 years ago

It’s basically just some rando tweeting a hot take.

drcode4• 5 years ago

He created two multi billion dollar companies just by "being lucky"?

I'm skeptical.

gota2• 5 years ago

I don't think the second one is as hard as the first. Maybe the luck requirements to do it once or twice are the the same.

jvanderbot• 5 years ago

Perhaps he had something special to start two successful companies, but I still agree with GP, that doesn't necessarily transfer to special insight into global economics.

Still, a broken clock is right twice a day, and it isn't too hard to predict inflation when inflation is already happening at higher than normal levels. That's like predicting floods when its raining.

toaam• 5 years ago

Its all good. Let people see them for who they are.

Learning takes time.

dang2• 5 years ago

Ok, but please don't post unsubstantive comments to Hacker News.

curiousgal2• 5 years ago

Isn't it a fact that he is not an economist? Oh well.

omgwtfbyobbq2• 5 years ago

If by hyperinflation, he means higher inflation, I can see that. It's not uncommon for periods of lower inflation to be followed by periods of higher inflation.

Waterluvian2• 5 years ago

Isn't that trivially true, though? Even if there's zero causation, when `n` is closer to its minimum, the possibility space for `n`'s future is mostly above it.

omgwtfbyobbq2• 5 years ago

I think so. I'm still surprised by how often it seems to be ignored.

cjensen• 5 years ago

"There will be inflation" is indeed a reasonable prediction. But that is definitely not the definition of hyperinflation[1].

[1] https://en.wikipedia.org/wiki/Hyperinflation

kafkaIncarnate2• 5 years ago

Does Jack Dorsey know this? Or does he just think hyperinflation is just like saying gigamegaultrainflation++?

josh_today• 5 years ago

Jack has a vested interest in hyperinflation through Square and his investment in Bitcoin

JanisL6• 5 years ago

Only people who don't understand the wealth destroying affects of hyperinflation will actually cheer for it.

nickff• 5 years ago

"Jack has a vested interest in hyperinflation through Square and his investment in Bitcoin"

How would Square benefit from hyperinflation?

adamnemecek• 5 years ago

The bitcoin.

jon37• 5 years ago

he also has a vested interest in the fear of hyperinflation.

gota2• 5 years ago

Maybe he does think that his life as a wealthy person is going to improve in any way with hyperinflation. I'd disagree completely.

In fact, I think hyperinflation in the U.S. could likely stir up wars that (as we've imagined since the cold war) could very well break the world. Of course I know nothing of value about this, but chaos followed by violence and escalating into full blown war sounds possible. Or at the very least more possible than now, with a stable structure of power(s) that only shift gradually.

I don't think crypto coins are useful if the world order dissolves and we have trouble keeping up eletric grids, much less a working internet.

crate_barre• 5 years ago

Let’s entertain him. If this happens, you gotta own equities and housing right? These should keep your savings on par (at least stocks, housing is not realistic for everyone).

Or are we royally fucked and there’s no keeping up?

herval• 5 years ago

I lived through hyperinflation as a kid (obviously not in the US). One of the things that kept us afloat were the 2 family cars - my parents sold them for a big profit, then sold the new cars again couple months later. Owning equity was a risky proposition at the time, as many companies went bankrupt overnight (including banks). You either kept the money in savings accounts that were indexed by gov bonds, or you’d lose most of your money value in a week.

Jensson• 5 years ago

crypto advocate says hyperinflation will happen

Hmmm, I really wonder why?

pcurve• 5 years ago

Would be nice to see some math on how he arrived at that conclusion. Common definition of hyperinflation is 50% inflation on monthly basis, which would be about 10,000% in a year.

seibelj3• 5 years ago

Inflation hurts those without assets most (the poor). When you see pundits, opinion writers, and politicians try to explain away inflation as temporary, no big deal, a “first world” problem, “only” 5%, and so on just remember it’s a scam. They are stealing money from people who can’t afford assets, like houses and stocks, which protect the rich.

neartheplain• 5 years ago

It's a double-edged sword. For people with debt, the value of their debt decreases as inflation rises. If salaries rise with inflation, even with some lag, the debt becomes easier to repay.

seibelj3• 5 years ago

There is a small benefit. However it’s a negative to the lenders which include many socially advantageous institutions like pension funds which purchase securitized debt.

The negatives are so numerous it’s a struggle to find any upsides. Luckily I am rich and own property with government-subsidized fixed rate mortgages so I will ride out all the terrible outcomes with a shrug.

rvz• 5 years ago

Which world? Clown world?

Perhaps this holds true if you are an economist from clown world, but I'm afraid things work differently here on Earth.

gpt52• 5 years ago

To bet on Hyperinflation you don’t only need to bet the rapid devaluing of currencies, but also bet that the government would do nothing to stop it. Which seems ridiculous to me given how easy it is (raising interest rate)

JanisL6• 5 years ago

With debt to GDP at such high ratios raising interest rates has some challenges, why do you think this is easy to deal with?

shrimpx3• 5 years ago

Curious, why do you think it’s difficult to raise interest rates when debt is high?

dragonwriter• 5 years ago

With debt to GDP at such high ratios raising interest rates has some challenges

No, it doesn't. I mean, it would have political problems if Congress had to do it, but that's literally why we have an independent central bank managing monetary policy, so decisions that would be difficult given fiscal policy preferences aren’t difficult to make.

why do you think this is easy to deal with?

Because it is.

shrimpx3• 5 years ago

The us did it in the late 80s. 15% interest rates!

dfadsadsf• 5 years ago

Some argue that current US debt level blocks country from meaningfully increasing interest rates as it will balloon interest payments which are paid (in reality) by printing money. I am also not confident than US politicians are smarter than ones in Venezuela

gpt52• 5 years ago

That’s not how it works. Increasing the interest rate will not increase the existing debt cost.

The problem is that we are issuing new debt to pay off the old debt, and that new debt is using the new interest rate.

shnp4• 5 years ago

Government revenue needs to come from somewhere, and inflation is a type of tax.

By the time hyperinflation is possible, the federal government will have two choices, keep interest rates low and keep borrowing, or to default.

Ma8ee3• 5 years ago

How does inflation increase government revenue?

eruleman• 5 years ago

Raising interest rates won't be easy — up to 30% of the federal budget could be spent servicing the debt. From Drunkenmiller's interview in May of this year:

"[Drunkenmiller] projects that if yields on the ten-year Treasury rise to the projected level of 4.9%, the government would be spending close to 30% of GDP each year simply paying back interest expense (compared to 2% last year) unless it monetizes the debt, which experts think is unlikely and Druckenmiller believes would have “horrible implications” for the U.S. dollar." [0]

The Fed has less actions available than you expect. Either the Fed lets inflation run hot, or the Fed raises interest rates to combat inflation, wiping out discretionary programs from the federal budget.

[0] https://www.forbes.com/sites/jonathanponciano/2021/05/11/bil...

drcode4• 5 years ago

The last two years make me think the government is quite capable of "doing nothing to stop" bad things from happening.

It is no longer ridiculous- I mean, they're working on trillions of dollars of economic stimulus as we speak, in the middle of an inflationary economy. You don't think that that will add fuel to the fire?

ojbyrne• 5 years ago

“Soon” is a pretty good weasel world.

iszomer• 5 years ago

CNBC reporting, of all places..

smt882• 5 years ago

Historically, Dorsey has come across as more of a wishy-washy stoner than a sharp business mind.

He's bought a lot of BTC, so any prediction he makes that's bullish on crypto should be treated with suspicion. I don't think he's a pump-and-dump artist like Musk, but he's still not an objective forecaster.

Also, he's either predicting something catastrophic (meaning something that would crumble the world economy) or he doesn't know the meaning of the word "hyperinflation" as most people use it[1].

For some other examples of why I don't trust Dorsey to predict anything, he also said that Bitcoin would be "the" digital currency in the near future (before 2028, but perhaps sooner)[2]. If anything, it's less likely to happen because of the rise of stablecoins.

Finally, there's a paper published recently[3][4] finding that, over the last 10 years, professionals (economists and businesses) were "substantially" better at inflation predictions than consumers.

Most economists expect inflation to peak something before the end of this year, and next year to have high-but-not-dangerous[5] inflation.

This makes sense if the cause of currently high inflation is supply-chain problems, which we have no reason to doubt so far.

1. https://www.investopedia.com/terms/h/hyperinflation.asp

2. https://www.cnbc.com/2018/03/21/jack-dorsey-expects-bitcoin-...

3. https://www.clevelandfed.org/en/newsroom-and-events/publicat...

4. https://www.reuters.com/article/us-economy-inflation-expecta...

5. https://www.cnbc.com/2021/10/12/inflation-gauge-should-be-ho...

joe_the_user• 5 years ago

So far we've had demand outstripping supply in many area without inflation happening.

Apparently, that's because in a lot of areas, consumers and businesses have demand but it's still price sensitive. And the chances are price increases aren't going to result in wage increases, so it's hard to see a cycle of inflation happening.

The US has spent it's way out of all the crises of the last twenty years and so far hyperinflation has been avoided (but other distortions have appeared, surging commodity prices, surging rents, etc).

kgin• 5 years ago

Efficiency that comes from increased technology and automation is strongly deflationary. COVID related stresses have only pulled forward investment in tech and automation. There’s a strong case to be made that the concern in a few years will be too little inflation.

mechanical_bear• 5 years ago

Deflation is easier to address. The economic levers to ease deflation are longer.

adam_arthur3• 5 years ago

Don't see how this is possible, strictly mathematically.

The money supply (M2) did increase 30% in a year, but for hyperinflation it would have to continue at a rapid pace.

I could see a situation where the Fed starts to taper/raise interest rates which triggers some turmoil, and then re-engages QE in a much more aggressive manner or goes negative rates. That could lead to extreme levels of inflation.

The truth is when you ease monetary policy, you somewhat trap yourself at that level, as people will take on additional debt due to lower carrying costs. This makes tightening more challenging, as the higher debt levels become more expensive to service.

Likely the only way we go hyperinflation is to monetize fiscal spending, thus fiscal spends more, thus we need to monetize more etc.

It is true that the Fed is currently buying 60% of newly issued treasuries, e.g. monetizing fiscal spending by money printing right now. So we're kind of on the verge of MMT here as it is.

Unfortunately the Fed has been pretty cowardly and optimizing for short term outcomes/political appeasement rather than doing the right thing for the long run.

If tightening monetary policy leads to disruption in the markets, we may just need to eat the short term pain. The consequences of continuing to monetize deficit spending and stoking rampant speculation are too great IMO.

We may see very high short term inflation if supply issues continue to worsen and widespread shortages develop. In that scenario prices would rise to compensate, and demand destruction would likely lead to a resolution. Of course, that's how layoffs start, and the whole thing becomes stagflationary.

nostrademons2• 5 years ago

The hallmark of hyperinflation is that the velocity of money increases rapidly, seemingly without control of the central bank. Basically it's a feedback loop where everybody thinks the currency is going to be worthless tomorrow, so they rush to spend it today, which makes money change hands more quickly than normal. Or on the supply side, they believe the currency is going to be worth less when they can spend it, so they pre-emptively raise prices to compensate for that.

adam_arthur3• 5 years ago

Zimbabwe, Venezuela, Germany... all modern examples of hyperinflation where the root cause was primarily through excessive money printing to fund debts/deficit spending.

There are other causes as well of course, but excessive printing seems the common thread between all of them.

I agree that an inflationary mindset is psychological and contributes, but without an increased money supply, people are constrained in how much they can spend.

E.g. how could a loaf of bread ever sell for 1000 USD without printed money? Nobody could afford those prices.

I doubt increased velocity of money alone is enough to sustain hyperinflation. Assuming velocity within the bounds of realism. Wages would have to rise significantly, creating a wage price spiral.

JanisL6• 5 years ago

While inflation is a monetary phenomenon I think hyperinflation is mostly a psychological phenomenon characterized by a lack of confidence in a currency. Fiscal policy changes could certainly change confidence or so could a number of other things.

adam_arthur3• 5 years ago

There's definitely a strong psychological component to inflation. And an inflationary mindset is probably needed for hyperinflation to materialize.

But I think increasing money supply is a necessary component for hyperinflation as well.

At least, in all modern examples of hyperinflation I've reviewed, there has always been a component of monetizing the debt/deficit.

Are there examples of hyperinflation where the money supply was largely fixed? I would be very curious/interested in that.

kyle_martin1• 5 years ago

Here’s what the White House has to say:

https://twitter.com/jasonrantz/status/1449144813291331588

Source article: Psaki Defends Rising Prices: ‘Good Thing’ Because It Means ‘More People Are Buying Goods’ https://www.dailywire.com/news/psaki-defends-rising-prices-g...

peter_retief• 5 years ago

Sadly he is right on this, the last 50 years or so the growth in the Chinese economy has created a high growth low inflation world economy, this has ended.

tompainetoday• 5 years ago

Maybe @jack thinks hyperinflation is when people hype Bitcoin to inflate its price? Cause we aren't seeing hyperinflation.

mmahemoff• 5 years ago

Twitter is like click-bait, but without the actual article.

Prominent personalities spew cryptic "profound" comments. The masses are supposed to fawn over them and speculate whatever this enlightened sage might mean by it. Like we just discovered the meaning of life scrawled on an ancient rock if only we could decipher those symbols.

My advice is ignore any prediction unless there's enough data and logic to back them up. Even if someone has a track record of predicting correctly, there's little to gain when you have no substance to triangulate between viewpoints and form your own view.

There might be some utility in looking at a poll of subject matter experts asked the same question(s), or a prediction market, but one person's idle speculation is noise.

kafkaIncarnate2• 5 years ago

What does it say about Hacker News that his tweet caused a CNBC article that was later submitted and upvoted/commented on heavily here?

Meta-meta-clickbait?

JanisL6• 5 years ago

Given the intersection of social media and monetary policy this article seems entirely relevant: https://www.epsilontheory.com/fiat-money-fiat-news/

Ma8ee3• 5 years ago

So a rich person whose wealth consists of crypto currencies make a prediction that could motivate people to invest in crypto currencies and make the rich person even richer. Why exactly should we believe him again?

IdontRememberIt• 5 years ago

My neighbor is Turkish (very good job). We often speak about inflation (because he recently came here and discovered almost zero inflation).

Sometimes he gives me examples of the consequences of high inflation in the little details of daily life. It is scary and frightening.

What people do not grasp is that high inflation kill all planification (even holidays, buy sometime "big" like a TV, meeting with friends, long term subscription, etc).

Because of it the reliability of business decreases as everbody is thinking short term and is acting at the last moment. How can you execute a big project if you do not know if the unpredictible inflation value will make it impossible or even kill your company? How do you handle an order if the customer cannot pay because the price went up? Or if the inflation eats all your margin, what do you do?

And of course I am not speaking about the negative impacts on the general mood, hopes, etc. on people.

repomies69• 5 years ago

As a BTC holder inflation is great. Prices just go lower. Holiday you were planning will be actually cheaper.

asjfj9• 5 years ago

No it doesn't. Hyperinflation means that although our BTC is worth more in USD, when we go to exchange our BTC for USD to go on that holiday, we'll need to give up more of our BTC since we need more USD to pay.

It would be much better if there is no hyperinflation. More and more people are moving parts of their money/assets into cryptocurrency. In the long run, holders like us will benefit. We all suffer when there's hyperinflation.

Disclaimer: My wife and I hold a significant amount of BTC in our child's trust fund.

garbagecoder• 5 years ago

Oh please, the fed has barely started raising interest rates. It’s not like they’ve tried and it failed. This is all horseshit.

sleepysysadmin• 5 years ago

Hyperinflation is 'out of control inflation' of minimum 100% in a year or 50% in a month.

That's absolutely not going to happen. There's absolutely no data to suggest this will happen.

Stagflation is inflation far in excess of gdp growth and rising unemployment. Also not really happening, we have good gdp growth within range of inflation more or less. If the central banks raise rates too quickly maybe we will get here but I very much doubt that will happen.

Inflation is going to be happening. The USD has about 40% inflation locked in over the next ~5 years. In the US it's already >5% and they arent even considering raising rates until summer? Probably sooner, and even if they do, it's not going to get inflation under control. All of 2022 is going to have high inflation and we will see what happens nearer the end of 2022.

Jack Dorsey says ‘hyperinflation’ will happen soon in the U.S. and the world

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