Twitter’s Jack Dorsey Predicts ‘Hyperinflation’ — Is His Warning Merited?

Mandatory Credit: Photo by Shutterstock (11832187ab)Jack Dorsey, Chief Executive Officer, Twitter, gives virtual testimony before the United States House Committee on Energy and Commerce Subcommittee on Communications and Technology and the Subcommittee on Consumer Protection and Commerce of the Committee on Energy and Commerce joint hearing titled, "Disinformation Nation: Social Media's Role in Promoting Extremism and Misinformation" on Capitol Hill in Washington, DC.
Shutterstock / Shutterstock

Twitter co-founder Jack Dorsey on Friday tweeted, “Hyperinflation is going to change everything. It’s happening.”

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Meanwhile, U.S. Treasury Secretary Janet Yellen said she expects inflation rates to return to normal, which is in the 2% range, by the second half of 2022, citing COVID-19 issues and supply chain challenges as reasons for rapidly rising consumer prices. Likewise, Federal Reserve Chairman Jerome Powell acknowledge Friday that inflation could last “well into next year.”

CNBC reported that the year-over-year price gain was 5.4% in September, with the bulk of that attributed to food and energy. In a conversation on Twitter Friday, Dorsey observed, “It will happen in the US soon, and so the world.”

What Is Hyperinflation?

Although the U.S. has seen an increase of 5.4% in consumer prices in the past year, mostly centered around two categories, hyperinflation occurs when consumer prices rise more than 50% per month. Hyperinflation is typically caused by one of two factors, or both factors converging:

Both of these things are happening in the U.S., largely due to COVID, stimulus packages and supply chain issues, but to lesser degrees than to cause hyperinflation.

How Inflation Works

The Federal Reserve buys bonds, placing electronic dollars into the reserves of big banks and, therefore, adding more money to the economy. This, in turn, drives down interest rates to help consumers borrow money which they can then also put back into the economy.

Make Your Money Work for You

At the height of the pandemic, Congress put mandates on the Fed to buy bonds, pumping money into the U.S. economy to maximize employment and stabilize prices. It’s the Fed’s job, along with Congress, to determine when they should pump the brakes on bond-buying.

The Path To Halt Hyperinflation

Twitter’s Dorsey may have a point: if — and only if — the U.S. continues on its current path of printing money, buying bonds and struggling with unstable supply chains, the country could experience hyperinflation. However, the Biden Administration’s Supply Chain Disruptions Task Force has called to open some of our nation’s most important supply ports on a 24/7 basis, which will help with the distribution of consumer goods. The Fed has indicated it would begin tapering bond purchases by December 2021. Similarly, if inflation overheats much more, or shows no signs of slowing, the Fed and Congress can instruct the U.S. Treasury to stop printing money. These are all ways to halt or slow inflation as needed.

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So far, most of the major investors have not predicted hyperinflation, CNBC reports.

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Last updated: October 22, 2021


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