A recent debate on Twitter has led to the likes of Elon Musk, Jack Dorsey, and Cathie Wood debating the issue of inflation, and discussing whether it will be a short-term concern, or as Square CEO JAck Dorsey believes, a sign of hyperinflation. Cathie Wood joined the debate to add her belief that inflation will be overcome by several deflationary forces.
The CEO of ARK Invest responded to Jack Dorsey’s statement that “hyperinflation is going to change everything”. Wood replied via Tweet noting that In 2008-09, when the Fed started quantitative easing she believed that inflation would take off. She added that, instead “velocity – the rate at which money turns over per year – declined, taking away its inflationary sting. Velocity still is falling”.
As concerns over the impact of the pandemic on the economy lead some, such as Jack Dorsey, to believe in the possibility of hyperinflation, others view the rising prices as a normal reaction that will be contained by a number of deflationary forces.
Wood responded to Elon Musk who joined in with the Twitter debate by stating that while he was unsure of the long-term, “short-term we are seeing strong inflationary pressure”. Wood responded to Musk by noting:
“Inflation has flared in response to COVID-related supply chain bottlenecks and oil supply constraints but, IMHO, the powerful and converging deflationary forces associated with AI, energy storage (EVs!), robotics, genomic sequencing, and blockchain technology will bend the curve”.
Wood added that she believes that three main sources of deflation will overcome supply chain-induced inflation with Technologically enabled innovation being the most deflationary. Additionally, Wood noted that a deflationary force known as “creative destruction” in the form of S&P 500 companies that did not invest enough in the future would also have a deflationary effect on the economy.
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