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Jack Dorsey says ‘hyperinflation’ will happen soon in the U.S. and the world
- gpt5 5y agoTo 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)
- JanisL 5y agoWith debt to GDP at such high ratios raising interest rates has some challenges, why do you think this is easy to deal with?
- shrimpx 5y agoCurious, why do you think it’s difficult to raise interest rates when debt is high?
- IG_Semmelweiss 5y agoSimple. As your interest increases, sondo your payments as a % of taxes At some point, if interest payments are too big of a slice off total spend, investors will start believeing the debt will never be repaid... And thus monetise debt instead.
- shnp 5y agoDebt levels being high means that a significant portion of the revenue is there to service the interest payments and the remaining is not enough to cover all other expenses. Therefore you either raise more debt, or default.
- JanisL 5y agoAt the moment we have a monetary system that's a debt based monetary system. In practice this means that many people are operating under the assumption that someone's liability is someone else's asset, I think this assumption is rather systemic at the moment. Beyond a certain level of indebtedness a rise in interest rates triggers off a chain of defaults and that can cause a situation of credit contagion. An uncontrolled credit contagion event could very conceivably destroy the financial system. Much power is currently held by creditors and they will likely try to fight any attempts to change policy in such a way that reduces their power. Here's a much more long form article that talks about the dynamics in play: https://desogames.substack.com/p/the-problem-is-too-big https://desogames.substack.com/p/the-problem-is-too-big
- shnp 5y agoAlso, no president or congress wants to be at the helm of a ‘self inflicted’ recession. Every politian just kicks the can down the road.
- shrimpx 5y agoThanks, and thanks for the linked newsletter. I’ll read it. I’m curious to learn how the current situation compares to the 80s when rates were pushed to 15% to stop inflation.
- dragonwriter 5y 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.
- shrimpx 5y agoThe us did it in the late 80s. 15% interest rates!
- dfadsadsf 5y agoSome 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
- gpt5 5y agoThat’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.
- shnp 5y agoGovernment 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.
- Ma8ee 5y agoHow does inflation increase government revenue?
- shnp 5y agoPrint and spend dollars at value ‘A’, right after the money gets in circulation, value decreases to ‘B’, the spread between ‘A’ and ‘B’ acts like a tax on all cash. This results in an increase in tax amounts (not actual value) because of price increases, making revenue numbers go higher, making it easier to pay off old debts It benefits those who holds the most debt, and is horrible on anyone who is on fixed income. Presumably capital gains will still be taxed, which means that inflation + tax can wipe out any income from gains.
- Ma8ee 5y agoYou mean printing money is bad? But that is not in general what causes inflation. Inflation in itself can not be considered a tax.
- eruleman 5y agoRaising 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/billionaire-investor-druckenmiller-blasts-feds-radical-stimulus-policy-warns-it-risks-stock-bubble-blowing-up/?sh=529bbbd22fe8 https://www.forbes.com/sites/jonathanponciano/2021/05/11/bil...
- drcode 5y agoThe 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?
- Kibranoz 5y agoIt would be catastrophic if it was the case
- rhizome 5y agoJack Dorsey isn't an economist.
- firecall 5y agoNo, 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 5y agoThere 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 5y agoPure B.S.
- dd36 5y agoI’ll take that bet.
- ls15 5y agoTen if you win, a trillion if you lose.
- pwinnski 5y agoAnd 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 5y agoBecause he's the CEO of Square.
- kyle_martin1 5y ago[flagged]
- deleted 5y ago[deleted]
- baby 5y agoTo fix a problem become part of the problem?
- kyle_martin1 5y agoThen use useful idiots (Twitter users) for your political advantage. Historical context: https://www.google.com/amp/s/www.robesonian.com/opinion/135975/history-shows-revolutionaries-like-to-use-useful-idiots/amp https://www.google.com/amp/s/www.robesonian.com/opinion/1359...
- dang 5y agoPlease don't take HN threads into ideological flamewar. It's all so repetitive and tedious. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- curiousgal 5y agoAny 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 5y agoCouldn't agree more! Yet our tribal brains are hardwired to listen and follow the people who have a lot of clout.
- mgamache 5y agoIt’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.
- Waterluvian 5y agoIt’s basically just some rando tweeting a hot take.
- drcode 5y agoHe created two multi billion dollar companies just by "being lucky"? I'm skeptical.
- gota 5y agoI 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.
- drcode 5y agoI agree that tech CEOs say a fair amount of dumb shit (because they tend to be brainstorming, free associative thinking types) but if you think any guy off the street could have been Jack Dorsey, if the dice had just rolled differently, then I would disagree hard.
- omgwtfbyobbq 5y agoIf 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.
- Waterluvian 5y agoIsn'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.
- omgwtfbyobbq 5y agoI think so. I'm still surprised by how often it seems to be ignored.
- cjensen 5y 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 https://en.wikipedia.org/wiki/Hyperinflation
- kafkaIncarnate 5y agoDoes Jack Dorsey know this? Or does he just think hyperinflation is just like saying gigamegaultrainflation++?
- newaccount2021 5y agoThe HN party line has moved from disavowing inflation to embracing it as a great time to buy stocks. High inflationary periods will be low growth...demand softens as buying power erodes. The time to buy stocks was the beginning of the Era of permanent QE (2009), not now. Either inflation erodes buying power and stocks suffer a grueling, long term erosion...or the Fed raises rates and you get a massive reset. When a society is as indebted as ours, you can't just casually raise rates. If the ten year bond reverted to the historical avg yield of 4.5%, national debt interest payments would eat 30% of the US Federal Budget...and that's just to pay interest, not principle
- josh_today 5y agoJack has a vested interest in hyperinflation through Square and his investment in Bitcoin
- nickff 5y ago>"Jack has a vested interest in hyperinflation through Square and his investment in Bitcoin" How would Square benefit from hyperinflation?
- adamnemecek 5y agoThe bitcoin.
- JanisL 5y agoOnly people who don't understand the wealth destroying affects of hyperinflation will actually cheer for it.
- jon37 5y agohe also has a vested interest in the fear of hyperinflation.
- gota 5y agoMaybe 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 5y agoLet’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 5y agoI 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 5y ago> crypto advocate says hyperinflation will happen Hmmm, I really wonder why?
- pcurve 5y agoWould 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.
- seibelj 5y agoInflation 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 5y agoIt'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.
- seibelj 5y agoThere 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.
- cudgy 5y agoWhile your stock portfolio drops massively as people move to i-bonds/commodities and your property prices fall as well since noone can afford to buy property at the higher interest rates.
- rvz 5y agoWhich 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.
- rh45h54h4 5y agoWhat rock are HN viewers living under? You guys just going to deny that hyperinflation isn't a reality because your hard on to hate a billionaire outshines any rational your brain might manage to produce? Billionaires suck, but he isn't wrong.
- ojbyrne 5y ago“Soon” is a pretty good weasel world.
- iszomer 5y agoCNBC reporting, of all places..
- smt88 5y agoHistorically, 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 https://www.investopedia.com/terms/h/hyperinflation.asp 2. https://www.cnbc.com/2018/03/21/jack-dorsey-expects-bitcoin-to-become-the-worlds-single-currency-in-about-10-years.html https://www.cnbc.com/2018/03/21/jack-dorsey-expects-bitcoin-... 3. https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/2021-economic-commentaries/ec-202119-whose-inflation-expectations-best-predict-inflation.aspx https://www.clevelandfed.org/en/newsroom-and-events/publicat... 4. https://www.reuters.com/article/us-economy-inflation-expectations/column-consumer-gut-on-inflation-is-wrong-that-is-a-problem-for-the-fed-idUSKBN2HB0UV https://www.reuters.com/article/us-economy-inflation-expecta... 5. https://www.cnbc.com/2021/10/12/inflation-gauge-should-be-hot-again-in-september-and-for-months-ahead-.html https://www.cnbc.com/2021/10/12/inflation-gauge-should-be-ho...
- joe_the_user 5y agoSo 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 5y agoEfficiency 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 5y agoDeflation is easier to address. The economic levers to ease deflation are longer.
- adam_arthur 5y agoDon'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.
- nostrademons 5y agoThe 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_arthur 5y agoZimbabwe, 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.
- kyle_martin1 5y agoHere’s what the White House has to say: https://twitter.com/jasonrantz/status/1449144813291331588 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-good-thing-because-it-means-more-people-are-buying-goods https://www.dailywire.com/news/psaki-defends-rising-prices-g...
- peter_retief 5y agoSadly 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 5y agoMaybe @jack thinks hyperinflation is when people hype Bitcoin to inflate its price? Cause we aren't seeing hyperinflation.
- mmahemoff 5y agoTwitter 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.
- kafkaIncarnate 5y agoWhat 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?
- JanisL 5y agoGiven the intersection of social media and monetary policy this article seems entirely relevant: https://www.epsilontheory.com/fiat-money-fiat-news/ https://www.epsilontheory.com/fiat-money-fiat-news/
- Ma8ee 5y agoSo 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 5y agoMy 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 5y agoAs a BTC holder inflation is great. Prices just go lower. Holiday you were planning will be actually cheaper.
- asjfj9 5y agoNo 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.
- voisin 5y agoIsn’t the thinking that BTC would increase relative to the hyper inflating currency to compensate for the inflation? So you wouldn’t have to pay more BTC for that holiday?
- 5y ago
- garbagecoder 5y agoOh please, the fed has barely started raising interest rates. It’s not like they’ve tried and it failed. This is all horseshit.
- sleepysysadmin 5y agoHyperinflation 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.