Inflation to get considerably worse: Twitter CEO Jack Dorsey

Twitter Co-Founder and CEO Jack Dorsey believes the escalating inflation is going to get considerably worse. He pointed out that hyperinflation is going to change everything. “It’s happening,” he tweeted.

The Twitter CEO sees the inflation problem escalating around the world. “It will happen in the US soon, and so the world,” he tweeted. Dorsey’s tweet comes with consumer price inflation approaching a 30-year high in the United States and growing concern that the problem could be worse than authorities have anticipated.

Jerome Powell, Federal Reserve Chairman, on Friday acknowledged that inflationary pressures are likely to last longer than expected. Powell hopes the Fed will soon begin to withdraw the extraordinary measures it has provided to help the economy that critics say have fuelled the inflationary run.

According to a Bloomberg report, the COVID-19 pandemic has prompted the fastest and most volatile economic cycle in modern times. It noted that fears of depression in 2020 have given way to alarm about hyper-inflation in 2021. The report said that if the main driver is too little industrial capacity to meet consumer demand over the long-term, then the policy prescription would be to end stimulus measures and allow market interest rates to rise. If the main driver is temporary supply shortages and recovering sentiment about global demand, then the current phase of inflation is a natural part of COVID healing.

Experts say the COVID economic cycle has been fueled by extraordinary supply-side shocks, from business investment, production chains to labor participation, as opposed to traditional demand-led forces. Inflation is a measure of how fast the prices of goods and services are rising. Very high or very low inflation are considered bad for the economy, so governments try to maintain within a desirable band.

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According to Smith and Williamson, a sudden rise in inflation due to the policy responses to COVID-19 is a key risk for any unprepared portfolio. it can be bad for assets where the returns tend to be fixed, e.g. bond/debt holders, as higher inflation erodes the value of those fixed income streams. As a result, portfolios with high levels of cash and fixed income bonds are particularly vulnerable to rising inflation, especially given how expensive these assets already are.