From cars to lumber to groceries, everything is in short supply and getting more expensive by the day. Twitter and Square CEO Jack Dorsey, for one, is worried that hyperinflation is coming to the U.S.
“Hyperinflation is going to change everything. It’s happening,” the 44-year-old billionaire tweeted to his 5.8 million followers on Friday.
Responding to a user from Nigeria commenting that his country is currently experiencing inflation at 16 percent, Dorsey said, “it will happen in the U.S. soon, and so the world.”
However, economists think Dorsey is either exaggerating the situation or doesn’t understand what the term “hyperinflation” means.
“There have been 62 certified hyperinflations in world history. At present, no country is experiencing hyperinflation,” tweeted Steve Hanke, an economist at Johns Hopkins University who’s known for his extensive research on the subject of hyperinflation.
Tweeting at Dorsey, Hanke said the Twitter CEO “should know better than to tweet irresponsible public statements.”
Dorsey responded with a passive aggressive rolling-on-the-floor-laughing emoji.
The textbook definition of hyperinflation is a situation where an economy is experiencing out-of-control price increases, typically at more than 50 percent per month or 1,000 percent per year.
In the past decade, there were only two cases of hyperinflation, one in Venezuela in 2016 and the other in Zimbabwe in 2017, according to the Hanke Krus Hyperinflation Table, a widely cited report co-authored by Steve Hanke and fellow economist Nicholas Krus.
In Venezuela, the rate of inflation reached 800 percent in 2016 and spiraled to 4,000 percent in 2017. The government stopped counting the following year.
Of course, the U.S. is nowhere near those levels. But the numbers are alarming enough to make policymakers worried. In the past 12 months, the consumer-price index, a key measure of inflation, has risen 5.4 percent, more than double the average rate of the past decade. President Biden said in summer that he believes the surge in U.S. inflation is temporary. Federal Reserve Chairman Jerome Powell has also insisted for months that price increases are “transitory,” largely reflecting pent-up demand as the economy reopens.
However, one of the 12 Federal Reserve banks in the central bank system sounded the alarm for a case of not-so-transitory inflation. Last week, Atlanta Federal Reserve President Raphael Bostic warned that the price surges we are experiencing now “will not be brief” and will likely extend into 2022 and beyond.
“The disruptions are going to last longer than we expected,” Bostic said in a CNBC “Closing Bell” interview last Thursday. “The labor markets are not going to get to equilibrium as quick as we hoped, but demand was also going to stay high and that combination was going to mean we’re going to have inflationary pressures. The more I talk to folks, it’s becoming clearer and clearer this is going to last into 2022.”