Wed. Dec 1st, 2021

Twitter co-founder Jack Dorsey has warned that “hyperinflation” could soon hit the United States, raising fears that Australia will suffer.

The 44-year-old billionaire CEO used his social media platform to warn his 5.8 million followers about the kind of global mega-price increases that have historically hit Germany’s Weimar Republic in the 1920s and dysfunctional dictatorships like Zimbabwe, Venezuela and Cuba.

‘Hyperinflation is going to change everything. It happens, he said.

He doubled when asked, ‘It will happen soon in the United States, and then in the world.’

Dorsey issued the warning about massive price increases in the world’s largest economy, two months after his Square group announced it would take over Australian purchases now, later paying juggernaut Afterpay for $ 39 billion.

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Twitter co-founder Jack Dorsey has warned 'hyperinflation' could hit the US soon, raising fears Australia will suffer

Twitter co-founder Jack Dorsey has warned ‘hyperinflation’ could hit the US soon, raising fears Australia will suffer

Global Covid shortages of supply and long port delays threaten at least to cause double-digit inflation in the United States, which has not been seen since the long run-up to the OPEC oil crisis more than four decades ago.

In 1980, US inflation hit 14.5 percent, while in Australia it peaked at 12.4 percent in 1982 during a prolonged drought and approaching double-digit unemployment.

The late 1970s and early 1980s were marked by stagflation, with high inflation and high unemployment.

In both cases, former US President Jimmy Carter and then-Prime Minister Malcolm Fraser lost the next election.

In 2021, US overall inflation rose to 5.4 percent in the year to September, with figures from the Bureau of Labor Statistics showing a monthly increase of 24.8 percent in energy prices.

The Australian consumer price index data for the September quarter will not be known until Wednesday, when new data from the Australian Bureau of Statistics will be published, but during the June quarter, inflation grew at an annual rate of 3.8 per cent.

This was the fastest pace since September 2008, during the height of the global financial crisis, and was above the Reserve Bank of Australia’s target of 2 to 3 per cent for the first time in a decade.

Gasoline prices are also at record highs, and lead-free in Sydney is selling this week for 172.2 cents per liter compared to 172.8 cents in Melbourne, 175.7 cents in Brisbane and 180.5 cents in Adelaide (the picture is a stock picture)

Gasoline prices are also at record highs, and lead-free in Sydney is selling this week for 172.2 cents per liter compared to 172.8 cents in Melbourne, 175.7 cents in Brisbane and 180.5 cents in Adelaide (the picture is a stock picture)

Dorsey issued the warning about massive price increases in the world's largest economy, two months after his Square group announced it would take over Australian purchases now, later paying juggernaut Afterpay for $ 39 billion (pictured is Afterpay co-founder Nick Molnar with his wife Gabrielle)

Dorsey issued the warning about massive price increases in the world’s largest economy, two months after his Square group announced it would take over Australian purchases now, later paying juggernaut Afterpay for $ 39 billion (pictured is Afterpay co-founder Nick Molnar with his wife Gabrielle)

Gasoline prices are also at record highs, with lead-free in Sydney this week typically selling for 172.2 cents per liter compared to 172.8 cents in Melbourne, 175.7 cents in Brisbane and 180.5 cents in Adelaide, MotorMouth data showed.

The pandemic has also pushed the price of used cars up in Australia, with average prices 36 per cent above pre-Covid levels, Moody’s Analytics figures for September 2021 showed.

“Limited supply of cars due to the global shortage of electronic semiconductors is expected to keep prices elevated in the short term,” it said.

It is no wonder that Australians are worried about an ANZ-Roy Morgan consumer confidence target for October, which shows customers are worried about what inflation will do over the next two years.

CommSec senior economist Ryan Felsman said the pressure on cost of living was now a fact.

“Record gas prices, higher food prices, increased utility bills and annual insurance price increases worry households,” he said.

The price increases are a dramatic turnaround from 2020, when Australia suffered annual deflation for the first time since the late 1990s, when national Covid lockdowns caused the first recession in nearly three decades.

On Twitter last Saturday, Dorsey wrote: 'Hyperinflation will change everything.  It happens'

On Twitter last Saturday, Dorsey wrote: ‘Hyperinflation will change everything. It happens’

The consumer price index rose 5.4% in September from last year, up from the August increase of 5.3% and matched the increases in June and July

The consumer price index rose 5.4% in September from last year, up from the August increase of 5.3% and matched the increases in June and July

In the United States, shipping ports are struggling to keep up with demand.

The Port of Los Angeles, which handles more than half of all shipping containers arriving in the United States, suffers significant delays with huge queues of trucks.

What is ‘hyperinflation’?

Hyperinflation is a term used to describe a period of excessive general price increases on groceries in a very short time.

Typically, hyperinflation sees inflation rise by 50 percent every month.

In comparison, the inflation rate has remained at around two per cent a year since 2011 – although the last 12 months have seen an increase of 5.4 per cent.

In contrast to standard inflation, which measures the increase in prices per month, hyperinflation monitors the increases every day.

However, hyperinflation does not usually occur without an initial trigger such as a war, social uprising, or supply shock.

Hyperinflation is usually not associated with developed countries and is more likely to occur as a result of war, social upheavals that prevent goods from entering the market, or a blockage of supply that pushes up the price of everyday items.

Hyperinflation gripped the Weimar Republic of Germany after World War I and saw money carried around in wheelbarrows in the early 1920s, following the tough claims for compensation from the French-led Treaty of Versailles.

A loaf of bread cost 200,000 million marks in November 1923 and saw the Germans turn to barter when monthly hyperinflation reached 29,500 percent.

This kind of economic disaster has also gripped Zimbabwe following the forced takeover of white-owned farms under the late Robert Mugabe and a long drought.

This African basket case from 2007 averaged a monthly inflation of 2,600 percent per month.

But in November 2008, it was a whopping 79,600,000,000 percent in a month, as prices literally doubled every day.

In Venezuela, under the spiritual successor of the socialist dictator Hugo Chavez, Nicolás Maduro, inflation rose to 800 percent in 2016 and rose to 80,000 percent two years later.

Cuba, which is living under prolonged US sanctions, also suffers from hyperinflation.

Fears of massive price increases have spurred demand for cryptocurrencies in large parts of developing countries, where confidence in the government and their central banks is low.

Dorsey’s warning on social media comes amid rising inflation in the United States, which has been linked to the continuing crisis in the supply chain.

In the United States, shipping ports are struggling to keep up with demand.  The Port of Los Angeles (pictured), which handles more than half of all shipping containers arriving in the United States, suffers significant delays with huge queues of trucks

In the United States, shipping ports are struggling to keep up with demand. The Port of Los Angeles (pictured), which handles more than half of all shipping containers arriving in the United States, suffers significant delays with huge queues of trucks

The worst hyperinflation in history

Germany: 29,500 percent per month in October 1923

Greece: 13,800 percent per month in October 1944

Zimbabwe: 79.6 billion per month in November 2008

Crossmark Global Investments chief investment officer Bob Doll said high inflation in the US is likely to last for a decade.

“Food and energy are more diverse, but that’s where the problem is,” he told CNBC.

‘Hopefully we start solving our supply shortage problem.

‘But when the dust settles, inflation does not go back to zero to 2 [per cent] where it was in the last decade. ‘

Finance Minister Janet Yellen insisted that the US did not lose control of inflation and expected it to normalize by the end of 2022.

“I do not think we are losing control of inflation,” Yellen told CNN’s State of the Union.

“Of course, I agree that we are going through a period of inflation that is higher than Americans have seen for a long time,” she continued. ‘And it’s something that obviously worries them and worries them. But we have not lost control. “

Yellen added that she expects inflation to return to a more ‘normal’ rate of around 2 per cent next year.

“On a 12-month basis, inflation will remain high into next year because of what has already happened,” she said.

“But I expect improvement in the middle to the end of next year – the second half of next year.”

Finance Minister Janet Yellen assured on Sunday that the US will not 'lose control of inflation', as she claimed that interest rates should return to 2 percent by the end of 2022

Finance Minister Janet Yellen assured on Sunday that the US will not ‘lose control of inflation’, as she claimed that interest rates should return to 2 percent by the end of 2022

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