Innovation investor Cathie Wood on Monday rebutted Twitter and Square founder Jack Dorsey’s theory on hyperinflation.
The founder and CEO of Ark Invest took to Twitter to expound upon her contrarian theory about deflation after Dorsey tweeted Friday evening that “Hyperinflation is going to change everything. It’s happening.” Wood estimates that her hypothesis will start to play out sometime after the holidays.
“In 2008-09, when the Fed started quantitative easing, I thought that inflation would take off. I was wrong. Instead, velocity – the rate at which money turns over per year – declined, taking away its inflationary sting. Velocity still is falling,” Wood said in a tweet.
“When costs and prices decline, velocity and disinflation – if not deflation – follow. If consumers and businesses believe that prices will fall in the future, they will wait to buy buy goods and services, pushing the velocity of money down,” she added.
“Now we believe that three sources of deflation will overcome the supply chain-induced inflation that is wreaking havoc on the global economy. Two sources are secular, or long term, and one is cyclical. Technologically enabled innovation is deflationary and the most potent source,” Wood said in the Twitter thread.
“As a result, once the holiday season passes and companies face excess supplies, prices should unwind. Some commodity prices – lumber and iron ore – already have dropped 50%, China’s crackdowns are one of the reasons. The oil price is an outlier and psychologically important,” Wood said.
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