Are we facing hyperinflation in the coming years? | Jack Dorsey thinks it is coming and you better be buying Bitcoin?

Came across an article on which Jack Dorsey spoke that we could be facing hyperinflation soon. So let's discuss on what hyperinflation is, what causes it and why Jack Dorsey is thinking that way.

Hyperinflation

Hyperinflation is where there is very high and typically accelerating inflation in which prices of goods increases and this erodes the value of money or the local currency. What this causes is that people would then switch their local currency for other more stable foreign currencies and in the case of Jack Dorsey, more people will switch to Bitcoin. Almost all hyperinflation are caused by government budget deficits financed by currency creation. Some people believe the U.S. is headed toward hyperinflation due to past and possible future government stimulus behaviour. Of course, hyperinflation is really exaggerated where something that cost $1 might cost $10 or $50 in a year. Hyperinflation are really rare and do not happen so easily.

Who is Jack Dorsey?

Jack Dorsey is the CEO of Twitter and Square, many people also know Jack as a Bitcoin maximalist. This means he believe that Bitcoin, which is the world's most popular cryptocurrency, is the only digital asset that will be needed in the future. Maximalists believe that all other digital currencies are inferior to Bitcoin. So of course, he mentioned that hyperinflation will be happening through a tweet explaining that hyperinflation is coming and will change everything.

This tweet follows after the consumer price inflation being at a 30 year high in the United States and policymakers have all along not anticipated inflation on such a scale as they have all along thought of inflation to be transitory.

Read more:

Federal Reserve Chairman Jerome Powell acknowledged that inflation pressures “are likely to last longer than previously expected,” and that they could run “well into next year.” The central bank leader also added that he expects the Fed to start reducing the extraordinary measures it has provided to help the economy that some critics say have stoked the inflation run.

The situation on the gas and electricity supplies

Another crisis that we are seeing that is hiking prices up are the gas prices that are soaring high. In Singapore, Mr Gan Kim Yong said fuel prices have more than doubled over the last one and a half years, with many places affected, including China, Japan, the European Union and the UK. He has advised for Singapore households to use electricity "prudently".

Electricity and gas is really the backbone of everything as hawkers need gas to cook and supermarket or shopping centres need electricity to keep the malls lit and cool. We have also seen several electricity retailers close down as they electricity prices increase and they are unable to continue on due to market conditions. The price hike for electricity is expected to stay for some time and hence they have chosen to exit. UK has also seen the exit of 9 energy suppliers as they are unable to keep to the price that was promised to the customers.

China and India are also facing coal shortages. The China's government has been rationing electricity to energy-hungry businesses because of a crunch in coal supply. India still relies on coal for 70% of its power with it being in short supply, India faces widespread blackouts.

Inflation is definitely here and staying but hyperinflation?

In my opinion, inflation is here to stay, your utilities, food, drinks, furniture and services will be increased in prices considering the supply chain issues and also restrictions making the earnings of owners reduced due to the lesser number of patrons. Hyperinflation is scary and I am sure the governments will not want it to happen as it will not just destroy the value of the local currency but chaos will also start due to fear and shortages.

It really is a domino effect as I think one thing might lead to another. No one expected the effects of the pandemic to be so severe and I thought that all would be back to normal once the pandemic is gone but it seems like it is not that easy. Well, there are really differing views but I think what we can do is to invest our money and just wish the governments are doing the right thing. The future is hard to predict.

Why Jack Dorsey says moving to Bitcoin is the way to go?

Of course, being a Bitcoin maximalist, some people question Jack on why he tweeted on the hyperinflation? Was it really his thought on the future or is to get more people to adopt Bitcoin into their portfolio. 1 Bitcoin will always be 1 Bitcoin but we are now of course comparing Bitcoin prices to fiat currencies so we are still not exactly at the stage where Bitcoin is the currency of the world although there are countries like El Salvador and Venezuela who have accepted Bitcoin as their currency.

Conclusion

The future is hard to predict, on my end, I am diversifying my investments and going more into alt coins. It is scary if the world really goes into hyperinflation, my mum's retirement fund might not be sustainable and so will many others. Wages don't seem to go up as much but for now, I am trying to make my money work for me as much as I can. I will be releasing a new post soon on the alt coins I am DCA-ing into. Do look out for it. 

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References: https://en.wikipedia.org/wiki/Hyperinflation
https://www.cnbc.com/2021/10/23/twitter-and-square-ceo-jack-dorsey-says-hyperinflation-will-happen-soon-in-the-us-and-the-world.html
https://www.straitstimes.com/singapore/housing/electricity-gas-tariffs-to-go-up-for-next-three-months-amid-rising-costs
https://www.straitstimes.com/business/economy/global-energy-shortage-or-a-coincidence-of-regional-crises
https://www.bbc.com/news/business-58746953
https://www.bbc.com/news/business-58662667
https://www.bbc.com/news/business-58090533
https://www.straitstimes.com/singapore/consumer/exits-by-spore-electricity-suppliers-sparked-by-price-volatility-amid-global