Treasury Secretary Insists Inflation Under Control Following Twitter CEO’s ‘Hyperinflation’ Tweet

By Jonathan Walker | October 26, 2021
Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
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WASHINGTON, DC - JULY 01: Treasury Secretary Janet Yellen smiles during a photo op with managing director of the International Monetary Fund (IMF) Kristalina Georgieva (L) at the U.S. Department of the Treasury on July 01, 2021 in Washington, DC. Yellen and Georgieva met to discuss steps the world is taking towards economic recovery. (Image: Anna Moneymaker/Getty Images)

On Oct. 23, Twitter CEO Jack Dorsey said in a tweet that hyperinflation is “happening” and that it will change “everything.” Dorsey’s tweet highlighted the inflationary pressure facing America and his tweet quickly became a hot topic. In an Oct. 24 interview with CNN, U.S. Treasury Secretary Janet Yellen dismissed concerns of inflation.

“I don’t think we’re about to lose control of inflation… On a 12-month basis, the inflation rate will remain high into next year because of what’s already happened. But I expect improvement by the middle to end of next year … second half of next year,” Yellen said.

The treasury secretary noted that the U.S. has been hit by a supply disruption due to a rise in demand following the economic reopening. She expects these bottlenecks to “subside” as the country emerges from the pandemic. “Americans will return to the labor force as conditions improve,” she added.

However, industry experts have expressed other views. Cargo companies have warned that U.S. President Joe Biden’s vaccine mandate is posing a threat to the supply chain as it could lead to a shortage of workers. The mandate has set a deadline of Dec. 8 for federal contractors to get their employees vaccinated.

When it comes to inflation, Washington’s push to pump in more money into the economy is expected to make matters worse.

“The Biden administration is trying to reach this deal to spend about another $2 trillion — makes a total of an extraordinary $5 trillion in spending this year. Inflation is growing at its fastest pace in 30 years. If the economy is already overheating, is spending even more money essentially pouring gas on the inflation fire?” CNN anchor Jake Tapper asked Yellen in an interview.

The treasury secretary replied that the spending package caused unemployment to drop to 4.8 percent and insisted that monthly rates of inflation have “fallen substantially” from the high levels seen in spring and early summer. 

According to a report released by the Department of Labor in early October, the U.S. consumer price index (CPI) is at a three-decade high and prices in September were up by 5.4 percent year on year. Inflation has led to price increases on practically every consumer good.

Some have come out in support of Washington’s economic policy. Cathie Wood, CEO of ARKinvest, said that inflation did not increase as expected after the Fed’s quantitative easing in 2008-09. Instead, the velocity of money, which refers to the rate at which money turns over per year, declined. This has subdued the effects of inflation.

“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 a tweet.

Larry Summers, an economic adviser during the Obama administration, believes that America is more at risk of “losing control of inflation than at any time in my career.” He criticized Yellen’s stance that inflation is declining and will be back to normal levels by next year, pointing out that CPI rates are around 5 percent.

“I actually believe the gap between Treasury & Fed statements and the everyday experience of businesses and consumers in terms of inflation has widened in recent months. Until the Fed & Treasury fully recognize the inflation reality, they are unlikely to deal with it successfully,” Summers said in a tweet. He expects housing inflation to “soar” in the coming months. Wage inflation is also “likely.”