Cindy Ord and Picture Alliance
- Technology like blockchain could help temper inflation, ARK boss Cathie Wood said on Twitter.
- Wood was responding to a tweet by Elon Musk on the current strength of price pressures.
- Supply-chain bottlenecks and shortages of labor and raw materials have seen a surge in global inflation.
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ARK chief executive Cathie Wood is firmly on the side of the debate that believes the current surge in inflation will likely be short-lived. In a series of Twitter exchanges on Tuesday with the likes of Jack Dorsey and Elon Musk, she explained the deflationary forces that will help quell the pickup in price pressures, including the role of technology.
Supply-chain bottlenecks at ports, warehouses and rail depots around the world that built up during the worst of the Covid-19 lockdowns, along with shortages of labor and raw material prices have sent the cost of consumer and producer goods and services to multi-year highs.
Central bankers face a delicate balancing act of curbing excessive price increases without dampening economic growth, which in many cases, is still below pre-pandemic levels.
On Monday, Wood took to Twitter to detail three deflationary forces that will "overcome the supply chain-induced inflation," responding to Jack Dorsey less than 72 hours after he sounded an alarm on rising prices.
Tesla chief executive Musk weighed in. "I don't know about long-term, but short-term we are seeing strong inflationary pressure," he tweeted in reply to part of Wood's thread.
"Inflation has flared in response to COVID-related supply chain bottlenecks and oil supply constraints but, IMHO (in my humble opinion), the powerful and converging deflationary forces associated with AI, energy storage (EVs!), robotics, genomic sequencing, and blockchain technology will bend the curve," Wood said in response to Musk.
"If they expect lower prices, most consumers/businesses will defer purchases, exacerbating a decline in the velocity of money. Despite the burst in cyclical inflation during the last year, velocity is hovering at low levels. If ARKInvest is correct, the next leg will be down," she continued.
She pointed to the decline in velocity - the rate at which money turns over per year - and how that will also help offset inflation.
"I am struck by the behavior of millennials who, at the margin, are sacrificing short term consumption to pay down student loans or invest in crypto and other assets. Bank loan growth also is tepid which would not be the case if velocity were increasing," she said.