Opinion from a Libertarian ViewPoint

Germany Could Witness A Cash Renaissance As Its Economy Continues To DeteriorateGermany

Posted by M. C. on October 24, 2022

And thirdly, people are increasingly fleeing inflation by going into real assets. They can no longer run to mortgages due to the rapidly rising interest rates. Although gold is in great demand in Europe, having a choice between gold and gold is not enough for somebody. And so the demand for such things as historical weapons, aged alcohol, or Swiss watches is growing. Exports of Swiss watches rose by 19 percent in September and could be a record this year. A time is coming when people will increasingly use cash instead of bank accounts and pour cash into cashable durables.

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MONDAY, OCT 24, 2022 – 02:00 AM

By Remix News

It may already have seemed that inflation in the West is slowly approaching its peak, but that is not the case. Considering the numbers coming from Germany, inflation may be far from peaking.

Producer prices in Germany increased by a record 45.8 percent year-over-year in September, the same as in August. Energy prices, which rose by 132.2 percent year-over-year, had the most impact on this. The only positive thing about this is that the month-over-month growth slowed a little due to the drop in commodity prices. However, for consumers, it follows that consumer inflation, which lags behind the so-called production inflation, must still climb. We cannot lie about this.

For Germans, however, the following sentence, which German statisticians added as a comment to the numbers, sounds the most frightening: “Compared to the same period last year, August and September recorded the highest increase in producer prices since the start of the survey in 1949.”

Germany is extremely sensitive to mentions of inflation or public debt. To understand why, we have to go back in history. The pre-war hyperinflation in Germany was caused by the fact that Germany could not finance the reparations from World War I. It began to pay its reparations with debt and started to monetize this debt, printing uncovered inflationary money and using it to pay off the debt. The result was hyperinflation and total economic disruption. Many historians believe it was this economic undergrowth that brought Hitler to power and marked World War II.

After the war, Germany, therefore, made a literal 180-degree turn. While before the war it showed enormous fiscal indiscipline, went into debt, printed money, and faced hyperinflation, after the war, on the contrary, it became Europe’s top-of-the-class in fiscal policy. It began scrupulously taking care to keep its public finances under control, not excessively inflating its debt, and not even remotely playing with anything resembling monetization. Jens Wiedmann, former governor of the German central bank, has been the most vocal central banker in Europe when it comes to criticizing the monetization of southern European debt and the policy of negative interest rates that the European Central Bank has begun to commit to in recent years. And it was the German Constitutional Court, through which some of the ECB’s plans of monetizing public debt did not pass.

So we have to understand that for Germany, the current inflation and debt monetization are much more sensitive topics than for any other European country. So far, consumer inflation in Germany is “only” 10 percent, a drop above the average inflation rate in the entire Eurozone, which reached 9.9 percent. Inflation, however, continues to rise.

Economics is not mathematics; economics is mainly about psychology.

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