This is an excellent blog from the Economist. Check it out!
via Economic history: Germany’s hyperinflation-phobia | The Economist.
This article explains Germany’s fear of inflation in very easy terms. The concept is not new. Scholars call it ordoliberalism. This is the German version of neoliberalism superimposed with fears about inflation.
Of course, this is only half the story. The second half is about the German government not telling the German people the truth, and helping German business to benefit at the expense of the rest of Europe. See Wren-Lewis for an expansion of this argument or or Krugman on the Fall of France.
Yesterday, Eurostat announced that Euro area annual inflation was down to 0.3% in August. It added that Euro area flash inflation for Services was 1.2% – other goods 0.3%, with Food at -0.3% and Energy at -2.0%.
If we add the impact of sanctions on Russia and Russia’s sanctions on Europe, the trend is into deep recession.
So how should the World convince Angela Merkel‘s government to urgently support reflation across the Euro area? In my mind, we need to look to the fear of inflation and convince German people that that the fear of deflation is much more serious than inflation. It is time for the mainstream media and the social media to convince German people that their deepest fear is really about deflation not inflation! Certainly, Paul Krugman is now focused on what he describes as “Germany’s sin” but that’s another blog…
I still remember my parents telling me of that time, and how afraid they were of it coming back again. a time when you had to immediately spend the wages you got on payday since the next day they would already have lost their value and you wouldn’t be able to buy anything with that money.
In addition to that, they also experienced the devaluation of their money after WWII, when with the introduction of the Deutsche Mark everybody got 40 Marks, regardless of how much money they had at that time.
Those were really traumatic experiences for them as they lost their savings two times in their lifetime, and that, I think, is still ingrained in the minds/subconscious of many Germans – at least of my generation – even if we didn’t experience it ourselves.
Thank you you very much for sharing those personal insights.
Would you care to expand your viewpoint and I would be happy to reblog it under my guest blog banner?