Daily Management Review

A Real Reason to Complain Exists for Germany’s Long-Suffering Savers


10/23/2016




A Real Reason to Complain Exists for Germany’s Long-Suffering Savers
A political currency that never seems to lose its value in Germany is fretting about inflation.
 
The savings of the people of Germany are in for a renewed onslaught from accelerating consumer prices and this has been re-enforced in at least three national newspapers have run prominent articles telling the same in the past week. As it is, the savings of people is denied the magic of compound interest by the European Central Bank’s low-rate policies. Whereas rates will likely be around zero, the Bundesbank forecasts average inflation of 1.5 percent next year.
 
Business daily Handelsblatt published a cover headline on Friday proclaiming that Germany is about to get caught in an “inflation trap” and it had in March ran a mocked-up front-page picture of ECB President Mario Draghi burning up a 100-euro note.
 
Yet ECB’s definition of price stability would be above a rate of 1.5 percent. And a goal that it essentially adopted from the Bundesbank, it aims for consumer-price growth of “below but close to 2 percent”. Draghi’s chief concern is that the euro area is still too close to deflation and renewed economic decline after more than three years below that threshold -- sometimes far below.
 
The national memory of hyper-inflation in the early 20th century is the typical explanation for why there seems to be a hair-trigger sensitivity in Germany to any threat to the power of money is psychological.
A clearer picture of why German savers might be disgruntled emerges and where the EBC has very little to do, when one looks back at real interest rates -- what you receive on your deposits adjusted for the actual rate of inflation.
 
Real rates in Germany were negative in 309 months, positive in 209 months, and at zero for 58 months, since September 1968, when the data series maintained by the Bundesbank starts. Means German savers lost money for most of the last 48 years. Oops.
 
At minus 0.16 percent, the average real rate over that period was indeed negative.
 
Many professional economists who are particularly worried about a decline in German purchasing power is hard to find though. There’s not much evidence of higher inflation expectations among the populace,  says Andreas Rees, chief German economist at UniCredit Bank AG in Munich.
 
“Frankly, I do not think that the German people expect a strong rise in inflation driven by monetary policy,” he said.
 
Yet there is a danger if German newspapers are sensing a public concern over price rises, and if policy makers react to it.
 
“Germany’s excessive fear with inflation generates an obsession with anti-inflation policies and thus the German monetary policy thinking tends to respond asymmetrically. This thinking can be risky because it’s easy to fight inflation when inflation is on the rise, while it’s difficult to overturn deflation once you are stuck in a deflationary trap,” said Johannes Gareis, an economist at Natixis in Frankfurt.
 
(Source:www.bloomberg.com) 






Science & Technology

Designing Of Cars Being Done With Hologram Goggles At Ford

The Already Surging Cyber Attacks Are Set To Rise Even Further, Says A Study

Chinese to equip smartphones with OLED displays

Based On One Photo, Research Shows A.I. Can Detect The Sexual Orientation Of A Person

Cyber Crime Risks Are Substantial, Systemic, Says SEC Chief

Tech Titans, Amazon & Microsoft, Partner To Integrate Their Respective A.I. ‘Voice Assistants’

SpaceX Selects Technical University Team’s Hyperloop As The Winner Of The ‘Fast Pod’

Market of autonomous cars will accelerate by 2025

AHA Customers In Iceland Enjoy The First ‘Drone Delivery Service’ In The World

Wal-Mart to unite with Google's voice platform

World Politics

World & Politics

Strong 3.4 magnitude earthquake detected coming from North Korea’s nuclear test site

Even As Kim And Trump Trade Threats, South Korea Approves $8 Million Aid For The North

From October 1 Uber is banned in London

Concerns about the far-right party are growing in Germany

Fight for clean air: 7 countries against internal combustion engines

Japan, India Agree To Deepen Defence With China In Mind

Myanmar's Rohingya Crisis May Be Taken Advantage Of By Terror Groups

The French people voted for Labour Reforms, there is no turning back: French Prime Minister Edouard Philippe