How does inflation harm a taxpayer

Inflation: Now the cold expropriation of savers threatens

The fact is: prices are rising in Germany - and surprisingly strong. In its latest monthly report from last week, the Deutsche Bundesbank reveals that consumer prices in January 2021 were 1.6 percent higher than a year ago. Far less surprising, as it is more automatically automated, such a price increase (in December, prices were still 0.7 percent below the previous year's level) arouses equally violent fears of inflation.

The inflation worries are also fed by the statement in the monthly report of the Bundesbank that the annual growth rate of the money supply M3 jumped to 12.3 percent by the end of December (M3 is the money supply that, from the point of view of the European Central Bank, ECB, has the decisive monetary influence on the price development exercises). It was more than twice as high as at the end of the previous year.

If the increase in the amount of money so overshoots the growth in the amount of goods, as it has been the case in recent years, prices should actually also skyrocket - so says conventional monetary theory. Generations of students have learned this relationship between the increasing amount of money minus the increasing amount of goods and rising goods prices as a quantity equation.

It was assumed that today, just as decades ago, banknotes would often be used every year to pay for goods - an assumption that has proven completely wrong. Regardless of this, the old inflation expectations remain.

Is there a threat of the cold expropriation of savers that many feared? A more than justified question! Because it is probably rightly expected that (savings) interest rates should leave the world of zero or even negative interest rates with a significant delay compared to inflation.

Standard of living in old age fundamentally at risk