With billions of packages attempt to help Central banks and States of the economy against the consequences of the Corona-crisis. The quantity of money rises sharply: The Commmerzbank expects a growth of ten percent in the next few months.

An increasing amount of money is often an indication of a approaching Inflation. And anyone who wanted to, could seemingly see the first signs: The prices for vegetables, but also for the hairdresser to visit rose in the course of Coronavirus-crisis. Alone, the tomato rose, according to demChili con Carne-Index of the University of Hohenheim in the top one-quarter.

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However, the view of the Big picture that speaks a different language: In may the inflation rate in Germany fell, according to initial estimates of 0.6 percent compared to the same month last year, in April, the figure was 0.9 per cent. In the Euro area the annual inflation rate according to Eurostat, in may, even if only 0.1 percent. For comparison: In April 2019, the value was 1.7 percent. This trend is likely to continue as the Inflation is largely determined by energy prices. These Bob up and down in spite of the recovery after the historic slump continued at a low level. db Oil price Brent 42,39 USD +2,49 (+6,24%) OTC

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"Great, Inflation is not coming,"

The rise of prices in different sectors "reflect only a temporary scarcity"explains Markus Demary, an Economist at the Institute of German economy in Cologne. "Due to the travel restrictions, the harvesters were scarce and there was less fruit and vegetables in the super markets. Hairdressers and Restaurants need to temporarily follow new hygiene rules and can serve fewer customers. Also here the price to reflect increases in a shortage of supply," says Demary. He is sure: "The great Inflation will not come."

Jörg Krämer, chief economist of Commerzbank, it looks similar. Against an inflation speaks his opinion that currently the growth of the money supply in the coming years will normalize when companies pay back their loans, and, secondly, that Inflation has been falling for decades. "All of that has anchored inflation expectations at low levels," says Krämer. "If, however, the companies expect a continued low Inflation, they will try not significantly higher sales prices." Webinar with Marc Friedrich: How do you now protect your wealth

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"the Biggest risk is Deflation,"

Instead of an Inflation Demary looks like a danger to Germany and the Euro area to come. From his point of view is the opposite, Deflation threatens. And also Gerhard Illing, Economist and Professor of macroeconomics at the Ludwig-Maximilians-University of Munich, warns: "Even if the current crisis is a mixture of supply and demand shocks, the effect outweighs the latter, but clearly the lack of demand, triggered by the Corona-measures, and compounded by the uncertainty about the duration of the crisis." For Illing, as well as for Demary clear: "At the Moment, the greatest danger in a Deflation, which would lead to a further downward spiral."

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consequences of a Deflation for the people are The Negative immensely: "What looks at first glance to be advantageous for the consumer, but turns out as a risk factor for economic growth," says Demary. "If consumers expect prices to fall, then push expenditure. Demand is missing, then sales is a lack of the company. If these then react with lower prices on the lack of demand, confirming the deflation expectations and spending will be further postponed."

in Addition, companies are not able to get their margins to maintain, and are sooner or later forced to dismiss employees. Because it is through the falling prices, the revenues are not to fall, while the cost of go back often to the same extent, for example, because wages are written down in treaties. As a result, the unemployment continues to rise and for the state, the revenue from the wage decrease tax. The result is rising unemployment, in turn, is a slower consumer - the people who can afford the high expenses and more. The state to lose tax revenue. In sum, the consequences of a Deflation is the result of a very real danger to the purse of the Individual. Demary: "The economy may fall into a long recession."

Appropriate response is to curb the expansionary monetary policy

the risk of Deflation, expect the Economists, appropriate measures of governments and Central banks. Illing: "A reasonable policy response in such a crisis is a mixture of expansionary monetary policies, government support the sectors concerned, as well as wide-scale programmes for the promotion of household demand."

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The economy Professor is trying to take those in fear, who see in the crisis programs, the safe way, in a sovereign debt crisis and Hyperinflation: "in view of the billions, many are concerned that the high debt burden will ultimately result in a sharp increase in Inflation. However, currently, negative interest rates seem to challenge this, now, finally, massive debt-financed government investment programmes to lead to long-overdue structural adjustments." If the programs succeed, to spark a dynamic growth, could decrease the debt load over the next few decades alone, as long as the growth rate of the economy exceeds the interest rate.

Demary rating of the most recent economic program of the Federal government as an important step to prevent a slide into Deflation: "The VAT reduction relieves the consumer and want to spend again more money. This stabilizes the expectations to the price development."

"Only the fear of Inflation, is fuelling Inflation,"

Central banks and governments Remain on the chosen path, see the Economists, the risk of Deflation banned. Illing has only one fear: "The real danger is that the growth are programs out of concern about high levels of debt is much too timid or again quickly stalled." A premature exit from the adjustment measures according to the economic experts are actually in a permanent state of Stagnation, which prevents a decrease in the real burden of debt on growth effects.

"Only in this case, it would come to problems on the supply side," said Illing. And thus the fear of inflation would then be entitled. Permanently high debt ratios could produce according to Illing political pressure, the objective of price stability to give up. "That would be a classic self-fulfilling prophecy," warns the Professor: "it is Only the fear of Inflation would Stoke Inflation."

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Date Of Update: 05 June 2020, 18:27