Inflation continues to rise. A central reason for this is also the enormous debt policy of the government. Where this can lead can already be seen in the USA.
In America, the country’s leading economists – including ex-Treasury Secretary Larry Summers – agree that Joe Biden’s policies are partly responsible for the accelerated inflation. Others may have created the explosive conditions, but Biden sparked the initial spark.
An already overheated economy, which after years of flooding with money was suffering from an acute bubble formation on the real estate and stock markets, was once again pushed to the extreme with borrowed state money. That was one stimulus too many.
As a reminder, in March 2021, shortly after taking office in the White House, Biden passed a $1.9 trillion stimulus bill. He wanted to banish the post-COVID mood. That was the double Obama. In 2008, the predecessor wanted to treat the post-Lehman trauma with 840 billion dollars.
Conservative economists warned Biden that this monetary oversupply could result in higher prices given the money overhang that already exists. But the Biden government decided to “go big” and thus had a much-noticed success on the labor market: nine million additional jobs have been created in the USA since January 2021. This avoided the COVID recession.
But at the same time inflation was underestimated. Treasury Secretary Janet Yellen called the risk of inflation “small and manageable”. Even months after the passage of the largest economic stimulus package in US history, she stuck to it:
It turned out very differently. A gallon of gasoline, which cost around $2.20 two years ago, has broken through the magical $5 mark for the first time in US history. Americans see these prices not as inflation but as deprivation of liberty. In an interview with CNN’s Wolf Blitzer, Yellen admitted for the first time:
The inflation rate is now 8.6 percent, the highest in more than 40 years. The situation could be summed up cynically as follows: People have jobs but no money. You can fill up, just not full. The Democrats face a serious defeat in the November elections.
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Which brings us to Germany. In this country, too, inflation is now leading the hit parade of fears. But important parts of the government – and therein lies the difference – make no attempt to come to terms with their responsibilities. On the contrary: the traffic light coalition is exacerbating the problem in many ways and continues to act as a driver of inflation:
Conclusion: without the chancellor at his side, the finance minister cannot be successful. But Scholz dances. He wants to appear fiscally serious, but not be. He is afraid of the recession and accepts inflation in return. If he’s unlucky, he ends up getting both.
Gabor Steingart is one of the best-known journalists in the country. He publishes the newsletter The Pioneer Briefing. The podcast of the same name is Germany’s leading daily podcast for politics and business. Since May 2020, Steingart has been working with his editorial staff on the ship “The Pioneer One”. Before founding Media Pioneer, Steingart was, among other things, Chairman of the Management Board of the Handelsblatt Media Group. You can subscribe to his free newsletter here.
