Germany and the UK had quite different experiences in
between the last century’s World Wars. Germany had runaway inflation, the UK high
unemployment. Both vowed never again, and the rest is history.
As a result, Germany has never been a country to see prices runaway with
themselves. Given the way Germany has kept a lid on inflation – when elsewhere it was
hitting double figures and more – perhaps it’s not surprising that, in recent months, while
economies have warned rising prices were back on the agenda, its Consumer prices
index, or HICP plummeted. In September, the headline rate was a mere one percent,
while the core level was even lower. Back at the tail end of 2004 in Germany, the core
rate of inflation was hardly rampant, but at 1.5 percent, it was three times higher than the
level seen today.
It’s a good example of how Germany has, in reality, suffered from the Euro. While
Spain overheats, with the euro rate of interest sitting at levels that are just too high for our
amigos, in Germany the Euro rate needs to fall. Instead, it’s expected to rise to 3.5
percent in December.
© Investment & Business News 2013