Now, Mr. Schulze, a 56-year-old auto mechanic, says runaway inflation looms again, threatening to decimate his savings and turn his carefully planned retirement into abject poverty. It is not so much the ghost of the 1920s that he fears, but the vocal demands around Europe and abroad for a “big bazooka” of public money to reassure markets and help European countries in heavy debt.
“I’m worried about my pension and my savings and the problems we’re facing right now,” Mr. Schulze said.
Many economists say aggressive purchases of the sovereign bonds of heavily indebted states by the European Central Bank are the quickest and surest path to stabilizing the crisis. On Thursday, Mario Draghi, the bank’s president, laid the groundwork for bolder intervention in markets if certain conditions were met.
To German ears those bond purchases, or anything that smacks of printing money, sound like a recipe for skyrocketing prices. German leaders, including Chancellor Angela Merkel and her former economic adviser, Jens Weidmann, now head of the German Bundesbank, have strongly discouraged any such move by the European Central Bank, stalling the rescue of the euro zone in the view of critics.
The prospect of a dim historical memory — the antique photograph of the wheelbarrow full of nearly worthless bills — helping to drive the world off the economic precipice and into another deep recession may seem like the height of irrationality and even irresponsibility.
But the German obsession with inflation has been difficult to overcome because Germans perceive themselves as more vulnerable to inflation today than their neighbors are. It is a force they believe could reduce or wipe out the competitive and financial edge they have labored to build.
By robbing a currency of its value, inflation wipes the slate clean for debtors and savers alike. Germans say they like the slate the way it is because they are on the plus side of the ledger.
Consumer debt, whether credit cards or in many cases even home mortgages, is frowned upon here. According to figures of the Organization for Economic Cooperation and Development, the German savings rate was more than 10 percent every year between 2003 and 2009, while during the same period it bottomed out at 1.5 percent in the United States, and never rose above 6.2 percent. As a result German households had net savings of $4.3 trillion, according to the Bundesbank, in a country of fewer than 82 million people.
Germans own homes at a lower rate, 41.6 percent, than the 66.3 percent of Americans who do. And most people do not invest in the stock market here.
“For the average American, inflation means the home price is increasing and the value of debt is going down,” said Peter Bofinger, a prominent economist on Mrs. Merkel’s independent council of economic advisers, “whereas the German invested in life insurance and sitting in an apartment he rented is much more vulnerable to inflation.”
Fear of inflation is a deep and broad consensus in Germany, but one that Sebastian Dullien, an economist and senior policy fellow at the European Council on Foreign Relations, said had worsened appreciably in recent years. “It is not about the 1920s,” Mr. Dullien said. “The fear of inflation went up when wages stopped going up.”
In an effort to regain lost competitiveness over the past decade, Germany went through a period of wage restraint and labor-market reforms that made the hiring and firing of workers easier and welfare benefits less generous. While countries on Europe’s southern edge, including Greece and Portugal, were enjoying the cheap money that came with membership in the euro, Germans were developing a newfound sense of economic insecurity, one that paired all too effectively with an old dread.
Article source: http://feeds.nytimes.com/click.phdo?i=de1e9c9c1a804d1cbaac4bd38cf3e999
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