[Skybird]

FOCUS disillusionises us again.

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In Europe, inflation is not only being allowed to drift, it is being fueled. In these days, of all times, when all politicians promise on TV to fight it. The explosive thing is that European politicians and central bank governors know what they are doing.

The galloping inflation and the heating up of the world climate have one thing in common: Both do not come over us like a force of nature. Both are man-made. It's man-made, as they always say at climate conferences.

Only the climate catastrophe, and that's where the difference begins, is being fought with united forces. Presidents and Nobel laureates, business leaders and a dozen international conferences have made sure of it: the decarbonization of Western economies is a done deal. War and energy price explosion may delay it, but they can no longer stop it.

Inflation is going a different way. In Europe, it's not just being allowed to drift, it's being fueled. In these days, of all times, when all politicians promise on TV to fight inflation, in reality the next big push is being prepared.

The German state sets a bad example

Without coordinated counteraction - all currently available data say so - we have entered a decade of exorbitant demonetization, which will please the debtor and mean tangible, even painful, losses of prosperity for all other citizens.

Many companies, and indeed all those that cannot pass on the effects of inflation to their customers, will not survive this decade. Inflation will first depress - and then destroy - their profits.

We cannot accuse European politicians and central bank governors of ignorance in this fateful hour: They know what they are doing.

1 The German state, which promises everything to everyone in social policy, is setting a bad example. The debt brake of the Basic Law is being circumvented by borrowing outside the federal budget. Meanwhile, unofficial debt exceeds official borrowing by more than five times.

The government subsidization of energy prices is not the last stroke, but it is the most massive so far. 200 billion euros, or 1.5 times all DAX profits in the pre-crisis year 2021, is available for this consumptive expenditure. The money will not be invested in a green technology of the future, but will be burned up in the truest sense of the word.

The Chancellor's Office has softly denied this

2 The bad example has a contagious effect on the other Europeans, who are now insisting on equal rights. The continent is facing a new debt orgy; on the sidelines of the EU summit in Prague, Scholz signaled his openness to joint borrowing for all of Europe, as Bloomberg claims to have learned exclusively from the chancellor's entourage.

The chancellor's office has softly denied this with the words "nothing is known of such plans". The truth is: Germany is helping to stabilize the high price level with its government gas price brake, which is causing outrage in Italy, Sweden and elsewhere.

German assistance as a loan guarantor and thus as a lender of last resort for the capital market - as already happened in the case of the Corona reconstruction program - fits in with the checkbook diplomacy in Europe to date.

At the ECB, many no longer want to fight inflation but recession

3. there is already no longer any inclination in the ECB to continue a tighter interest rate policy during the recession. At the next meeting of the ECB Executive Board, there is likely to be another upward move in interest rates.

But for the coming year, when the effects of the recession, the winter and the energy price explosion will be felt by all, important forces in the central bank's leadership circle no longer want to fight inflation, but recession.

The historical experience that you end up with both inflation and recession cannot slow down the southern countries in their ambition to fire up the money printing machine again.

They want to inflate their debts and in no way adjust their spending patterns to actual revenues. They regard the ECB Tower in Frankfurt as an oversized ATM.

The second-round effect is coming as surely as the Amen in the church

4. employee representatives all over Europe will soon be making their contribution to driving up prices. That is what their members expect. Just yesterday, the Verdi union and the civil servants' association demanded 10.5 percent more income for federal and local government employees. IG Metall will enter the collective bargaining round with an 8 percent demand.

Companies are now also calculating with significantly rising wages. In view of this historically high rate of monetary devaluation, there is no ethical justification for denying the working population, of all people, this compensation payment.

The so-called second-round effect will come as surely as the Amen in the church. Any union leader who calls for moderation now is risking his job.

High wages, and therein lies the problem, dampen the impact of current inflation on individuals, thereby driving up future inflation. Prices drive wages, whereupon wages drive prices. These are precisely the ingredients for long-lasting inflation.

5 High interest rates alone, which further complicates the situation in Europe, are not enough to stop currency devaluation at present. This is because, unlike in the U.S. - where the government's nearly two trillion dollar stimulus program drove up inflation - in Europe it is the supply side that is driving up prices - i.e., lack of energy and broken supply chains.

Political calculations rule when it comes to fighting inflation

Prof. Lars Feld says: "Industry either doesn't produce because it finds energy too expensive, or it can't produce because it doesn't have the parts and there's still a supply chain issue." That means inflationary pressures are intensifying because supply can't expand at all into government-increased demand.

6. In the climate change movement, it is always Follow the Science. This does not apply at all to the fight against inflation. Here, political calculations rule, and the voice of economists is considered rather annoying.

Yesterday's surprising downward forecast of inflation for 2023 by Economics Minister Habeck is based on the rose-tinted assumption of laws that have not yet been passed and goes against the advice of all economic research institutes. They expect inflation to continue rising. Habeck versus the rest of the world.

Conclusion: this policy is short-sighted, not sustainable. The state does not want to eliminate our suffering in the present, only to narcotize it. The savior appears as the perpetrator and prepares that wave of inflation which it claims to eliminate. Next to us the deluge.

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Some more deelaying of the already inevitable collapse, thats what its about. Additionally bad is that the German spendings are not investments, but one-time-fires fueling good mood in the electorate for some weeks - and then the money is gone, the debts are up, and no structural change and investment has been done. Nothing is diffrerent to before - just that immense additional credit has been blown up.


Needless to say: with thes ehuge debt bruden and interests to be paid, the states have practically no space for active and cretaive pöolicy-,making anymore, all taxes are spend on pensions, social payments and interest payments.


The situation is an utmost and complete desaster already now. I am certai n they know and, when cams and mikes ar eoff, they tlak amongst each other that the Euro and EU already are done. Stupidity meets criminal energy.