Hans-Werner Sinn with highly interesting statements on why inflation has not (yet) arrived

Hans-Werner Sinn is the former head of the Munich-based ifo Institute. He is interviewed in the following (german) video on the current economic situation surrounding the corona crisis. For example, it is discussed that Germany is doing very well on the subject of unemployment compared to other countries thanks to the instrument of short-time work. As a result, actual unemployment is significantly lower. Hans-Werner Sinn’s statements on two points become interesting. Similar to China, he also believes in a relatively rapid economic recovery worldwide. The purchasing manager data for China would already show a rapid recovery to old levels.

Why, according to Hans-Werner Sinn, inflation has not yet arrived

Hans-Werner Sinn’s statements on the subject of inflation after the corona crisis are really interesting. Because many critical “zeitgeists” like Max Otte, Markus Krall or Dirk Mueller see (we would like to point out) a great, brutal inflation coming towards us. Their arguments are good, but controversial. After all, a great deal of data is currently pointing the way towards deflation. Some countries in Europe have already arrived at declining prices (see here). Hans-Werner Sinn describes the current situation in a very clear and easily understandable way. The Corona crisis is costing an incredible amount of money. One could spend every Euro only once, even if many people thought that with the help of the printing press (ECB pumps freshly created money) one could also spend it two or three times.

According to Hans-Werner Sinn, there is currently a phenomenon of extremely sharply rising national debt and at the same time money-printing central banks. The second point is the problem. It would not be okay if these new debts of governments were sold to the central banks. All the money spent (short-time work, subsidies etc.) comes directly from the ECB’s printing press. But it simply is not money that has been earned in real terms before. This leads to a money overhang!

Fears about the future

At the moment there is already four times as much money in circulation in the Eurozone as there was in 2008. People have (all in all) a lot of money in their pockets. However, they do not spend it at present because of (understandable) fears about the future. When the crisis is over, this situation could change. Then the extra money pumped into the system would be spent and there would be a danger of real inflation. You are welcome to watch Hans-Werner Sinn’s very interesting comments on this in the following video.

Hans-Werner Sinn
Hans-Werner Sinn. Photo: https://www.hanswernersinn.de/de/Bildarchiv
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