Germany’s long-suffering savers fear inflation

Bloomberg

In Germany, fretting about inflation is a political currency that never seems to lose its value. In the past week, for example, at least three national newspapers have run prominent articles telling the populace that their savings — denied the magic of compound interest by the European Central Bank’s low-rate policies — are in for a renewed onslaught from accelerating consumer prices. The Bundesbank forecasts average inflation of 1.5 percent next year, whereas rates will likely be around zero.
Business daily Handelsblatt, which in March ran a mocked-up front-page picture of ECB President Mario Draghi burning up a 100-euro note with a cigar wedged in his mouth, published a cover headline on Friday proclaiming that Germany is about to get caught in an “inflation trap.”
Yet a rate of 1.5 percent would still fall short of the ECB’s definition of price stability. It aims for consumer-price growth of “below but close to 2 percent,” a goal that it essentially adopted from the Bundesbank. After more than three years below that threshold — sometimes far below — Draghi’s chief concern is that the euro area is still too close to deflation and renewed economic decline.
The typical explanation for why there seems to be a hair-trigger sensitivity in Germany to any threat to the power of money is psychological: It’s about national memories of hyper-inflation in the early 20th century. But there’s something else.