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Volkswirtschaft





Inflation



"All investors share one formidable and all to easily underestimated adversary: inflation."

Charles D. Ellis, Winnig the loser´s game, page 98, 1998



Today a serious investor - not a trader - has to challenge really difficult questions:

Is there any difference between debt monetization and quantitative easing?

When there is none, what consequences will result from quantitative easing?

If there is any difference, will it be sufficient enough to not result in hyperinflation?

As a starting point:



Carl Ludwig Holtfrerich, Die deutsche Inflation 1914-1923 Seite 113, 1980

"Insbesondere konnten aus den ordentlichen Einnahmen der Zinsdienst für die staatliche Kreditaufnahme nicht mehr aufgebracht werden, obwohl inzwischen alle Militärausgaben, auch die dem Friedensbedarf entsprechenden, über den außerordentlichen Haushalt finanziert wurden."

or

Daniel L. Thornton, Federal Reserve Bank of St. Louis, 1984

"Alternatively, suppose the Federal Reserve’s intermediate policy objective is to peg interest rates at some desired level. Then the Federal Reserve monetizes the debt only when changes in the debt, ceteris paribus, produce changes in interest rates in the same direction. That is, if increases in the debt put upward pressure on interest rates, the Federal Reserve will monetize the debt under an interest rate target."

or

Olivier Jean Blanchard, IMF, Macroeconomics page 429, 1997

"But with the central bank´s cooperation, the government can in effect finance itself by money creation. ... This process is called debt monetization. ... But at the start of hyperinflations , two changes usually take place: The first is a budget crisis. The source is typically a major social or economic upheaval. ... The second is the government´s increasing unwillingness or inability to borrow from the public or from abroad to finance its deficit. ..."