Inflation ǀ “Our money” doesn’t exist – Friday

by time news

Whoever needs something under capitalism has to buy it. Before consumption or consumption, the market has set the payment. Because all the beautiful things are – as in any system – based on the division of labor and therefore socially produced. As goods, however, they are the property of people or institutions who want to make a profit with them and therefore only give them to those who need them in return for payment. In this way, everything is available for money in capitalism, but everything is only available for money, which leads to the characteristic juxtaposition of abundance and scarcity.

Whoever wants to consume has to pay: prices separate needs from the means to satisfy them. That is considered normal. It is true that in private life there are always complaints that everything is so expensive. Usually, however, it is not the price that is considered too high, but rather one’s own income as too low, which expresses the same ratio, but assigns the responsibility for it to the buyer. If you can’t afford something, you just have to earn more. Prices rarely become a political issue – when they rise faster than usual. Then there is a “risk of inflation”, as is currently the case, and there is debate as to whether the current high rate of inflation is temporary or permanent, whether the “mega-inflation is eating up our money” (image) or only parts of it. It is noteworthy that four very different emergencies are mixed up under the warning call “Risk of inflation”.

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First, there are the consumers, who are affected by the rise in prices. Fruit, gasoline, natural gas, computers – everything is getting more expensive. This means that larger parts of the household budget are spent on it. So inflation initially makes consumers poorer. And it hits above all those who have little money anyway: 34 million people in the European Union lack the means for sufficient electricity and heating. In Germany, poverty-related malnutrition promotes the differences in life expectancy between the poor and the rich. The problem of rising prices could be solved by making consumers earn more. But on the one hand this is being prevented politically – recipients of social assistance will receive 0.76 percent more money next year, even though the inflation rate is currently more than four percent. On the other hand, there is even a warning that wages could rise sharply in times when everything is becoming more expensive for companies anyway.

This brings you to the second group: the manufacturing companies, whose calculations are suffering from rising prices for raw materials and preliminary products. You have a choice: Either you do not pass on the higher costs, so you forego profit. That would affect their returns. Or they add the higher costs to their prices. In doing so, however, they worsen their competitive position and also damage demand – “How long will consumers be able to pay the rising prices?” Asks the Bloomberg news agency with concern.

For the third group, inflation is actually not a problem, but only a factor when evaluating investment alternatives: Financial investors react to permanently higher inflation by demanding higher interest rates or switching their investments in investments with higher returns – stocks, real estate. In this way, they compensate for the loss of return due to inflation.

Hence the concern that a permanently higher inflation rate could lead to higher interest rates. In turn, rising interest rates could initially put an end to the stock and property market boom and lead to drastic losses in value. That’s one thing. The other: In recent years, the global economy has survived its various crises without major damage because governments have increased their debt and central banks have drastically increased their purchase programs. The “strange equilibrium of the world economy” consists in a rather sickly economic growth and a fragile stock exchange and financial market boom, which have been sustained by additional indebtedness. The basis of this arrangement was the low inflation, which justified the low interest rate.

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But if inflation rises, then this arrangement is in jeopardy, and at a very sensitive point in time. Because many industrialized nations are currently launching debt programs to finance the green and digital revolution of the coming years. The fourth group of those affected by inflation are thus the states. With inflation rates soaring, they worry about investing confidence in their currencies that they need to compete in the next level of global market competition.

All economic experts currently agree that there is cause for concern, but only if the inflation rate remains high over the long term. But that is unlikely as long as wages do not rise sharply, so there is no “wage-price spiral”. The fact that dependent employees could compensate for the loss of purchasing power through appropriate wage increases – that currently seems to be the greatest threat to the global financial system and “our money”.


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