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As Merkel’s Kryptonite of Inflation Suddenly Emerges, the Beleaguered German Chancellor Points to Draghi and the Euro

Monday, February 20, 2017 11:22
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from Rogue Money:

German Chancellor Angela Merkel has efficiently kept her office over the past decade by primarily ensuring that the German economy has been insulated from the most important economic data point in the minds of the people… that being inflation.

In fact with Germany being the most powerful EU nation when it comes to trade and economic growth, the deflation that has suffused the West since the 2008 financial crisis has actually been a bonus for Merkel’s administration and political party. So much so that even with her controversial policy of allowing millions of Islamic refugees and immigrants to come into Germany to feed off the welfare trough and raise the crime rate, it has only put a minor dent in her chances to win back the highest office in the oncoming elections.

But that is now changing, because over the past two months her hold on inflation has suddenly been lost, and the one piece of kryptonite that is the death knell of all German Chancellors has surfaced at a time where more and more people are paying closer attention to the economy, and to politics in the EU.

European bonds extended the worst start to a year in almost two decades as German regional data pointed to accelerating inflation in the euro area.

Ten-year securities fell in all but one member of the 19-nation currency bloc after consumer prices rose at the fastest pace in five years in Saxony. Euro-area government bonds posted a 2.1 percent loss in January, heading for the worst start to a year since at least 1998, according to the Bloomberg Barclays Euro Treasury Index.

Higher commodity costs, an uptick in growth and populist politics leading to trade barriers across the globe are prompting investor concerns and fear among German taxpayers about faster inflation.
— Bloomberg

Needless to say, the specter of inflation is not being lost on the electorate as German Federal Elections are scheduled to take place in late September of this year. And this election will also come after the results are determined from three other elections (Netherlands, France, and possibly Italy) which could invigorate the German people to enter the populist game that is sweeping across Europe ever since last year’s Brexit vote.

So in response Angela Merkel did something unthinkable, or at least unprecedented since the 2008 financial crisis. She herself spoke out against Mario Draghi rather than having her chief pitbull Wolfgang Schauble play the bad cop as per her normal M.O., and even went so far as to comment on the Euro currency, which she now sees as a ‘problem’ despite years of zero to negative interest rates, and hundreds of billions spent in quantitative easing.

Two weeks ago, German finance minister Wolfgang Schauble confirmed Donald Trump’s charge that the Euro is far “too low” for Germany, but said he is unable to do anything about it and instead blamed Mario Draghi. “The euro exchange rate is, strictly speaking, too low for the German economy’s competitive position,” he told Tagesspiegel on February 5. “When ECB chief Mario Draghi embarked on the expansive monetary policy, I told him he would drive up Germany’s export surplus . . . I promised then not to publicly criticise this [policy] course. But then I don’t want to be criticized for the consequences of this policy.”

Then, on Saturday, his boss German Chancellor Angela Merkel echoed her finance minister, and also admitted that the euro is indeed “too low” for Germany, but once again made clear that Berlin had no power to address this “problem” because monetary policy was set by the independent European Central Bank.

”We have at the moment in the euro zone of course a problem with the
value of the euro,” Merkel said in an unusual foray into foreign exchange rate policy.
— Zerohedge

Indeed, it IS highly unusual that Chancellor Merkel would publicly speak out against the European Central Bank, and the monetary policies enacted by its head, Mario Draghi. But perhaps this is because deep down Merkel sees the writing on the wall for both the continental union and currency, and is quietly preparing for their demise through Germany’s repatriation of their gold.

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