Euro on path to crash and burn

It was AEP who nudged my thoughts. I take his column with a pinch of salt, but he is right to anticipate problems from our response to the crisis.  People are saving and paying down card debt, using the furlough splurge as an opportunity to retrench. Consumer demand is down, and the whole supply side constrained by the virus closures. In the autumn this will turn into full blown recession as unemployment will rise to maybe 10%. And all the while we’re printing money by the tanker-load and pumping it into assets that are inflated like a Peking duck. The stock market should be crashing, so should property prices. Well, what do you think will happen when too much money chases too few goods?

It may of course be a cunning plan. There are three ways of dealing with debt; pay it down, inflate it away or default on it. Inflation of 5% – 10% a year for three or four years would certainly make a massive dent in the national debt, but would leave millions of ordinary folk in dire straits. The effect on the Euro nations would be the same, as AEP writes

Prof Polleit said the ECB is walking in the steps of the German Reichsbank in the early Twenties. “We’re not heading for hyperinflation of course but in some ways it is similar. The Reichsbank started buying a little, and then a bit more, until they realised that it was out of control,” he said.

Weimar inflation was a diabolic disturbance of the settled social order. Speculators made fortunes overnight. Diligent law-abiding citizens were pauperised, losing their bank savings and paper securities. The sense of injustice drained the Weimar Republic of its legitimacy.

So here’s a question for you. If anyone has a few bob in the bank, what should they buy with it now, to ensure they’re one of the speculators that does well, rather than one of the paupers?