The money that an over-indebted state lacks can only come from four sources, namely – the taxpayers of the country in question raise it themselves, – the creditors waive it, – the taxpayers of other countries step in, or – the most risky but at the same time most dangerous path is taken: the central bank reduces the pressure of the public debt through inflation (monetization of public debt). In this case, all owners of money initially pay for the debt: their purchasing power is reduced. On closer inspection, however, it is primarily the permanent employees and welfare recipients who have to bear the main burden. As history teaches, in this case the economy collapses and society sooner or later comes apart at the seams. Germany had to experience this as well: hyperinflation set in. At the beginning of 1923, the price of 1 liter of milk had risen to 200 billion marks; the postage for a letter cost several million marks and the National Socialist movement was gaining ground. For this reason, a central bank should be wary of financing government debt by whatever means. – See European Monetary Union, fundamental error, ECB sin, money ownership, money functions, primary, monetary policy, monetary stability, inflation compensation, purchasing power, nominal value principle, policy default, cost-of-living index, price stability, shadow state, savings rate, Stability and Growth Pact, redistribution, central bank induced, constitutional article one, path inflation, payday basic rule.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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