Yesterday in a great op-ed piece in Die Presse, Christian Ortner examined COVID 19 the economic stimulus packages and asked the provocative question: What’s the difference between a talented counterfeiter and the European Central Bank? According to Ortner, not much.

In 2020 economic output in the eurozone has fallen by 7-8% and the ECB has countered by printing money. Currently, there is roughly 12% more currency in circulation than in 2019. Ortner notes that when central banks have printed money on such a massive scale in the past, it has always led to severe inflation and dire consequences. Hyperinflation in the 1920s in Germany and Austria essentially destroyed the entire middle class leading ultimately to the horrors of the Final Solution – if you can’t fix the economy kill people.

The ECB, and other reserve banks, however, argue that there is little cause for alarm. Inflation can be effectively combated by raising interest rates which have been at zero since 2016. The probability of the ECB significantly raising interest rates, however, is unlikely because heavily indebted states in the euro zone – e.g. Italy – would go bankrupt.

What are your thoughts? Does current ECB monetary policy pose a risk of inflation or hyperinflation?

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