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Inflation: When money falls in value – BAnaneweb

Inflation, a word that has been used especially since the Corona-Pandemics is often used – but what does inflation actually mean? Inflation is generally referred to when money loses value, i.e. when one euro can no longer buy two rolls but only one roll, for example.

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Money can lose value if there is too much money in circulation. Do many people have a lot of money, consumer goods prices are like Bakery products raised. Even when there is a shortage of resources, as we are currently seeing with oil and gas, the price can rise. In addition, there are many other factors that can lead to such a development.

Inflation always occurs when you suddenly don’t get as much as before for a certain amount of money. We have the politics and economics teacher on the current economic situation Evamaria Berg (small picture) from the school of our lady questioned:

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Interview

How Manfred Schnabel and Achim Wambach assess the consequences of the Ukraine war for the regional economy

Released
01.04.2022
Von
Walter Serif and Bettina Eschbacher

To what extent will inflation in Deutschland through the war in the Ukraine influenced?

Evamaria Berg: If Russia started on February 24th, the Ukraine bombing, the world has changed radically. No one thought it possible that there would be a mean war of aggression within Europe could ever give again. This is a so-called external shock for economic development. Let’s not forget, almost exactly two years earlier, Covid took over Europe and paralyzed normal life. None of us have forgotten that. lockdown The economy recovered again in the second half of 2021 without the supply and transport problems in the supply chains having been resolved.

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Economists and politicians have calculated that 2022 will be the year of recovery and stable growth of 4.5 percent in Deutschland would be. Then came the war. The has made it clear that the German economy depends to a large extent on its success from cheaper energy Russia owes to the international division of labor with cheaper production, among other things in China and its export success from strong demand mainly in the Chinese market of 1.5 billion people. With the Chinese attitude to the war in the Ukrainehuman rights violations related to forced labour Uiguren and dealing with Covid China for Deutschland also become a very problematic partner. This means that two central pillars of German economic success and widespread prosperity among the population are crumbling. This affects price stability.

The War in the Ukraine is driving energy prices in particular higher in this country. However, they rose noticeably in the second half of 2021 because industry started up production again and demand for energy was high. Because we get about 50 percent of our energy from Russia related, the war made energy even more expensive. Anyone who consumes large amounts of energy, for example in the chemical industry, the automotive industry, in the production of food, etc., has higher costs that are passed on to the prices of the goods, making them more expensive. In this respect, the Russian war of aggression is Ukraine definitely a price driver in Deutschland.

How can inflation be brought down again in the longer term?

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Berg: This is the questions of all questions! Inflation management is the job of central banks. They are trying to make loans more expensive by raising interest rates, thereby reducing the amount of money in circulation. But when inflation doesn’t come from cheap credit, but from a variety of factors like it is now, it becomes very difficult. Central banks everywhere are struggling to find a suitable reaction, timing plays a role and when in doubt, interest rate hikes will come – as recently by the ECB – too late, because there is always a delay effect before a measure takes effect. At the moment, economists assume that inflation will remain at the current level until the end of the year and will not decrease.

If we assume that the causes of the current inflation are essentially political in nature, then in the longer term the fall in inflation will have to be brought about politically. Of course, the Russian war is playing against them Ukraine an essential role, but also how it Deutschland manages to break out of dependence on gas, oil and coal Russia to reduce – which the Minister for Economic Affairs has already achieved impressively in recent weeks.

Another problem is the global supply chains, which have suffered significantly from the Covid pandemic over the past two years and have not healed to this day, what with the lockdown in Shanghai and Peking connected. As a result, many goods or parts required in production are scarce or unavailable, which in turn drives up prices. But even that is not an issue where central banks, as managers of price stability, can do anything. Finally, there is the enormous challenge of feeding the world under the current conditions Russia and the Ukraine together are the largest grain suppliers in the world. The dispute over the grain that the Ukrainian port in Odessa cannot leave because the Russian Navy Black Sea blocked is a visible aspect. During the year we will see images of millions of people on television around the world, but especially in Africawho will starve. Mia Eck

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