Reinhard Panse's Perspectives
Reinhard Panse's Perspectives
Podcast
28.5.2021
Prophets of crisis on the stock market are always right. Anyone who warns every week that the next bubble will burst or says that the financial markets will soon collapse again will be right again at some point. Even books can be sold well with such scenarios. And because it's so nice, I'm doing the same now. Don't worry, I'm not currently working on a dubious book about the end of the (financial) world. But I must at least point out that inflation will rise in the coming years. This is definitely no reason to panic - but you should be aware of what is happening.
There are a whole range of reasons for rising inflation rates. The fact that a highly indebted state consistently spends too much money on social benefits is one of them. The fact that a state simply prints its own money without any rhyme or reason is another. Currently, the massive increase in government spending since the start of the pandemic just over a year ago could be one reason. The US government, for example, has had to accept an extremely high national deficit in order to ensure the livelihood of the poorly protected unemployed in the US. Fighting the pandemic there has cost 900 billion US dollars so far. Three further programs will now be added over the next six months, which will cost a total of USD 6.9 trillion.
And Germany? We can only wait and see what gifts the parties want to hand out during the election campaign. A nationwide rent cap would be one such example. Until then, however, Germany may have to contend with rising electricity prices and even an unstable power supply. According to calculations by the Institute of Energy Economics at the University of Cologne (EWI), electricity consumption in Germany will increase by 20 percent by 2030 - interestingly, the German government is currently still expecting stagnation. Rising consumption can lead to rising prices, while at the same time the supply of goods decreases as demand increases. This drives up the inflation rate.
So far, inflation expectations on the capital market for the next ten years in the eurozone are only 1.5% per year. I expect inflation of at least three percent in the industrialized countries. That's a long way from being alarmist. During the hyperinflation in Poland in the 1920s, prices shot up by 636 percent. The inflation rate back then was 60 percent. Nevertheless, investors should keep an eye on current developments.
Reinhard Panse's Perspectives
28.5.2021
Reinhard Panse
Government spending in many countries has jumped to a new high. While this is understandable, for example to get the economy back on track, it also increases inflation.
Prophets of crisis on the stock market are always right. Anyone who warns every week that the next bubble will burst or says that the financial markets will soon collapse again will be right again at some point. Even books can be sold well with such scenarios. And because it's so nice, I'm doing the same now. Don't worry, I'm not currently working on a dubious book about the end of the (financial) world. But I must at least point out that inflation will rise in the coming years. This is definitely no reason to panic - but you should be aware of what is happening.
There are a whole range of reasons for rising inflation rates. The fact that a highly indebted state consistently spends too much money on social benefits is one of them. The fact that a state simply prints its own money without any rhyme or reason is another. Currently, the massive increase in government spending since the start of the pandemic just over a year ago could be one reason. The US government, for example, has had to accept an extremely high national deficit in order to ensure the livelihood of the poorly protected unemployed in the US. Fighting the pandemic there has cost 900 billion US dollars so far. Three further programs will now be added over the next six months, which will cost a total of USD 6.9 trillion.
And Germany? We can only wait and see what gifts the parties want to hand out during the election campaign. A nationwide rent cap would be one such example. Until then, however, Germany may have to contend with rising electricity prices and even an unstable power supply. According to calculations by the Institute of Energy Economics at the University of Cologne (EWI), electricity consumption in Germany will increase by 20 percent by 2030 - interestingly, the German government is currently still expecting stagnation. Rising consumption can lead to rising prices, while at the same time the supply of goods decreases as demand increases. This drives up the inflation rate.
So far, inflation expectations on the capital market for the next ten years in the eurozone are only 1.5% per year. I expect inflation of at least three percent in the industrialized countries. That's a long way from being alarmist. During the hyperinflation in Poland in the 1920s, prices shot up by 636 percent. The inflation rate back then was 60 percent. Nevertheless, investors should keep an eye on current developments.
About the author
Reinhard Panse
Reinhard Panse is Chief Investment Officer and co-founder of FINVIA Family Office GmbH. Until February 2020, Reinhard Panse was a member of the Management Board and Chief Investment Officer for HQ Trust GmbH, which is owned by the Harald Quandt family. From 2004 until joining HQ Trust GmbH in 2011, Reinhard Panse was Chief Investment Officer of the UBS Sauerborn business unit created within UBS Deutschland AG. From 2001, Reinhard Panse was a member of the Management Board of Sauerborn Trust AG and its legal predecessors. He was responsible for the investment strategy and played a leading role in the holistic asset management and administration of large private assets. Reinhard Panse began his career by taking over capital market and client support activities at Feri GmbH in 1989, after having founded and managed his own wealth management as managing director.
