Inflation can be good to some but a bane to others. In Germany, due to the past experiences of hyperinflation, any form of debt, especially consumer debt, is frown upon by most Germans. The country’s saving rate was more than 10% during the period 2003 to 2009. For the same period, the Americans’ saving rate was merely 1.5%. The German economy has improved and is in much better shape after it went through a period of painful wage restraint and labour market reforms. Hiring and firing of workers are made easier while welfare benefits have been reduced.
The Germans hardly invest their money in stock market, but mostly in life insurance instead. On the other hand, stock market is important to US, that helps to explain why Wall Street is important to the policymakers. Fewer Germans owned houses, 41% compared to 66% for US. For this, inflation is good for the Americans because when housing price goes up, the value of debt will decrease. For the Germans who are mainly renting, inflation is bad for them. Hence, the Germans are generally more concerned over inflation than the Americans.
For Singapore which has enjoyed mild inflation of not more than 3% for the past decade, the spike in inflation in the past two years to above 5% probably explains why housing price has been skyrocketing for the same period too. For those who are renting, high inflation is a ‘poison’.
The Germans hardly invest their money in stock market, but mostly in life insurance instead. On the other hand, stock market is important to US, that helps to explain why Wall Street is important to the policymakers. Fewer Germans owned houses, 41% compared to 66% for US. For this, inflation is good for the Americans because when housing price goes up, the value of debt will decrease. For the Germans who are mainly renting, inflation is bad for them. Hence, the Germans are generally more concerned over inflation than the Americans.
For Singapore which has enjoyed mild inflation of not more than 3% for the past decade, the spike in inflation in the past two years to above 5% probably explains why housing price has been skyrocketing for the same period too. For those who are renting, high inflation is a ‘poison’.
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