The saver, in Germany and elsewhere, has not had it easy for a good ten years. His best, most loyal friend has run away: the interest. This loss of pain is called the “system emergency”. The a The question that millions have been asking since the Great Financial Crisis is: Where only with the money? Although there would have been lucrative alternative investments in the past decade, many investors would not have been so sluggish and resistant to advice. Shares, real estate, precious metals – when the interest rate fizzled out in nothing, all of this rose rapidly in value, at least until the escalation of the Corona crisis two months ago.
A roughly simplified rough calculation, however, shows how dramatically the mixed situation has changed in just one generation for anyone who tries to advise the government on private pensions to close their “pension gap”.
who thirty years ago had a million marks on the high edge, had been reasonably enough. Assuming an interest rate of six percent, the monthly income was 5,000 marks (before taxes and inflation). With such an income, you could not serve vintage champagne for breakfast every day, but you could live decently. You had your livelihood, you could maintain a car, go on vacation, splurge every now and then.
who today has a million euros (almost double) on the high edge, has to come to terms with a different reality. If he is lucky and can use a call money account at 0.001 percent, he will receive ten euros in interest for his euro billionaire on New Year’s Eve. For the whole year. And of course also before capital gains taxes, solidarity surcharge, church tax and inflation if necessary (currently 1.4 percent). The most Swabian of all housewives is likely to be able to get their loved ones through with it for a year.
Financial repression is when politicians and the central bank expropriate citizens
It hurts. The zero interest rate is only a Example of so-called financial repression, state-wide redistribution when politics or central banks specifically expropriate citizens. They do this as subtly and unobtrusively as possible. As possible so that savers cannot defend themselves or even flee. Because those who fled – withdrawn from the Treasury’s access, i.e. emigrating – are no longer available for painful financial procedures of all kinds.
Anyone who feels “investment distress” because of his mini-interest should pause. “Not” is a relative term, and the catalog of financial repression has something completely different in store than a drop in interest rates. All old school, by the way, not reinvention of genius-mad culprits in politics and high finance. Such measures could soon drive some traditional savers with a penchant for “safe” investments such as overnight money or concrete gold into despair. Because states need money in and after the corona crisis. Much Money. Beyond the classic, downright boring means of tax increases across the board, there is a lot that could come.
The idea of Property levy was already warmed up by Saskia Esken, when some people at Corona still thought of beer or smoke cigar. Esken, former member of the country’s parents’ council in Baden-Württemberg, has been the co-boss of one of the traditional German parties, the SPD, which is currently governing the country for almost five months. The question of how brightly the candle of economic knowledge burns at Esken could be discussed controversially as to what we want to save here. The point is different here. The Esken faith community apparently acquired its economic expertise in Entenhausen. It seems to be attached to the idea that “assets”, like in Dagobert Duck’s money store, lie in sacks from which the state can effortlessly tap a handful; is still enough afterwards. Entenhausen, you might have to remember, is fabulously cute, but not real.
A typical German large fortune is not in accounts, but in companies
In the real world there is money and wealth Not physically in sacks (or digitally in accounts). A typical German large fortune is rather in companies than equity. It should bring returns in good times, of course, and secure the company in bad times is one of them. It’s not liquid like comic book fanatics. And this fortune is melting away like ice in the sun in the wake of the Corona crisis. For many companies, equity fizzles out just like interest did for savers. So now a tax to overcome the economic crisis?
Difficult. Which hardly changes anything that a wealth levy should come in any form. In a democracy, if taxes are to be paid by a minority (“the rich”), the majority (the voters and the parties who campaign for them) tend to wave them through. One would hope that someone important would classify such wealth discussion boards. After all, Chancellor Angela Merkel already knew in 2012 that one had to be careful “that the rich don’t all go somewhere else, but that a few more rich still live with us” (“Handelsblatt”). However, she is also the one who likes to argue with “no alternative” when needed. Let’s wait and see.
The interest is gone, but the saver has another loyal companion – the soli
The saver’s old friend, the interest, is gone. For this he has had another loyal companion for a long time, the Solidarity surcharge. The “soli”, de facto a tax surcharge, was introduced in 1991 by Merkel’s predecessor Helmut Kohl to finance German unity and other major projects, initially for a period of one year. Three decades later, in 2021, according to the coalition agreement, it should finally be deleted. However, the complete deletion has been deleted and the soli continues for “higher earners”.
Bavaria’s Prime Minister Markus Söder recently brought an immediate-and-complete shutdown of the soli to stimulate the economic misery into the debate. An interesting objection, but presumably inconsistent. It is more likely that the solos will extend to eternity and possibly elevated becomes. Of course that would require a bit of marketing, a skilful prettling up of the nomenclature. A “Corona solos“Already wobbled through the media; an obvious suggestion, although, well, sounding somehow sick. Neat political labels like “European solos“Or”Justice solos“, Which should be well received by some voters – because who would dare not to show solidarity with” Europe “to find the beautiful word” justice “vague !? That there is a permanent tax increase behind it? No matter. One has to be reminded of a bon mot by the American Milton Friedman, one of the great economists of the 20th century: “Nothing is as permanent as a temporary government program.”
Compulsory mortgages would really throw money into the state treasury
By the way, when it comes to finding sparkling sources of finance, representatives of the people are blessed with ingenuity and terrierness. A government that needs fresh funds is ideally looking for a taxable item that is substantial, secondly cannot escape and thirdly is already properly registered somewhere. In short: the property in the country.
Real money would flow into the state treasury if the idea of Compulsory mortgage Celebrate resurrection. A compulsory mortgage is an extra liability entered in the land register, an additional tax on property ownership (and therefore also a property tax). Since much of the Germans’ belongings are in their own homes, this would be lucrative and, politically opportune, it would particularly affect the relatively “rich” – those who have their own four walls.
At a Forced loan in turn, another instrument of financial repression, the state forces its citizens to lend them money to deal with an extraordinary crisis – typically on unsavory terms.
Gold and other precious metals, known as a “safe haven” in times of need, are also not safe from the state’s financial torture. So far, no one has been buying physical gold (bullion coins, bars) value added tax on – unlike with silver, platinum, palladium. The increase in value, in turn, is one for all those who have held their investment metal for at least one year Capital gains tax exempted. Both could be changed quickly, but would be comparatively harmless. One would be more drastic – and considerably more painful for security-oriented investors Ban on private ownership of gold. You would then have to hand in your precious metal against payment of compensation, usually less tempting.
Some will object at this point: ‘Nonsense, all of this is unthinkable in Germany, it would be a massive encroachment on fundamental and property rights!’ It is therefore far from impossible. For one thing, we (and other democracies) have seen in the past few weeks of exit and contact restrictions how vulnerable fundamental rights can be. On the other hand, a look at the history books is helpful:
• Compulsory mortgages enacted (West) Germany u. a. in the early phase of the Federal Republic. It was an element of Load balancing the postwar period.
• On Compulsory Bonds set the Weimar Republic in the early 1920s. Since the hyperinflation of the time made the bonds worthless in a short time, it was de facto an expropriation.
• Hyperinflation also led to one in Germany Gold ban – as well as a ban on silver, platinum, even foreign exchange. Fundamental rights enshrined in the Weimar constitution (protection of property, inviolability of the apartment, letter secrecy …) were suddenly more of a theoretical nature. Overall, private gold ownership in Germany (east and west) was illegal for three decades in the 20th century. Gold bans were also occasionally a. in the United States, France, Great Britain, India and in many totalitarian states.
Anyone who today complains about “investment shortages” in view of their zero or negative interest rates must accept the accusation of a certain cry-crying behavior. In the larger order of things, what we have seen so far in terms of financial repression has been a tea party. Once the corona pandemic is over and the costs of the current global economic crisis come into focus, the question will be who will finance countless corporate failures, unemployment and the unprecedented rescue measures by politicians and the central bank. To put it biblically: It will be a howl and chatter of teeth. Zero interest rates would have been the least problem for the saver.
Michael Braun Alexander is one of the most distinguished financial journalists in Germany. He has been writing about the stock exchange and the economy since 1995. a. as a correspondent in Mumbai and New York as well as a columnist for Bild am Sonntag, and has published numerous books on investing (“When money dies”, “How gold works”, “Really rich”).