HW4
1. In just few sentences explain where does the Germany fear for inflation comes from?
In 1923 when hyperinflation hit Germany, people suffered allot especially the middle class by losing all their savings. Inflation was so high that prices went up even two times a day from July 1923 until the introduction of the Rentenmark (currency issued on 15 October 1923) to stop the hyperinflation. The value of the marks falls very bad one dollar was worth 4.2 trillion marks, compared to 4.2 marks in 1914. The central bank starts printing huge amount of money on the request of the government; they even print money on one side only at one stage. Marks became worthless very quick, you can see them as wallpaper in some of the public toilets.
Germany …show more content…
In just few sentences explain what does this fear have to do with the European debt crisis?
There is evidence that Germany fear for inflation plays a crucial role in regulating European debt crisis. In 1998 when ECB ( European Central Bank ) has been established, Germany insisted that ECB should follow Bundesbank the independent German central bank, a model with a low rate of inflation. Thus, ECB has been constructed under German rules, same rules that Bundesbank follows; one of the rules is that ECB should not be allowed to lend money direct to the governments.
When European crisis starts, governments of the EU countries seek help from ECB, by asking for money. Moreover, banks board voted for ECB to have the power of lending money to the countries in need ( money that will be very hard to return ); as a result of voting for ECB to lend money, the monitor stability will be lost and the inflation will be no longer under …show more content…
The fact that Germany had to share the same currency along with all the EU country members made them a bit nervous; they fear that in the case of something wrong would happen they will have no control over the situation. Therefore, Germany came with few rules, conditions for joining the union currency. The conditions were that ECB (European Central Bank) would never be allowed to repeat the mistake that German independent central bank did back in their 1920's. The condition was that ECB should be independent from the government, so that government should never have the power to go the ECB and ask them to print money. The second rule were that ECB should keep a stability in inflation and keep the prices consistently.
4. Comment in few sentences the following newspaper clip; Getting the machines
1. In just few sentences explain where does the Germany fear for inflation comes from?
In 1923 when hyperinflation hit Germany, people suffered allot especially the middle class by losing all their savings. Inflation was so high that prices went up even two times a day from July 1923 until the introduction of the Rentenmark (currency issued on 15 October 1923) to stop the hyperinflation. The value of the marks falls very bad one dollar was worth 4.2 trillion marks, compared to 4.2 marks in 1914. The central bank starts printing huge amount of money on the request of the government; they even print money on one side only at one stage. Marks became worthless very quick, you can see them as wallpaper in some of the public toilets.
Germany …show more content…
In just few sentences explain what does this fear have to do with the European debt crisis?
There is evidence that Germany fear for inflation plays a crucial role in regulating European debt crisis. In 1998 when ECB ( European Central Bank ) has been established, Germany insisted that ECB should follow Bundesbank the independent German central bank, a model with a low rate of inflation. Thus, ECB has been constructed under German rules, same rules that Bundesbank follows; one of the rules is that ECB should not be allowed to lend money direct to the governments.
When European crisis starts, governments of the EU countries seek help from ECB, by asking for money. Moreover, banks board voted for ECB to have the power of lending money to the countries in need ( money that will be very hard to return ); as a result of voting for ECB to lend money, the monitor stability will be lost and the inflation will be no longer under …show more content…
The fact that Germany had to share the same currency along with all the EU country members made them a bit nervous; they fear that in the case of something wrong would happen they will have no control over the situation. Therefore, Germany came with few rules, conditions for joining the union currency. The conditions were that ECB (European Central Bank) would never be allowed to repeat the mistake that German independent central bank did back in their 1920's. The condition was that ECB should be independent from the government, so that government should never have the power to go the ECB and ask them to print money. The second rule were that ECB should keep a stability in inflation and keep the prices consistently.
4. Comment in few sentences the following newspaper clip; Getting the machines