Asset Angst

The 'Other' Inflation

A housing market bubble in Germany is not included in consumer inflation.
  • Why it matters

    Why it matters

    German economists believe the ECB’s monetary policy is driving up asset prices, while consumer prices have remained relatively flat. The new index backs up their arguments.

  • Facts


    • Consumer prices briefly increased by 2.4 percent in 2011, but then declined again and even turned negative at the start of this year.
    • Asset prices, on the other hand, increased by 4.4 percent in the first quarter of 2015 alone, according to the new index.
    • The sharp rise in asset prices is attributed to the ECB’s relaxed monetary policy.
  • Audio


  • Pdf


It has been a perennial concern of German economists: The European Central Bank’s loose monetary policy could be setting the stage for rampant inflation in Germany.

“Hyper inflation” is a term long feared by the German public ever since it experienced skyrocketing prices in the 1920s and 1930s – the kind that forces families to transport cash in wheel barrels to the local supermarket.

It is a fear that helps explain Germany’s reluctance to back the Frankfurt-based ECB, which sets monetary policy for the entire 19-nation euro currency zone, and which has embarked on a series of aggressive moves recently to fight the very opposite of hyper-inflation. “Deflation,” or falling prices, is a danger that is currently threatening much of Europe. Most economies have recovered much more slowly than Germany since the 2008 financial crisis.

So far there has been no proof that the ECB’s policies are leading Germany into any kind of dangerous territory. Annual consumer price inflation briefly rose to 2.4 percent during the course of 2011, but then it declined again. In fact, in January 2015, German prices fell into negative territory.

The picture may now change. For the first time, in a project launched by Handelsblatt, an institute in Germany has sought to measure the rising value of assets in the Europe’s largest economy.

Their results tell a very different story. The new index, which will now be released quarterly, supports the notion that asset prices have increased substantially over the past few years.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.