Deutsche Bank issues dire economic warning for America

[Hydrogen]

As the world economy awakens from the 15-month slumber caused by the pandemic, Deutsche Bank has launched a series of research articles to spark debate and discussion about pressing post-pandemic economic issues.

On June 7, Deutsche Bank issued its first report of the new series, titled “Inflation: The defining macro story of this decade.”

According to the report, “US macro policy and, indeed, the very role of government in the economy, is undergoing its biggest shift in direction in 40 years. In turn we are concerned that it will bring about uncomfortable levels of inflation.”

That could be deemed an understatement considering that the U.S. economy is already experiencing “uncomfortable” inflation.

Consider: Based on the most recent inflation report from the U.S. Bureau of Labor Statistics, “In April, the Consumer Price Index for All Urban Consumers rose 0.8 percent on a seasonally adjusted basis; rising 4.2 percent over the last 12 months.”

An annual inflation rate of 4.2 percent is more than “uncomfortable.” But the looming threat of inflation seems to have fallen on deaf ears in Washington, D.C., over the past year, as Congress has supercharged spending to levels unseen since World War II.

As Deutsche Bank notes, “The current fiscal stimulus is more comparable with that seen around WWII. Then, US deficits remained between 15-30% for four years. While there are many significant differences between the pandemic and WWII we would note that annual inflation was 8.4%, 14.6% and 7.7% in 1946, 1947 and 1948 after the economy normalised and pent-up demand was released.”

If the U.S. economy descends into an inflation spiral like that experienced after World War II, we could be on the brink of excruciating economic pain.

However, the profligate spending by Congress is only part of the problem.

According to Deutsche Bank, “Monetary stimulus has been equally breath-taking. In numerical terms, the Fed’s balance sheet has almost doubled during the pandemic to nearly $8tn. That compares with the 2008 crisis when it only increased by a little more than $1t, and then increased another $2tn in the subsequent six years.”

As any economist will tell you, printing gobs of money over a short period (which is what the Federal Reserve has done during the pandemic) is a key inflation ingredient.

We have seen this happen many times over the past century. From Weimar Germany to present-day Venezuela, massive money printing never works and always spurs out-of-control inflation.

The Deutsche Bank report concludes with this dire warning, “We worry that inflation will make a comeback. Few still remember how our societies and economies were threatened by high inflation 50 years ago. The most basic laws of economics, the ones that have stood the test of time over a millennium, have not been suspended. An explosive growth in debt financed largely by central banks is likely to lead to higher inflation. … Rising prices will touch everyone. The effects could be devastating, particularly for the most vulnerable in society. Sadly, when central banks do act at this stage, they will be forced into abrupt policy change which will only make it harder for policymakers to achieve the social goals that our societies need.”

As mentioned above, the German people are well aware that skyrocketing inflation in and of itself can spark more than just economic upheaval. Hyperinflation, like that experienced in post-World War I Germany, can also lead to social disorder and political chaos.

In fact, one of the reasons Adolf Hitler and the Nazi Party came to power in Weimar Germany was the public's resentment concerning the hyperinflation they suffered as a result of endless money printing by Germany’s central bank in the 1920s to pay off World War I reparations.

Of course, the rise of Hitler was not solely due to hyperinflation in Weimar Germany. But when out-of-control inflation takes hold, people (reasonably) panic.

Throughout history, we have seen inflation-spurred panic manifest in social, political and economic turmoil. The looming question is how Americans will deal with the strong possibility of a post-pandemic inflation environment the likes of which could be unprecedented in our nation’s history.

https://thehill.com/opinion/finance/557743-deutsche-bank-issues-dire-economic-warning-for-america

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This was published in the opinion section rather than the financial section with media approved pieces. Perhaps so thehill can maintain some degree of plausible deniability.

Still some interesting content here. Doom and gloom is nothing new in the world of economics and finance. I think the difference here is people might be more willing to believe this negativity due to them seeing the effects at gas pumps, in stores. The reality of hearing someone say it, is different from seeing it with your own eyes. And paying for it out of your own pocket.

Bank of America was quoted around a month ago as saying that "transitory hyperinflation" would be coming to the united states. But I couldn't find a good source for it most would accept and so won't bother posting it. The sequence of events is interesting. The implications could be more interesting still.

Will inflation and negative economic issues materialize into legitimate troubles for the USA? What does everyone think.

[Lucius]

We know that the whole world has become one global village, and that everyone is watching what is happening in the US, but I think it is still excessive to direct all attention to one country as a measure of the economic situation in the post-pandemic world. Their money printing policy is a decision they made, and now they will have to live with it and ask themselves if they could have done better or differently, or was this policy the only possible way out.

The Germans should be much more concerned with their problems, because the situation is not good in the EU either - and comparisons with Hitler, and what brought him to power are completely inappropriate in this context - because it implies that a fanatic may come to power in the US (can it be worse than Trump or incompetent Bush Jr.?) who might want some new war?

Otherwise, if the Germans want a little more truth about why Hitler managed to do so much evil in the world - let them scratch a little under the dirty surface of the Bush family who always seemed to help future US enemies - from the Nazis to the Bin Laden family.

[kryptqnick]

I'm curious to find out if the US manages to get away with all that extra dollar printing they did because of the pandemic. Since nothing like this was ever done before, nobody knows how this will turn out and how safe this move was. Dollar is not getting out of control for now, but the inflation rate is already above normal. What's sad is that if dollar goes down, it won't be bad merely for the US economy. Many countries largely rely on how their fiat measures up to dollar, so there will be chaos once the etalon is down. Moreover, China will definitely become the dominating world's economy in that case, meaning that it'll be able to get away with more human rights abuses and other things because the world will depend on China even more than today.
Unfortunately, crypots aren't strong enough to take over in that the USD devaluates at a high rate. The scalability and volatility issues would only worsen under such circumstances. So I hope the US takes the warning seriously.

[Coyster]

Will inflation and negative economic issues materialize into legitimate troubles for the USA? What does everyone think.

It definitely will, but the thing is, it's not just in the U.S alone, the United States weren't the only country to print more money or to take policies that have consequences in a bid to control the pandemic. I personally do not blame the United States for some of the things they did to control the pandemic. I mean, if you look at it from different perspectives you'd understand that it was something they had to do, they were pretty aware of the consequences, but the pandemic was taking its toll and something really had to be done, they resulted to printing money, it was somewhat bad, but I just feel they had to do it.

Each and every country will also feel the impact of the pandemic as well as their decisions/policies to control it, what's required now is better economic measures in order to recover from the damage of what already has been done, but notwithstanding, the consequences must surely be felt sooner rather than later.

[fiulpro]

I do think that its not just a probelm for the USA. But the whole world. First of all I do think that they have to bring around a law, a law to make sure the companies are not going to take illegal benefits from hyperinflation.
Remember what happened during the start of the pandemic?? I purchased a mask for 7$!! Sanitizer and everything was sold like liquid gold. I do think that it's high time that the Governmental bodies think about implementing such rules.
Then let's talk about endless money printing. What was Donald Trump's strategy ? Use the money to buy people's votes. He succeed for so many years!!! Why?? It should be illegal to print out money like that, why it is not illegal yet? Implementing such laws can also keep hyperinflation in check.

[beerlover]

Doom and gloom is nothing new in the world of economics and finance. I think the difference here is people might be more willing to believe this negativity due to them seeing the effects at gas pumps, in stores. The reality of hearing someone say it, is different from seeing it with your own eyes. And paying for it out of your own pocket.

Bank of America was quoted around a month ago as saying that "transitory hyperinflation" would be coming to the united states. But I couldn't find a good source for it most would accept and so won't bother posting it. The sequence of events is interesting. The implications could be more interesting still.

Will inflation and negative economic issues materialize into legitimate troubles for the USA? What does everyone think.

Unfortunately USA will not care about inflation right now considering all the shit they are going through. We are talking about a nation that literally had people storming the capitol building to kill senators, LITERALLY KILLED A POLICE OFFICER, and there is nothing going on with it right now, there is no larger check on balances, everyone got away with it, just the people who did kill the cop will be persecuted and zero politicians are held accountable, senators who hided or senators who held the doors closed shut from fearing their life ended up saying it was nothing just to get more votes.

Not like that was enough already, they are now making voting incredibly hard, as hard as it could get in the state level, which means they are trying to make sure that less and less people vote, and democrats are just watching, they are bunch of proper idiots as well, so democracy is going away as well. Inflation is NOTHING compared to these type of things they are dealing.

[jaysabi]

There are some progressive members of congress who are pushing Modern Monetary Theory which states that governments should print as much money as is required to fund all government functions without worrying about deficits because the government can't go bankrupt.  It flies in the face of everything we've known about government spending and fiat currency thus far.  With inflation starting to be felt, they're going to have to answer how MMT could possibly work where smaller doses of what MMT would unleash are already causing inflation.

[so98nn]

Doom and gloom is nothing new in the world of economics and finance. I think the difference here is people might be more willing to believe this negativity due to them seeing the effects at gas pumps, in stores. The reality of hearing someone say it, is different from seeing it with your own eyes. And paying for it out of your own pocket.

Bank of America was quoted around a month ago as saying that "transitory hyperinflation" would be coming to the united states. But I couldn't find a good source for it most would accept and so won't bother posting it. The sequence of events is interesting. The implications could be more interesting still.

Will inflation and negative economic issues materialize into legitimate troubles for the USA? What does everyone think.

Unfortunately USA will not care about inflation right now considering all the shit they are going through. We are talking about a nation that literally had people storming the capitol building to kill senators, LITERALLY KILLED A POLICE OFFICER, and there is nothing going on with it right now, there is no larger check on balances, everyone got away with it, just the people who did kill the cop will be persecuted and zero politicians are held accountable, senators who hided or senators who held the doors closed shut from fearing their life ended up saying it was nothing just to get more votes.

Not like that was enough already, they are now making voting incredibly hard, as hard as it could get in the state level, which means they are trying to make sure that less and less people vote, and democrats are just watching, they are bunch of proper idiots as well, so democracy is going away as well. Inflation is NOTHING compared to these type of things they are dealing.

You said it to the actual point mate. The inflation can be overcame in no time with the political agenda. That would be the last thing they wanna worry about. Having political rein for years to come is much much important than looking after who died in the cold war or on the street. Sorry to say but this is how the politics works. They know this right from the beginning.

What we see is just cream layer of the cake, the actual base is never shown to us. So many are killed to protect the honour of political career. Just get few peoples behind the bars and the dust settles in the eyes of common peeps.

The banks, they dont care because banks not what runs the America, consider America as unity of different political powers coming together. They control the whole thing bi**ch.

[paxmao]

The US was certainly looking for some inflation, even if it may result a bit high it is ok, because that is how we are all actually going to start paying the COVID bill. Until now, it has been paid with Monopoly money, but that may not continue to be the case in the future. Anyway, they main problem is that, like wars, you can start inflation but it is much more difficult to stop it and you may not be able to do it when you want.

A high inflation is particularly problematic in the current context of "zombie companies", living dead that are only keep alive by a hyper-cheap debt blood line that ends the moment the interest rates need to be raised to control inflation.

[Hydrogen]

We know that the whole world has become one global village, and that everyone is watching what is happening in the US, but I think it is still excessive to direct all attention to one country as a measure of the economic situation in the post-pandemic world.

Some experts and analysts claim the economic crisis of 2008 was caused by recession in the united states. That's one motive behind it receiving so much emphasis and attention. America has the #1 economy in the world. Its the largest economic trading partner. Recession and slowdown in the USA could have a domino effect, negatively affecting the economies of all nations.

Policy decisions made by the federal reserve, Joe Biden and others in positions of US influence could affect everyone positively or negatively. Even if they reside on the other side of the planet.

At least, that's the conventional wisdom. Perhaps times have changed and new modern monetary theory explanations have arisen to disprove everything I'm saying here?

[Lucius]

~snip~

Such influence of one country on the whole world should not exist, although the fact is that it does exist - which is again the fault of other countries that are too dependent on the US in economic or any other way. The world should not suffer because of American politics and clowns like Bush Jr. or Trump playing cowboys and Indians in the modern world.

Self-sufficiency, strengthening ties between countries in the region, and finally rejecting the idea that we must all be shaken if someone sneezes on the other side of the world, is the path we should take as soon as possible. When I see the so-called united EU and all its weaknesses, I wonder how it is possible that such a community of 500 million people represent almost nothing in a world that has turned into a conflict between the US and China which shapes the rest of the world.

[zanezane]

If an inflation happens in USA, pretty sure that they will be able to alleviate it, this isn't their first ride in economic collapse, they had a lot of stock market crashes, recessions and housing crisis here and there but they seem to be doing fine and I think that with a lot of billionaires in the country, they will probably help in alleviating the problem if it suits their own purposes.

[Fesatmas]

This was published in the opinion section rather than the financial section with media approved pieces. Perhaps so thehill can maintain some degree of plausible deniability.

Still some interesting content here. Doom and gloom is nothing new in the world of economics and finance. I think the difference here is people might be more willing to believe this negativity due to them seeing the effects at gas pumps, in stores. The reality of hearing someone say it, is different from seeing it with your own eyes. And paying for it out of your own pocket.

Bank of America was quoted around a month ago as saying that "transitory hyperinflation" would be coming to the united states. But I couldn't find a good source for it most would accept and so won't bother posting it. The sequence of events is interesting. The implications could be more interesting still.

Will inflation and negative economic issues materialize into legitimate troubles for the USA? What does everyone think.

as a country that owns the printing press, the US will not easily admit the economic collapse it will face. even for the crisis caused by the pandemic, they have printed money which has led to inflation. but does the US recognize the inflation they feel? not !!!
they will deny and say that the US is a country with all intellectual property, where the institutions try to cover up the lies of the government.
well, let's look at a country outside the US? Doesn't it look horrifying today when the Dollar continues to experience inflation, while Bitcoin continues to be dismissed on charges of money laundering? they try to manipulate all points of view of opposing elements of society.
therefore we are just waiting for the revolution of the opposition to undo the rotten dollar inflation in the eyes of the world.

Chian came and tried to mediate but in the end, trust in China was no longer useful, after their policy of closing mining, which country should we refer to after the chaos made by both parties?
while the economy is getting worse day by day?

[BrewMaster]

Some experts and analysts claim the economic crisis of 2008 was caused by recession in the united states.

in my opinion the only reason why the recession was worldwide was because the same corruption at the heart of economy with banks at its head existed in other countries. it is not because America is #1 it is because all those other countries were copying their mistakes so they should have surely followed US down.

more interesting is that there were other countries during 2007 to 2012 that weren't even affected by the corruption and the resulting recession simply because their economy and banking system wasn't a copy of US and either didn't have the corruption or had a different kind of corruption: China, Japan, Brazil, Iran, India, Russia, Peru and Australia are some of the countries that were mostly unaffected.

[el kaka22]

Some experts and analysts claim the economic crisis of 2008 was caused by recession in the united states. That's one motive behind it receiving so much emphasis and attention. America has the #1 economy in the world. Its the largest economic trading partner. Recession and slowdown in the USA could have a domino effect, negatively affecting the economies of all nations.

Policy decisions made by the federal reserve, Joe Biden and others in positions of US influence could affect everyone positively or negatively. Even if they reside on the other side of the planet.

At least, that's the conventional wisdom. Perhaps times have changed and new modern monetary theory explanations have arisen to disprove everything I'm saying here?

That's exactly what happened in 2008. We all know the reason with the mortgages and how everyone got some, and how the debt default rate was higher than what people were led to believe etc etc that part is already know. However what people do not realize is that some people in wall street got greedy and because of that Greece and Spain literally bankrupted. Can you imagine how powerful USA is in the world economy stage? Some people in wall street (well almost all people in wall street) sold bad mortgage bonds that had high default rate and because of that whole nations had horrible situations for years to recover.

So, if anyone ever doubts how important USA is in the economy, just tell them wall street can destroy nations by being greedy, you have the proof. Which is why this new hyper inflation scare is no joke, something like that in USA would not just hurt USA, it would hurt the whole world.

[The Sceptical Chymist]

This was published in the opinion section rather than the financial section with media approved pieces. Perhaps so thehill can maintain some degree of plausible deniability.

No doubt.  I don't trust the media or the government one bit, and I'm not sure which one I despise the most.

4.2% inflation in the US is incredibly "uncomfortable" I'd say, and I've been noticing prices of various things going up, including gasoline--and that probably affects Americans the most.  But what do you expect?  All this new money creation coupled with all the free money handed out by the government in the form of stimulus checks and unemployment compensation has flooded the country with cash.  Of course inflation is the result; and just look at how overvalued the stock market is right now.  Money is being pumped into all sorts of things (crypto included, BTW), and it's driving up the prices of things like crazy.

I have zero faith that the Biden administration has any sort of plan to deal with any of this.  I know it wasn't his doing, but it's his mess now whether he likes it or not.  Unfortunately, the guy can barely string two words together that make sense.  It's like Weekend at Bernie's in the White House right now, and if things don't change we're all going to be royally fucked.

[paxmao]

This was published in the opinion section rather than the financial section with media approved pieces. Perhaps so thehill can maintain some degree of plausible deniability.

No doubt.  I don't trust the media or the government one bit, and I'm not sure which one I despise the most.

4.2% inflation in the US is incredibly "uncomfortable" I'd say, and I've been noticing prices of various things going up, including gasoline--and that probably affects Americans the most.  But what do you expect?  All this new money creation coupled with all the free money handed out by the government in the form of stimulus checks and unemployment compensation has flooded the country with cash.  Of course inflation is the result; and just look at how overvalued the stock market is right now.  Money is being pumped into all sorts of things (crypto included, BTW), and it's driving up the prices of things like crazy.

I have zero faith that the Biden administration has any sort of plan to deal with any of this.  I know it wasn't his doing, but it's his mess now whether he likes it or not.  Unfortunately, the guy can barely string two words together that make sense.  It's like Weekend at Bernie's in the White House right now, and if things don't change we're all going to be royally fucked.

Kind of agree widely on the points there. The modern US and other states are trying to cope with crisis as they come. They learnt the hard way during the 2009 crisis that hit hard in Europe that you cannot reduce public expenditure and expect the economy to go well by itself. Now they are trying the opposite recipe - what if I throw a huge amount of cash into the peoples hands? Well, no wonder we are talking inflation after decades of nearly zero rates in Europe, Japan and low rates in US, UK.

This is the way we are going to pay for COVID. It is inevitable - COVID did happen, it did strike the economy of the developed countries and far worse for underdeveloped and emergent economies. People had to be saved printing money but the fact is that the world is now poorer than before and it will take several years to catch up again.

I am quite sceptic about the ability of any government of any sign to cope effectively with this. Biden seem to be throwing more money into the economy but I think is more related to trying to keep the US up to date with the world by investing. I am certainly unaware of any plan not to deal with inflation, which can be easy, but the plan to deal with high interest rates when they come.

[Kyraishi]

I honestly think that it's a bit overblown.

The Fed at least in the short run still has a lot of ammunition in terms of its ability to adjust interest rates upwards. Deflation is actually the big issue that the fed would still struggle to deal with right now given that the Fed Funds rate is effectively zero.

Unless there is some sort of catastrophic warfare or QE that continues for another decade, I doubt things will get too out of hand. For now, that is.

[hugeblack]

Covid-19 pandemic has not ended yet, it is bad to start thinking about its negative effects, so I don't think the time is right to publish such reports. short term.
It looks like a proactive report to protect money in the short term from inflation and thus force shareholders to spend more on activities considered safe in the bank's eyes rather than short-term losses.
Dealing with the pandemic was a unique event, so we will not know the feasibility of these solutions until several years from now.

[Webetcoins]

It’s not only in the US that there is a problem like this, this is a problem that is being faced by so many countries around the world right now. And I believe that in Germany they are also having the same issue, because according to the news I read earlier this week, the EU has suffered some serious problems that arose due to the pandemic, and the Euro is going down.

So, I don’t really see why they would be worrying themselves over the problem of another country, while they themselves have not even solved their own problem that they are having.The US chose to be printing lots and lots of money, and I believe before their presidency made that choice, they already understood the consequences.