Many of you will know him: Hans Werner Sinn, ex-IFO president and one of Germany’s best- known and most renowned economists. After his basic training in economics in Münster, he came to Mannheim, where he earned his doctorate and eventually his habilitation.
The debates about inflation and the correct interest rate, and fiscal and financial policies are experiencing a boom. While many – ECB President Lagarde, for example – assume that the current increase in prices is only a transitory event, others like Sinn believe in massive and lasting inflation. Joseph Stiglitz, a professor at Columbia University in New York and Nobel Prize winner, recently intervened in the battle for the German finance ministry. He spoke out in favour of Robert Habeck and against Christian Lindner because he is convinced that debt must be taken on to make investments in the future and thus innovate society. Clinging to the black zero, on the other hand, he considers making little sense. In doing so, he complied with the asset managers BlackRock and State Street, who are also critical of the Lindner personnel for the Ministry of Finance. Hans Werner Sinn took up the cudgels for Christian Lindner’s ordoliberal principles. The following summarises some key points from an interview with Hans Werner Sinn in the Handelsblatt. Rating: enlightening. And for all supporters of the market economy: reassuring.
Point 1: The ECB should ensure wider interest rate spreads so that those states that are getting further and further into debt (Italy, Greece, for example) have to pay higher interest rates to their creditors and thus receive clear incentives to reduce their debts.
Point 2: The Maastricht treaties may not even be worth the paper they are printed on. These treaties contain, for example, the 60 per cent clause, which states that the states in the Eurozone should have a debt ratio of no more than 60 per cent of total economic output (GDP). These are (actually) criteria for admission as well as for remaining in the EU. Germany has adhered to it for a whole four years in the last 21 years, some countries never have, and in 2020 only 13 of the 27 states had remained faithful to this principle.
Point 3: The current inflation dynamics are comparable to the first oil price shock 50 years ago. Sinn believes that inflation will come in waves, similar to a pandemic. This art is mainly due to the many disruptions, which act as inflation catalysts one after the other and somehow simultaneously. First, there is the energy transition with the phase-out of nuclear power and all fossil fuels. According to Sinn, this will exert considerable cost pressure on all production processes. The second disruption is demographic change, i.e. the ageing of society. Here the effects are barely noticeable, as the entire baby boomer generation will only retire in the next few years up to 2030. Supply bottlenecks, material shortages and special effects due to pandemics, natural disasters and the like are on top of that.
Point 4: According to Sinn, anyone who rejects Christian Lindner’s commitment to the black zero and to orderly and frugal politics in today’s times as an arch-capitalist society, as BlackRock and State Street as asset managers and financial investors are, can no longer be an advocate of the market economy. According to Sinn, the FDP is the most liberal and free-market party in Germany. Suppose American asset managers now speak out against Lindner as finance minister. In that case, this allows only one conclusion, according to the economist: all these companies no longer have any interest in the market economy at all, but only an interest in more and more money flooding the markets and in being able to speculate with ever-higher sums. Profits would be privatised here, and losses (mainly well seen in the measures taken after the