Purchasing power loss in Germany might amount to €170 billion in 2022

According to the German “Interest Rate Radar” for August 2022, inflation in the Eurozone is destroying more savings than many investors might be aware of. The loss of purchasing power in Germany alone, at above-average inflation, is likely to amount to around €170 billion this year. This per capita loss of more than €2,000 is in stark contrast to less than €12 in per capita interest income. In a recent interview with German newspaper “Rheinische Post”, Bundesbank President Joachim Nagel said he expects an inflation rate of 10 per cent for the rest of the year due to the expiry of some of the German government’s relief measures. He estimates around 6 per cent inflation for 2023.

Euro purchasing power already declined significantly before 2022

The loss of purchasing power of a fiat currency is particularly obvious in phases of high inflation, but occurs almost continuously over time. This development is especially evident in currencies compared to the gold price. According to an analysis by precious metals company Solit Kapital, the euro lost almost 81 per cent of its purchasing power against gold between the years 2000 and 2020. Since early 2000, the US dollar has depreciated even more significantly compared to the precious metal: its purchasing power was at only 18 per cent at the end of 2020.

Gold has gained around 500 per cent since the turn of the millennium

From less than €10 per gram at the beginning of 2000, the price of gold has risen to its present level of €56 (as of 22 August 2022) – a gain of around 500 per cent. In 2022, gold has thus far once again fulfilled its role as a store of value, despite many critical voices in the media. According to the “Gold Mid-Year Outlook 2022” of the World Gold Council, the gold price has seen a 9.4 per cent rise in the first half of 2022, thus outperforming many other asset classes such as shares and bonds.