The yield on private financial assets - Germany in an international comparison

Low interest rates have been the order of the day in Germany since 2010. Although interest rates, measured in terms of the yield on German government bonds with 9-10 years to maturity, have been on a downward trend since the 1990s, it was not until 2010 that a new phenomenon emerged: since then, interest rates have been significantly and permanently lower than nominal economic growth. In other words: the interest rate level can no longer be explained by the fundamental data, i.e. by a drop in growth and inflation, but is biased downwards.

It doesn't take much imagination to find the culprit: the unconventional monetary policy. Since the outbreak of the euro crisis, the ECB has been doing everything in its power to stop the spiral of mistrust and the increasing fragmentation of the euro financial market: by making unlimited liquidity available to banks in the long term with the first, limited ad hoc purchase program for government bonds (SMP) and with the promise to buy up an unlimited volume of government bonds if need be (OMT). The last in this series of moves has been the decision, taken by the ECB at the start of the year, to launch a large-scale purchase program for government bonds and other securities (quantitative easing, or QE for short). This is the ECB's most potent weapon to date in the fight to get the euro area back on to a sustainable growth and inflation path.

But although this ongoing "euro bailout policy" has proved a success in some respects – the markets have settled down and the economy is bouncing back – it is also important not to underestimate the side effects: zero interest rates are eating away at capital gains, putting long-term obstacles in the way of anyone trying to build up savings. Some even go as far as to accuse the ECB of expropriating savers and creating an environment in which saving isn't worth anyone's while anymore. And indeed, real returns on bank deposits have been negative since the end of 2010, as the Bundesbank emphasized in its monthly report for October . Although negative real returns on bank deposits are not uncommon, a trend lasting this long is unprecedented.

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