I’m glad I don’t live in Germany right now…


… because the cost of living there is going through the roof.  Reuters reports that last month, German producer prices rose by 45.8% compared to August last year.

Producer prices for electricity rose 174.9% compared with August 2021 and by 26.4% compared with the previous month.

Excluding energy, the year-on-year rise in producer prices came in at 14% in August.

Producer prices for intermediate goods also rose significantly, up 17.5% on the year, driven mainly by a 19.9% surge in metals prices.

There’s more at the link.

Note that these are producer prices, not consumer prices.  Those are downstream of producer prices, and will almost certainly reflect even higher increases.  There’s no sign that producer or consumer prices will be brought under control anytime soon:  rather the opposite, in fact.  Just look at Germany’s Producer Price Index from 1980 to 2022 inclusive, courtesy of Quoth The Raven this morning.  Click the image for a larger view.

That last bit doesn’t look very healthy, does it?  Sundance points out that this is “the highest jump in prices in the history of the German economy” since formal records began to be kept in 1939.

The statistics behind the energy impact upon the German economy, the largest economy in the European Union, are almost unfathomable in scale.  There is no way for the German industrial economy to continue with this level of price pressure.  Stick a fork in the current creation of German industrial products and exports, the inflection point of feasibility for continued production has been crossed.  They are done.

. . .

What does this mean in practical terms?

Firstly, it means the people within Germany and the larger EU will not be able to afford goods if the increased price to manufacture them is passed on to customers.  German industrial goods, including the heavily dependent auto sector, will hit the market at double the price from last year.  Exported goods, again assuming the government doesn’t provide some sort of subsidy to offset, would also double.

Secondly, it means the prices of used goods will increase in value.  With imported vehicles holding that scale of increased manufacturing price, I would expect to see German automobile dealers in the U.S. sending out incentives to purchase used BMW’s, Audi’s and Mercedes for the products that are not produced in North America.

Lastly, on a global scale, Germany is dependent on selling industrial equipment to Asia and North America in the manufacturing sector.  With declining demand for finished products -the result of inflation- there was already a lowered demand for machinery, machined tools and heavy equipment.  Downward pressure due to a lack of demand, combined with upward price pressure to manufacture the industrial products, creates an even worse scenario.

Right now, Germany is on the cusp of a full-blown economic meltdown…

Again, more at the link.

Note that as of July this year, Germany was the USA’s fifth-largest trading partner.  Also, last year, Germany accounted for more than one-fifth (21.3%) of the European Union’s gross domestic product.  If Germany’s economy tanks, so does that of the EU as a whole;  and if the USA loses, not just Germany’s contribution to our trade, but also much of the EU’s, we’re deep in the hole ourselves.

Bottom line?  If you want any German product – a vehicle, electronics, whatever – order it now, while supplies are still available.  It’s highly unlikely they’ll stay that way.  Furthermore, don’t plan on travel to Germany in the near future, until the situation becomes clearer.

We’ve talked about hyperinflation in the Weimar Republic during the 1920’s on three previous occasions here.  I suggest you follow those three links to learn more . . . because if Germany can’t bring energy prices under control, I suspect it’ll be well on its way to experiencing the same disaster again.



  1. Are the Germans and other Europeans going to continue supporting this proxy war of Ukraine versus Russia? Wait until it starts getting cold this winter. Are the Germans and others having any regrets over demonizing fossil fuels and nuclear energy and spending so much on solar and wind energy?

  2. Yes, Germans are going to freeze to death and starve, but at least Putin knows that (most of) Europe thinks he's a very naughty boy! I mean obviously that's a priceless point to make, since Switzerland was willing to throw away hundreds of years of neutrality to make it… *Shrug*

    Off topic:
    Idk if it's just me, but the mobile version of your blog (the one I use 99% of the time) is now apparently set to "dark mode" or something. Just a heads-up. All the pages are white text on black background.

  3. Yeah, yeah…blame the Ukrainians for not rolling over when invaded by the same people who starved millions of them to death in the ‘30s.

    Who decided to shut down all Germany’s nuclear capacity and make up for it by becoming co-dependent with a violent, despitic and neurotic neighbour?…. the German Government.
    Who decided to panic over Covid and print a ton of money thus driving up the cost of pretty-much everything?…. the German government.
    Who decided to *ditto* and shut down the economy, including transport, thus reducing both effective incomes and driving up costs? The German government.

    Who wants to whimp out on doing what is right, throw the victims under the bus and reward a dictator because the consequences of stupid decision hurt?…… far too many of us.

    How about being bloody thankful that someone else IS doing the bleeding, because the alternative is waiting until Putin, Xi or someone similar decides to do another Pearl Harbour, and then it gets REALLY inconvenient.. Those of us who bother to study history know that the Axis declared war on the US because they were convinced that the Americans would not fight and would fold after the first bunch of military funerals. We remember the WTC attack because UBL thought exactly the same thing. He said it explicitly.

    If you will not fight when it is easy and victory is sure…..

  4. PeterW thank you for an excellent Readers Digest condensed version of American Neo-con propaganda.

    I'm not going to flood Peter our hosts blog with a point for point fisking of your comment.

    WTC and Usama Bin Laden? Ask yourself why two planes hit two towers and THREE Towers (#7) also fell down inside their footprint, almost like a demolition job? AND how many times WE KILLED UBL with confirmed "Kills"?

    Is the US Gov and its propaganda arm the Media honest?

    Have you ever served overseas and held a dying fellow soldier or treated a civilian for "Collateral Damage"?

    It's not a videogame where you get to hit restart and play again.

  5. "If you want any German product – a vehicle, electronics, whatever – order it now, while supplies are still available."
    There are no supplies available 😀

    Everything that does not use raw materials is dependent from China.
    I have customers, people who produce stuff or own companies, tell me that they have enough contracts but they can'T ship their products because some small parts are missing – the product is 80% ready but some electrical component or some other small stupid but important part is missing because they by it from somewhere else.

  6. tired:
    hopefully people pay attention to the fact that buying critical parts outside your own country leaves you vulnerable to major problems. It should be a major wake-up call for everyone. Nationalism has important benefits that were ignored in the drive to make a few more cents by outsourcing production. Most of the Western World is going to pay a high price for that bit of stupidity and greed.

  7. @ Will: I fear that the powers that be will not learn. And I fear what the powers that will be will learn from that.

    There's a fine line between healthy and toxic nationalism – and right know a few European countries (looking at you, Poland) are missing the line and veering off into toxic nationalism.

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