Die wundersame Geldvermehrung (The Miracle of Monetary Expansion)

Buchcover Die wundersame Geldvermehrung

Herder: Freiburg, November 2021, 432 pages. 

This book is one of the first academic monographs to explain inflation in Europe as an interplay between the coronavirus pandemic and government debt caused by the ECB's decades-long expansionary monetary policy and government bond-buying programs. Sinn discusses in detail the mechanisms and conditions that led to the inflationary situation in Europe, points to historical parallels and attempts to outline a path back to a sound financial system.

Intro to the Book:

Europe has stumbled from one crisis to the next in recent years. Public debt and the money supply have grown. At the same time, the pandemic has led to considerable shortages in the supply of goods. The resulting excess demand presents a threat of in-flation. 

The debt ratios of key Eurozone countries doubled between 2008 and 2021. In the same period, the money supply increased sevenfold and interest rates plummeted. Not only has this put a burden on the savings of ordinary investors – there is now also the risk of assets being devalued by inflation.

Is Inflation Coming?

Inflation already has begun. At this writing, the inflation rate for consumer goods prices stands at 4.5%, and industrial producer price inflation is already above 14%. This is the highest level in half a century. The ECB should now be curbing inflation, but it is downplaying the danger. In doing so, it is also playing with fire. 

Europe must return to the path of sound monetary policy as quickly as possible. Only then can confidence in the euro be maintained and the European dream of prosperity and peace be restored.  

Endorsements (Translated from German)

»Hans-Werner Sinn's new book comes at the right time. The ECB has now led the eurozone into a dead end. Sinn explains the foreseeable consequences of an extremely expansive monetary and fiscal policy for the stability of the euro and the cohesion of Europe in an analytically brilliant, readily understandable and stimulating way for the reader«
Dr. Nikolaus von Bomhard, Chairman of the Supervisory Board and former Chairman of the Management Board, Munich Re

»Is inflation coming back? How will the ECB react? Where will the exorbitant debt of many countries lead? These and other questions and concerns are on people's minds. The author provides answers in a sophisticated yet understandable way. A 'real Sinn'.« 
Prof. Dr. Otmar Issing, Präsident des Center for Financial Studies, Frankfurt am Main, Former Chief Economist of the ECB, member of the ECB Executive Board, holder of the Chair of Economics, Money and International Economic Relations at the University of Würzburg

»Hans Werner Sinn has written an important and provocative book. It shatters the currently prevailing monetary policy orthodoxy, according to which the current surge in inflation is only a temporary phenomenon driven by a very short-lived supply shock. The analysis forces the reader to think in new ways.«
Harold James, Professor of Economic History, Princeton University

»A book that takes up solid historical experiences, analyzes the present with diagnostic acuity and opens up a therapy of reason for the future.«
Prof. Dr. Paul Kirchhof, Seniorprofessor distinctus for constitutional and tax law at the University of Heidelberg, retired judge of the Federal Constitutional Court.

»Hans-Werner Sinn demystifies the 'miraculous increase in money' with rich facts, theoretical models and clear lines of argument. States and central banks in Europe run the risk of overstretching fiscal and monetary policy and mixing them with distribution targets: grippingly provocative, analytically convincing.«
Prof. Dr. Bernd Rudolph, Former Director of the Institute for Capital Market Research and Finance at the Ludwig Maximilian University of Munich

»Back to sound finances - that is what Hans-Werner Sinn demands from the Eurozone countries. Otherwise, the EU community project is in danger of failing due to over-indebtedness, inflation and zombification. Sinn's book is a wake-up call that deserves to be heard if Europe is to remain a global player.«
Dr. Wolfgang Schäuble, President of the German Bundestag, former Federal Minister of Finance

»The ECB's ongoing zero interest rate policy and liquidity pump are causing considerable risks. The flood of money and avalanche of debt threatens monetary stability, leads to the division of Europe and causes social distribution conflicts. To date, no one has described these risks more succinctly and exhaustively than Hans-Werner Sinn. His book should be required reading for politicians, provide an impetus for public debate - and be a clear warning to the ECB.«
Peer Steinbrück, former Federal Minister of Finance, former Chairman of the SPD

»Hans-Werner Sinn writes pointedly and often provocatively about uncomfortable truths in politics. In his new book, he dissects the ECB's ultra-loose monetary policy with analytical acuity. He convincingly demonstrates that the enormous risks to price stability also jeopardize Europe's cohesion in the medium and long term. Sinn knows like no other how to combine a high academic standard with comprehensible language. An important and timely book: compulsory reading for all political decision-makers!«
Dr. Edmund Stoiber, Former Governor of the Free State of Bavaria, former Chairman of the CSU 

»Hans-Werner Sinn has written an extremely important book. Never before has anyone explained and criticized the consequences of the ECB's policy so clearly and comprehensively. The book forces us to think and act, not only in Germany, but in Europe.«
Nout Wellink, former President of the Dutch Central Bank, Chairman of the Basel Committee on Banking Supervision, Chairman of the Board of the Bank for International Settlements (BIS), Director at the International Monetary Fund

Book reviews and reactions on the book:

In an article published on Project Syndicate on March 31, 2023, Prof. Dr. Dr. h.c. Lars P. Feld, Professor of Economics, University of Freiburg, Chief Economic Advisor to Christian Lindner and former Chairman of the German Council of Economic Experts, wrote the following:

"... Similarly, in a now-famous Christmas Lecture in December 2020, Hans-Werner Sinn of the University of Munich warned that the eurozone’s highly expansionary fiscal and monetary policy mix would lead to a future of higher inflation. Back then, his views were dismissed with a smile by all those fiscal-stimulus aficionados on social media (who are always and everywhere advocating higher government spending). Since his lecture, Sinn has since elaborated on his argument in his book Die wundersame Geldvermehrung (The Miraculous Multiplication of Money).

Sinn’s viewpoint is at its heart monetarist: he emphasizes that the monetary base (M0) in the eurozone has grown extremely rapidly in recent years, from €1.2 trillion ($1.3 trillion) in March 2014 to €6 trillion in September 2021. But he also highlights the sharp growth in gross public debt among EMU member states, from 73% of GDP in 1998 to 97% in 2020, with the lowest figure (66%) recorded in 2007. Since 2015, the ECB – or more precisely, the euro system – has purchased government bonds in secondary markets, thus refinancing expansionary fiscal policy.

More intriguingly, Sinn describes the transmission process exactly. When EMU member-state economies were hit by the COVID shock, aggregate supply and aggregate demand fell. The ECB and member-state governments then reacted with expansionary monetary and fiscal policies, thus keeping aggregate demand high. But aggregate supply remained suppressed because of distortions in value chains, labor-market shortages, and other production issues. With too much money chasing too few goods, prices duly rose.

It turns out that the Sinn of 2020 was a visionary. Why did no one listen to him? In the preface to his book, he notes that his Christmas Lecture had received 1.6 million views online between December 2020 and the summer of 2021. But even if his argument was heard, it did not stick, because modern macroeconomists had come to believe that monetarist thinking was outdated. Indeed, Sinn had been warning for years that the ECB’s monetary policy would end up producing higher inflation, but eurozone inflation remained low from 2015 to 2019. ..."

"Why Inflation Persists", Prof. Lars P. Feld, Project Syndicate, March, 31st, 2023.

More reviews in German:

"Rezensionen", by Bodo Herzog, Der Betriebswirt, issue 63, no. 4 (2021), pp. 265-270, Duncker & Humblot Berlin.

"Die wundersame Geldvermehrung", by Frank Schäffler, Prometheus.de, January 7th, 2022.

"Die Folgen der wundersamen Geldvermehrung", by Joachim Starbatty, Junge Freiheit, December 17th, 2021, No. 51, p. 13.

"Jetzt kommt der Schwall", Focus Money, November 24th, 2021, No. 48, pp. 6-12.

Excerpt from the Book

Table of Contents and Introduction


Publication details:

Hans-Werner Sinn, "Die wundersame Geldvermehrung: Staatsverschuldung, Negativzinsen, Inflation",
November 2021, 432 pages.
ISBN: 978-3-451-39127-9
Hardback € 28,00 [D] | eBook € 21,99 [D]
Order via www.herder.de or www.amazon.de.