State and central bank aid should not remain indifferent to the consequences the economic crisis will have for many people’s pensions. In this article, we will talk about how private retirement provision will be hit hard from the consequences of the corona crisis and why the “inflation rate” of Bitcoin is becoming significantly more attractive.

In contrast to the 2008 financial crisis, the fight against the corona crisis may not just cause inflation of assets. While we have seen in the last decade an 8 percent or more inflation in the real estate and stock market, the official inflation which is measured primarily by real economic goods and services, remained below 2 percent.

So far, consumers and savers have had little reason to worry about inflation on their bank or savings deposits. Although they missed a comparatively high return that they could have achieved on the stock or real estate markets, their purchasing power was largely retained on Life Insurance Retained Asset Accounts. That is exactly what will change soon. Not necessarily by hyperinflation, but at least by trotting (2-10 percent) to galloping (up to 50 percent) inflation. Because this time the money will not flow mainly into the financial sector, as after 2007, but also into the real economy.

Germany is particularly hard hit by the crisis

The damage is likely to be particularly hard for German investors, as they have low equity and real estate ratio compared to other EU countries. Germany is almost at the bottom when it comes to Real Estate in the EU and for stocks, it looks a little better. With savings assets and funded life insurance, on the other hand, Germans are at the top of the podium. There are currently around 83 million Life insurance policies in Germany, practically one per citizen. Many of them also serve to build up capital or for private retirement provision. The guaranteed interest rate already reduced for these policies is only 0.9 percent.

If you take the state-funded form of funded life insurance, the Riester pension, there is a major shortcoming: insurance companies have hardly any opportunity to generate a higher return than 0.9 percent.

Providers of fund savings plans and unit-linked pension schemes must guarantee capital preservation. Since the guarantee cannot be represented by equity funds, fund companies and insurance companies use investment concepts in which pension funds generate reliable returns with high-quality borrowers.

The worst of all forms of investment

Due to the maximally expansive monetary policy and low-interest rates, the chances of higher interest rates are poor. The interest rate on government bonds is also unlikely to rise very much. After all, countries like Italy, Spain, and France, in particular, would then no longer be able to borrow to cover their debts. At the same time, the multi-billion dollar rescue packages will increase the money supply, both in the financial and real economy.

Anyone who still has money in a bank account or in a private pension insurance fund can hardly generate a positive return after deducting inflation, which should start to rise soon.

Riester pension is a patriotic act with a guaranteed loss

The core issue is that the assets that are eligible for this form of retirement provision are no longer able to secure purchasing power in the long term.

Whoever pays monthly into the Riester pension and Co. thus primarily finances the rising government debt or the bond bubble. From a systemic point of view, these investors make an important contribution to European stabilization. Unfortunately, savers and Riester depositors cannot buy anything from this gratitude.

Bitcoin instead of Bundesbank nostalgia

One possible explanation for the disadvantageous investment behavior of many Germans is the monetary stability of the D-Mark. For example, the Bundesbank has ensured a high level of monetary stability more than any other central bank, so that despite high inflation rates, despite inflationary phases, such as in the late 1970s, positive returns could be achieved with savings deposits and insurance policies. Unlike countries such as Italy or Spain, where the unstable currency was rather quickly invested in their own property, German investors did not have this pressure.

Accordingly, investors who have not yet done so should switch quickly now. There will be no central bank policy like that in D-Mark times for the foreseeable future. Instead, to protect their money from inflation, investors should deal with stocks, real estate, precious metals and of course Bitcoin.

In contrast to the euro, bitcoin halves its current “inflation rate” from around 3.6 percent to 1.8 percent in May. When the next halving takes place, the bitcoin emission per block is reduced by half. Bitcoin’s “monetary policy” is therefore in stark contrast to all other fiat currencies. As much as the euro and the US dollar are suitable as well-functioning means of payment, they are likely to lose their attractiveness as a store of value.