Posted by: Dirk | August 8, 2012

Bundesbank bought German sovereign bonds – in 1975!

The SPIEGEL reports today that the Bundesbank, the central bank of Germany, bought German sovereign bonds by the billion in 1975. The magazine cites a study by BNP Paribas:

Den Analysten der BNP Paribas zufolge kaufte die Bundesbank in jenem Sommer vor 37 Jahren Staatsanleihen und Anleihen der staatlichen Deutschen Bundespost für stolze 7,6 Milliarden Mark – das entsprach damals einem Prozent des Bruttoinlandsprodukts.

DM7.6 bn, about 1% of German GDP in 1975,  translated into euros would be about €3.7 bn (not adjusted for inflation). In the article it is argued that during a recession in 1975 it was feared that the fall in demand for sovereign bonds would lead to inflation. Remembering stagflation, it must have been interesting times that, however, barely allow us to say anything about today’s situation. What becomes clear is that even the Bundesbank at times broke the rules in order to achieve its goals. The ECB already broke some rules, and saving the euro would be a good excuse to break the rules once more. Something more than buying sovereign debt would be required to bring about adjustment in the real economy.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: