Mr. Jens had been threatened by Marah and seemed unsettled. He repeatedly changed his sitting position. Marah wanted to talk to him about money, she had said, but that was not what she really wanted from him. Reyji looked at her wristwatch, then lit a cigarette. Marah continued talking.

"The other day I read an interview with you in a business magazine from your island and there you explained that the free banks are aiming for two percent inflation in their expanded currency area and that they are doing this because it fosters planning security and price stability. I was very surprised that people are swallowing that. I can only speak for myself personally, but I prefer it if my money is tomorrow as valuable as it is today. If you have your money in our state bank, you don't get any interest, but it retains its value. Our state bank guarantees that your money will not lose purchasing power until next fall. Would you not agree that this offers more planning security? But why shouldn't it be like that? If I put a can of pea stew in my cupboard, I can still eat just as much pea stew next year as I can today. So why use your trash currency? Why not trade in cans instead? Certainly for practical reasons, but a few warehouses somewhere in the middle of nowhere aren't actually that expensive and when I look at the price trend over the last 100 years, the cans never lose. It's your currency that loses more and more value until you have to replace it to keep up with the cans. Well, anyway, I wanted to ask why the free banks have such silly goals?"

In the meantime, Reyji had reached for the ashtray and Marah had noticed that she wanted it and given it to her.

"It is not our aim for prices to rise. Inflation of 2% is our definition of price stability, as you know."

"Yes, but why?"

"You know it."

"Why don't you explain it to me anyway?"

"Because deflation would be worse than inflation. Because it is not possible to measure inflation with a high degree of accuracy. We want to keep the risk for deflation low, so we are aiming for two percent inflation. You don't have inflation because you only measure the price development of your state goods, which are priced by you. Goods that are not offered by your public companies are not considered. You have no inflation because you pretend you have none. You only have to look at Ebensbach's annual reports on domestic sales volumes or unit costs to see that there are fluctuations."

"Yes, but that's no secret. That is exactly what I announced back then. The state companies ensure the basic supply of the population. The prices of goods from the private sector are not decisive. The prices of state goods will not rise next year either. The production costs of almost all companies have fallen since the price guarantees began. I didn't know at the time whether we would get Blau, so I left us some leeway, which is why some Ebensbach goods are still in the middle price segment today. But why would deflation be worse than inflation?"

Mr. Jens sighed as he exhaled and explained monotonously.

"Deflation lowers the profitability of investments. Those who can safely afford it save their money when it increases in value. Turnover shrinks. Productivity falls. Wages fall. Unemployment rises and so on. "

"And what do you do in the event of deflation?"

"If it wasn't already happening, we would lower the prime rate and the respective states would have to increase their spending."

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"In other words, YOU will do nothing. If you're targeting 2% inflation, why have you been above that so many times in the last 10 years?"

"I don't know what you're talking about. In the extended currency area of all world banks, we've been at 2.3% for the last decade, so we've been roughly on target."

"Currently, the Fee now has 8% inflation in your expanded currency area."

"We have an eye on that."

"Don't act so secretive. You're going to raise the prime rate."

"I'm not able to comment on the actions of the free banks in this case at the present time."

"You will do it, but you don't have inflation because too much money is being spent, but because three of your member states will soon be at war and there are fewer suppliers than usual, which is why prices are higher than usual. If you raise the prime rate, you may prevent a bidding war, but to the detriment of the economies of your member states. Companies have to buy raw materials. They cannot not buy. It would be better for the states to absorb the costs through new debt."

"I agree with you that there is such a thing as a price shock, which we can't do much about in the short term, but in the medium term we will reach our target this way. As for the states absorbing the costs through debt, you may see it like that, but we don't."

"Yes, but you clearly have no idea anyway. Let's take a look at their policy. Inflation is low, so they cut the interest rate to stimulate the economy and inflation is rising, so they raise the interest rate to slow down the economy. In a deflation, the states should take care of it themselves and launch economic stimulus programs and, if necessary, issue bonds for this purpose, which you gradually buy back, leaving the private banks swimming in central bank money, therefore increasing the deposit rate and adjusting the interbank interest rate. That is essentially all you do. Did you only have one page of paper per student in economics school or how do I have to imagine that? Was it a one-hour course?"

"You can criticize me all you like, but that doesn't mean I'm going to agree with you. Unlike you, I'm not one of those people who believe that you can accumulate debt indefinitely. The national debt ratio is not irrelevant. There is an upper limit that should not be exceeded."

"Oh, how high would that limit be?"

"I can't give you a general answer to that. It depends on the level of interest rates and growth expectations, but there is a level of debt at which there are disruptive effects. You will no longer be able to find buyers for your bonds and there will be a threat of national bankruptcy or, in Baele's case, the result will be hyperinflation."

"It's probably more of a feeling... We spend a lot more than we collect, but our currency is still one of the strongest."

"The S-Mark is also STILL spreading in third countries and is STILL a popular investment due to the high material value of the coins, but that doesn't mean it will always stay that way."

"What about Delxawe? They now have a national debt of 205%, but the Nitzia is as strong as ever."

"However, Delxawe also has very low taxes, which they can raise at any time, which would bring in more revenue."

"So your secret tip is to reduce revenue if you want to increase expenditure?"

"No, I wouldn't say that."

"Isn't that what you just said? Let's assume that Delxawe's national debt continues to grow, what exactly will happen then? Will the bitchy private banks stop buying bonds from them and then? You know who will then step in. The world bank will buy the bonds itself. After all, you already do that from time to time."

"If it makes sense, then we'll do it, but we can't do it ad infinitum. Open market transactions are very limited."

"But you will do it. The money goes to the rich, doesn't get collected there, so it has to become more money. Besides, you shouldn't make it sound as if you didn't put the shackles on yourself. They can do it forever. The limitations are self-created. I assume it's because of the threat of inflation?"

"Yes, that's one of the reasons."

"But Nitzia could certainly use a higher inflation rate right now. After all, the inflation rate in Delxawe has been below its target value for decades and has recently turned negative again, if the measurement is correct. What else are they supposed to do?"

"I knew that's what you were going for, but I can't answer that spontaneously in the current situation."

"It doesn't matter. I didn't expect an answer anyway. I have one myself. They should emission bonds and massively increase their spending."

"And like I just said, I can't answer that off the top of my head and I'm not going to."

.../ End Part