The Pitfalls of Borrowing Despite High Inflation

Last Updated: 17. November 2023By

Inflation decreased last month, but the level remains high. In October, inflation was at 3.8% compared to the same month of the previous year. In September it was still at 4.5%.

The target value aimed for by the European Central Bank (ECB) is 2%. This means that the inflation rate is almost twice as high as desired by the ECB.

When discussing inflation, it is often mentioned that savers lose out with high inflation rates, while debtors win.

When it comes to borrowing money… According to, the website of a German real estate financier even advertises that it is now worth it to take on debt. “As a real estate loan borrower, you generally benefit from an increasing and sustainable inflation, as the real value of the debt decreases”, it says.

An argument that is heard frequently lately: The amount of the loan remains the same, but is „devalued“ by the high inflation – just like savings or money in general are devalued. This is basically correct, but you should look at the interest rates, because: Only if these are below the inflation rate, debtors can benefit from inflation. This is no longer the case.

According to, consumers had to pay an average of 8.5% interest for new consumer loans in September. Inflation was 4.5% in the same period. The interest rates were thus clearly above inflation. Interest rates are based on the ECB’s key interest rate, which has been increased 10 times in a row.

The high interest rates make the loans more expensive. This applies to both consumer and government loans.

Why government debt is increasing More and more governments are getting into trouble as the debt mountain grows and grows. The Corona pandemic cost a lot of money, and now aid for Ukraine and Israel is taking its toll.

„Government debt reaches record high,“ reported several media outlets in late July, when according to the Federal Statistical Office (Destatis), the federal government, states, municipalities and social security funds were in the red to the tune of 2,368 billion euros at the end of 2022 – 47.1 billion euros more than in the previous year.

For comparison: In 2012 it was only 2,068 billion euros, 300 billion less. In 2002 it was even only 1,277 billion euros, almost half as much as in 2022.

If the government debt is put in relation to economic performance, the figures do not look so dramatic and dangerous anymore. Nevertheless, Germany and other states are continuing to make debts, and the loans are getting more expensive due to the high interest rates.

Who pays the bill in the end? It is understandable that more and more federal citizens are asking themselves who will pay the bill in the end. As well as the concern that we will all have to pay at the end.

Asset protection is therefore more important than ever. The good news is: Taking measures is easier than you think.