Clem Chambers: Germany’s tacit acceptance of inflationary measures suggests the eurozone crisis story will fade

However, creating inflation is only possible with the tacit agreement of Germany, and the Germans are very reluctant to allow it. This has been the road block to the only possible solution beyond a Euro-wide financial meltdown.

The rallying markets tell us that Germany has acceded to the inflationary road. If it had not, bond yields in Italy and Spain would be above 10 per cent, Europe would be in meltdown and the stock markets would be in free fall.

Of course, Germany cannot just come out and state that it is happy with UK-style inflation. Its politicians would get fired en-masse as politicians can’t admit their national debts and budgets are out of control and the only way out is to renege on them via inflation. To admit to this reality would be self-defeating and accelerate the process of readjustment they are trying to smooth out over years.

It only takes a quick look at the hard numbers of the situation; the vastness of the debt, the giant nature of the many bailouts, the running deficits, to see how titanic the sums involved are and to realise that everything about them is inflationary.

We do not talk about millions anymore, its billions. Yet billions are no longer the “big unit” defining awesome scale – that has moved on to trillions. This is hard evidence that soon things that were tens of pounds will be hundreds and soon enough the decimal point in our lives will shift.

Fortunately, these increases in money supply are not antagonised by rigid supply issues like the bad old days of the 1970s, so certain goods will resist the path of inflation more than others. But, where supply is less flexible than, say, the production of a flat screen TV or the latest computer game, prices will, and for that matter have, shot up.

Food, energy and hard assets have been and will continue to ascend quickly, even while mass-produced consumer goods may be far slower to rise. Bubble prices on houses will descend in a much gentler trajectory, even though their real money value gets eaten away by inflation in just the way governments like – slowly and relatively painlessly.

Unless the politicians of Europe score yet another spectacular own goal, the EU crisis story will fade. A story doomed to the back pages at least as long as the central banks can keep the rate below around 7 to 8 per cent.

It was German intransigence that blew up the pound in the old days of the ECU and the “snake”, so it may still come to pass that Germany could suddenly turn its back on the stealth rescue deal of high-ish inflation. Last time, it was the Deutschmark’s strength as a function of German re-unification policy that forced the UK’s exchange rate out of its band. This time it might be another flavour of German politics that tears up monetary union.

There is still a chance that Germany might for its own short-term reasons destroy the euro and with it a generation of effort to build a united Europe. The markets seem to suggest that even the Germans are not that obdurate, and with that being the case, the acute traumas of this phase of the unification of Europe have passed.

• Clem Chambers is chief executive of stocks and shares website www.advfn.com