Eight months before the crucial midterm elections, the administration of President Donald Trump is battling high living costs. The strike against Iran threatens to undo the first successes achieved in the struggle against inflation via falling energy prices.

Ludwig Erhard understood the formula for sustained political success. The equation was as simple as it was powerful: stable money circulating in free markets coordinates the millions of individual decisions made by households, businesses, and credit institutions—day after day—in the most efficient manner.

Stable money requires a lean state. Public debt, meanwhile, is widely regarded as the primary cause of inflation, because it is typically financed or diluted not through real growth but through the central bank’s printing press.

Erhard condensed his economic principles in his popular work Prosperity for All—recommended reading for anyone seeking to understand the roots of Germany’s present political crisis from the perspective of economic policy.

Regardless of how one assesses his chancellorship, the framework designed by the nonpartisan liberal economist remains a civilizational achievement of modernity.

It stands for economic rationality, rules-based order, and the conviction that prosperity grows out of freedom. Yet these principles are too often forgotten—or systematically discredited by political and left-wing ideologies.

In the United States, after years of regulatory decay, this thinking has found renewed resonance. Donald Trump deliberately aligned his campaign with Erhardian principles.

He understood that elections are decided at the checkout counter, in housing prices, and at the gas pump. The upcoming midterms—where half of Congress is up for election—will effectively become a referendum on living costs and the purchasing power of the working middle class.

That class suffered enormously under the expansive monetary regime of the lockdown years. Prices continue to rise due to the artificial liquidity surge, stimulus checks, and state-generated job demand.

After one year in office, the central question therefore arises: Has Trump delivered? Has life actually become more affordable for the average American family? Has the vicious inflationary spiral been broken—a development with systemic roots in the fiat-credit monetary system and ultimately a secular problem?

The answer, for now, is a qualified yes and no.

During last week’s State of the Union address, the cost of living occupied a prominent place in the speech. Energy prices in particular are declining in the United States.

As a largely self-sufficient producer of oil and gas, America possesses a strategic advantage that could shield it, at least in large part, from a prolonged Iran shock.

The primary victims would be Europeans, who have managed to mismanage energy policy in almost every conceivable way.

Core inflation in the United States has indeed continued to decline over the past year and is currently fluctuating between 2 and 2.4 percent.

Housing prices are also edging down regionally—particularly where additional housing supply has been freed up through the administration’s large-scale remigration policies.

Fundamentally, one should abandon the notion that prices will return to pre-Covid levels. Inflation is a monetary phenomenon.

As noted, the financing of massive public debts—on both sides of the Atlantic—through the printing press has solidified into political routine. Fiscal and monetary policy have merged into a single power complex.

The existing fiat-credit system would immediately collapse under a shrinking money supply and falling prices. It is structurally dependent on continuous credit expansion, where outstanding debts remain sustainable only through new borrowing and sufficient liquidity.

If the money supply contracts and deflation sets in, the real burden of debt rises, loans turn non-performing, asset values lose nominal footing—and the confidence-based system begins to falter.

All the more noteworthy, then, is that the Trump administration has reportedly eliminated around 300,000 federal positions deemed unnecessary, eased the burden on taxpayers, and reduced the budget deficit from 6.7 to roughly 5.5 percent.

Nothing spectacular—but in contrast to many European states, something significant is happening in the engine room of the American economy that could substantially reduce price pressures in the years ahead.

A massive wave of private-sector investment—also the result of deregulation and tax cuts—has pushed overall productivity up by 4 to 5 percent over the past year.

This implies a substantial increase in prosperity and translates—driven by reinvigorated market forces—into correspondingly dynamic real wage growth. The U.S. economy is primarily propelled by private investment and is literally “on fire.”

Given comparatively higher interest rates in the United States, excess liquidity is being absorbed by the competitive strength of the American economy.

Non-viable business models are once again allowed to fail; the era of perpetual bailouts in the European style appears to be over. Meanwhile, the U.S. banking system presents itself as sufficiently robust to withstand shocks and insolvencies.

Yet time is running out for Donald Trump. Eight months remain until the midterm elections. Economic reforms, however, require time before their effects become visible.

The sweeping deregulation of energy markets will reduce costs for American households in the future—that much is clear.

But the major investments in grid expansion, nuclear capacity, and infrastructure are happening now.

They are exerting pressure in the short term, including on commodity prices. Patience would be required—a virtue that carries little weight in electoral politics.

The continuity of rational policy remains the structural weakness of party democracy. Yet it is indispensable from a monetary perspective.

One of the great failures of postmodern democracies is that they have been unable to wrest the printing press from political control.

Without state money creation, Germany would never have fallen victim to its recent wave of green transformation policies—perhaps the most striking example of recent times.

What role the Federal Reserve will assume in the future—whether Donald Trump reforms it or harnesses it fully as a political money printer—remains to be seen. Perhaps he will instead restore it to its earlier role as a lender of last resort to the banking sector, rather than a cheap engine of populist monetary expansion, regardless of party.

________________

Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.