By an indexation prohibition (national) a prohibition is understood to make an agreement the component of a contract those meant that the amount of the height of a money debt is a function of a current index level, thus about the current conditions indices dependently is. (Index clause)

Regulations like "“the price X changes proportionally to the consumer price index."” or "“the DAX falls under 4000 points, then the price computes itself as follows [...]"” can be affected by the indexation prohibition.

Idea

Indexation prohibitions are allegedly therefore imposed upon to the restaurant subjects of a national economy, because otherwise danger of inflation would exist. The thought thereby is following: If all contracts would be equipped with an index clause, which turns off to a consumer price index, and the consumer price index around 10% would rise, then the prices would likewise rise into the around 10%. Since the consumer price index is derived straight from the prices of all contracts, thereby the consumer price index would rise around further 10%, thus already around 21% in relation to the original index level. In this way it is possible that the consumer prices would rise into shrinking heights and therefore a galloping inflation would develop.

Criticism

Critics of indexation prohibitions mean that these were imposed only therefore, in order to hush up the worthlessness of the respective national currency, since the central bank does not have material values as covering for the money spent of the central bank (Fiats money), which can lead at all only to an inflation risk. Because material equivalents (e.g. real values) for the spent money would have been deposited and a currency would become only slightly less worth (inflation), then the market participants with their less value money become to the central bank would go and evenly these material values in would call and its money (that same nominal value has as before) for it the central bank would return. All (former) owners of money their money would have back-exchanged short hand into e.g. worth-steadier goods, would practically not have been possible a further inflation, since no more owner of money of the easily inflationierten currency suffers a depreciation, since there would then be no more such owner of money. For this reason an indexation prohibition as prohibition to keep demands of stable value to be able to keep seen as revealing the central bank over their inability, their currency of stable value.

A further point of criticism is following: The value of a currency (expressed e.g. by a consumer price index) varies. These fluctuations are classified among other things in inflation and deflation. With inflation the value of a currency sinks. For a credit giver this is rather negative, because the money, that due to the credit to it is paid back is less worth. With deflation the value of a currency, the prices rises falls thus. For an applicant for the credit this is rather negative, because then he must produce and sell more value (because of the lower price), in order to pay the same nominal credit sum. Besides the sales is very many more difficult in deflation times, since the money sits less then "“loosely"” than otherwise. Some critics call this fraud on the debtor or fraud on the creditor and reject already therefore an indexation prohibition.

For safety reasons therefore the credit giver sets the interest rate so highly on (the longer the running time the more highly) that it is probable even with a certain measure of unexpected inflation that the credit agreement will be profitable. These interest rates are because of the general risk shyness regularly too highly, like that critics, so that straight long-term investments were inadequately disadvantaged, which a reason for short term managing was. If it would be permitted the credit givers and applicants for the credit to keep their contracts worth stable by for example the height of the payments which can be made would be coupled to the consumer price index, then, the risk impact accordingly lower and long-term credits would be switched the inflation risk off thereby more favorably, which leads to a more favorable investment climate.

Country-specific

Germany

Legal basis for indexation prohibitions in Germany is the quotation and price clause law, "§2.Links:

• Federal Office for economics and export control as responsible authority

to the term

Some mean, the term indexing prohibition is the orthography because of more suitably than indexation prohibition. However the use of the term indexing prohibition is unknown in context economic policy.

Articles in category "Indexation prohibition"

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