johannes beermann : annual accounts 2020 speech by dr johannes beermann, member of the executive board of the deutsche bundesbank, at the press conference presenting the annual report 2020 of the deutsche bank, virtual, 3 march 2021. * * * ladies and gentlemen, i would now like to take this opportunity to present the bundesbank ’ s annual accounts for 2020 in a little more detail. you will also find all the figures in the annual report, which contains the bank ’ s balance sheet and profit and loss account as well as notes thereon, starting on page 43. and as always, we will be happy to take any questions you may have afterwards. with that in mind, i would like to focus my attention on a small number of standout points in our annual accounts. let us first take a look at the bundesbank ’ s balance sheet for 2020. in a reflection of the bank ’ s monetary and foreign exchange policy operations, total assets grew considerably in 2020, expanding by €747 billion, or 42 %. not only is the growth rate potentially record - setting, but the figure of €2, 527 billion in total assets is €685 billion higher than the previous all - time high of €1, 842 billion reached in 2018. looking at the medium - term picture spanning the past five years, the bundesbank ’ s total assets are currently up by €1. 5 trillion, or 150 %, compared with five years ago ( end - 2015 ). on the assets side, the main reason for the increase in total assets in 2020 was lending related to monetary policy operations. this item recorded growth of €265. 6 billion, owing not least to the tltro - iii operations offered to credit institutions at particularly favourable terms since the end of june in response to the coronavirus crisis. however, holdings of euro - denominated securities resulting from purchases made under the monetary policy asset purchase programmes also expanded significantly, with growth of €221. 0 billion due, in particular, to the temporary pandemic emergency purchase programme, or pepp. liquidity inflows from other european countries were the third factor contributing to balance sheet growth, reflected in an increase of €240. 8 billion in the target2 claim on the ecb to a total of €1, 136. 0 billion. the target2 claim has thus risen by 27 % over the past 12 months. on the liabilities side of the balance sheet

human resources for eldercare. therefore, demand for low - skilled labour in advanced countries is expected to grow. this could result in more upward pressure on wages as well. goodhart and pradhan reasoned at the onset of the pandemic that the surge in inflation that would follow the pandemic would be more than a “ temporary blip ” and would mark “ the dividing line ” between the disinflationary forces of the last decades and the new regime. 5 up to now, there is no clear evidence to suggest that their conclusion is wrong. the economic impact of the russian invasion of ukraine is in part similar to that of the pandemic. looking at the international supply chains, we are again experiencing a massive supply shock, which might reinforce the tendencies sparked by the pandemic. furthermore, both shocks – the pandemic and the war in ukraine – are fostering deglobalisation tendencies and therefore directly undermining one of the major forces that goodhart and pradhan see behind the disinflationary pressure of the past. the uk weekly newspaper the economist recently called the war in ukraine “ the third big blow to globalisation in a decade ”. the first setback was former president donald trump ’ s trade wars. the second was the coronavirus pandemic, which briefly saw cross - border flows of capital, goods and people dry up almost completely. 5 the economist estimates that a retreat by the west to cold - war spheres of influence would be equivalent to writing off us $ 3 trillion of investment and thus lead to less efficient production, hurt living standards, and heat up inflation. history has taught us that turnarounds in inflation tendencies commonly occur when the authorities and economists are either not seeing the risks or denying them. a good example of this is the meeting of the federal open market committee in washington on 15 december 1964. the minutes from that meeting contain a series of interesting passages. one section reads : “ so far, the supply of labor has been adequate to meet expanding demands without any strong general upward pressure on prices. ” and another notable section states : “ with prices of industrial materials increasing little [... ] prices of finished goods have not been subject to pervasive upward cost pressures. ” 6 to sum up : inflation did not seem to be a problem. it was around that time that the great inflation era began, and it was to last for the next 17 years. this period led economists to re