A euro collapse is inevitable
Well then, Happy New Year: Markus Krall predicts that the global economy will crash in the third or fourth quarter of 2020. Only after his prediction comes the recession, then the banks tip over, prices plummet, the central banks counter it with even more money, which leads to high inflation and finally to the collapse of the financial system.
For Marc Friedrich it will come by 2023 at the latest, the "greatest crash of all time". "We are in the monetary endgame," he said recently on Maybrit Illner's talk show, citing the example of Zimbabwe, where banknotes say 100 million. There are simply too many indicators: the rich are getting richer and richer, normal citizens are creeping into expropriation, and zombie companies are kept alive with low interest rates.
The economy in Germany is weakening towards the end of the year, only one industry is growing: that of the crash prophets who predict the downfall of the economy. Their names are Krall and Friedrich, Matthias Weik, Dirk Müller or Max Otte. Her books have titles such as "The greatest crash of all time", "World system crash", "The Draghi crash" or simply: "The crash is here". In the bestseller lists, three such titles recently appeared in the top ten. They were lying en masse under the Christmas trees as gifts. The prophets are heard. Your posts on Youtube are clicked hundreds of thousands of times. They tinker through talk shows, discuss with serious economists and leave a thoughtful audience behind.
Why is crash literature so popular right now? Is there perhaps even something to the prophecies of the economic end? Doesn't everything inevitably have to collapse at some point when central banks cover up the problems with more and more money? It's time to crash test the crash prophets.
Nikolaus Braun is a fee-based investment advisor in Munich. He is currently registering a wave of uncertainty among investors. Before Christmas, a woman came to him who wanted to keep her money safe and had just invested everything in gold and Swiss stocks. "It's like 2011 at the height of the euro crisis," says Braun. He sees the mix of political and economic risks as the cause: trade conflicts, Brexit, economic weakness, negative interest rates. "Disaster scenarios fall on fertile ground in this climate."
"The diagnosis is correct, the conclusions are wrong."
The books are all structured in a similar way: First, the authors describe economic imbalances that actually exist. The glut of money from the central banks, Italy's indebtedness and the design flaws of the euro play a central role. Added to this are the vulnerability of European banks, illegal immigration, the growing gap between rich and poor, and climate catastrophe. The authors let the problems grow in the future. From this finally follows the great collapse. Anyone who reads the books feels overwhelmed by such inevitability in the end.
"The catch is that the problems in an otherwise static system grow dynamically," says the Munich fund manager Andreas Beck, who has dealt a lot with the doom scenarios. The authors selected data unilaterally, overinterpreted them and always assumed that politics and business cannot influence it. Therefore the problems escalate. "The diagnosis is correct, the conclusions are wrong," says Beck.
The theses follow a pattern: The ECB's policy is destroying our prosperity, debt is destroying the economic sustainability of our states, wrong migration policy is destroying our liberal society. There is always an evil one, the normal citizen is always the victim. And in between the prophet as a lonely caller in the desert. But salvation is near: the crash destroys the corrupt elite, followed by a golden age.
"The authors have neither the competence, nor special data, nor special possibilities of interpretation to make such theses," says fund manager Beck. Marcel Fratzscher, head of the German Institute for Economic Research, accused Friedrich of crashes in Illner's talk show "Demagogy and Black Painting", his theses lacking any scientific basis.
An example: Crash prophets often scourge the ECB because they pimp "the Italians" with the low interest rates and expropriate "the German savers". They hide how much the export nation Germany benefits from the euro and how unpopular the central bank is in Italy because it imposes strict conditions on the country.
Another example: Krall assumes that the German banks will collapse because 15 percent of all companies are de facto insolvent. He cites a study by the Bank for International Settlements, according to which the number of zombie companies writing losses for three years in a row has risen from two to 15 percent within 20 years. However, the study only takes into account listed non-financial companies - 0.5 percent of all companies. The KfW SME Panel, which looks at almost 100 percent of all companies, comes to a different conclusion: the return on sales and equity ratio have increased significantly, while losses have decreased.
Some also offer funds, they are traveling salesmen on their own behalf
And then there is another problem of credibility: The prophets give readers tips on how to escape the impending crash. As a rule, it boils down to taking the money from the bank and investing it in real assets: in stocks, gold, also in vintage cars or Bitcoin. Müller, Friedrich / Weik and Otte also manage their own funds and advertise them. Your crash prophecies are a business model. "They are business travelers on their own behalf," says Ali Masarwah of the Morningstar fund rating agency. That fundamentally calls into question their qualifications as saviors of the investor community.
What does honorary advisor Nikolaus Braun do when a concerned citizen comes to him and wants to reallocate all of his assets? "We always point out to our customers that at some point they will experience phases in the capital market in which they will lose money," he says. Corrections and crashes are inevitable in a capitalist economic order. Nobody has a mechanism to foresee this. But: As long as the market economy works, things will pick up again after slumps, and in the long term the customer will benefit.
In the case of the prophets, however, skepticism towards the market economy often resonates. Her tone is illiberal, there is a proximity to right-wing populism and conspiracy theories, and sometimes also to nationalism. They appeal to people with a pessimistic view of the world.
Braun has seen many people who "tore their own fortunes out of fear of a crash". They bet on gold or falling stock prices and missed the stock market boom that has been going on for ten years. Anyone who believes in the downfall is easy to forget the topmost principle of investing: to distribute your assets across many asset classes and regions.
The prophets like to formulate in superlatives. "Interest rates will never rise again," say Friedrich and Weik. Since 2008 there has been "a historical turning point, the greatest in 100 years". Honorary advisor Braun finds such sentences downright obscene: "Don't they know what was going on in Germany in the 1940s?"
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