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Related Categories: International | Labor & Workers
The big crash just isn't heating the stark markets
by Urs P. Gasche
Thursday Aug 19th, 2021 1:39 PM
The author reminds us that "never in history has a crisis been solved by printing money." The states and central banks had "maneuvered themselves into a dead end from which they can no longer get out" through their own fault. For now it would no longer be possible to overcome future recessions and financial crises with financial injections.
The big crash isn't just hitting the stock markets © recentr
"Coming global economic crisis will be worse than the one in 1929"
By Urs P. Gasche
Financial expert Marc Friedrich sees the future as bleak. But his latest book is called "The Greatest Opportunity Ever."
[This article published on 8/11/2021 is translated from the German on the Internet, www,infosperber.ch.]

The coming collapse of the financial and global economy will shift existing fortunes "as never before in the history of mankind." The Corona epidemic could serve as an accelerant. The "cleansing thunderstorm" is to be expected "by 2023 at the latest," predicts Friedrich, who has been warning of the "biggest crash of all time" for years.

Friedrich sees the rapid accumulation of debt by the central banks of the U.S. and the EU with their monthly purchases of government and corporate bonds in the billions and billions of euros as an alarm sign. Global debt, meanwhile, would exceed global gross domestic product by 360 percent.

The author reminds us that "never in history has a crisis been solved by printing money."

The states and central banks had "maneuvered themselves into a dead end from which they can no longer get out" through their own fault. For now it would no longer be possible to overcome future recessions and financial crises with financial injections and changes in interest rates. With each crisis, the firepower and efficiency of the central banks' stimulus packages and purchase programs would diminish. We had reached a "lethal overdose" of these measures. In parallel, the collateral damage associated with the measures would increase.

The central banks' flood of liquidity has driven up stock and real estate prices, even though the global economy in 2020 has never collapsed so much since World War II (minus 3.5 percent): "Never before have the countries of the world had to dig deeper into their pockets to stimulate the economy. The fact that this flood of money does not lead to inflation is a deception of the public. The consumer price index does not take into account the enormous inflation in stock, land and real estate prices driven by the money supply. Friedrich estimates that the "true inflation" in Germany in 2020 will be "almost 14 percent - contrary to the officially communicated consumer price index of 0.3 percent" [in July 2021, the annual inflation rate in Germany rose to 3.8 percent].

People need to understand that you can't have a little inflation, because a little inflation always leads to more inflation, and higher inflation inevitably leads to even higher inflation.

Friedrich August von Hayek, Austrian economist, 1899-1992

Wrong signals from the stock markets

Stock markets had been booming before 1929 and had not signaled a catastrophe. If today's rising stock market prices rise to even higher heights, Friedrich is convinced that this does not mean at all that the crisis is over and the basic problems have been solved: "Quite the opposite: Then the crash will come even more forcefully with even more collateral damage in one to two years. My forecast is that the cleansing storm will come in 2023 at the latest. By then, the crash will be here." Because we've been doing nothing but economic damage limitation for a long time now, and because we keep raising the bar, the crash will be all the more severe: "The coming crisis will be worse than the banking crisis of 2008 and also worse than the great crash of 1929."

Marc Friedrich no longer gives the prevailing economic system a chance:

"We are heading for the abyss at full throttle. Even if we were to do a full brake now, it would be too late ... We will experience a global depression, because no country is immune from the crisis ... Civilizations and empires always come to an end. That's the way of things and a natural, recurring cycle."

The growth imperative as the main problem

Friedrich sees the core of the problem in the fact that the current economic and monetary system is "highly dependent on growth." This growth, he says, is only possible through ever new debt with new money. Furthermore, according to Friedrich, economic growth is also dependent on the population constantly increasing: "Without population growth, there is no economic growth." In Japan, where the number of inhabitants has been declining for some time, stagflation has prevailed for years.

Because further economic growth cannot stop the debt spiral, and because the accumulated debt can never be reduced and repaid, Friedrich sees only three scenarios for the future:

A big inflation;
A debt cancellation by means of currency devaluations or a currency reform;
A war.

"You can now choose what you think will be the most likely solution and prepare accordingly," Friedrich says. He himself expects a mixture of inflation and debt cancellation. The Bible already called for a Sabbatical year (year of remission or jubilee) to be declared every seventh year. After 49 years, the debts were completely cancelled so as not to burden the next generation.

In 2013, Greece had a debt cut to bring its debt down from 160 percent of GDP to 120 percent. But currently Greece has more debt again than before the cancellation, because the monetary system has not been changed. Because of a lack of tourists and the lockdown, experts would expect Greece's national debt to exceed 200 percent of GDP.

New backed money thanks to blockchain technology
"Friedrich sees the basic evil" in "our wrongly designed and destructive monetary system." The creation of money out of nothing leads to ever new speculative bubbles, he said. That's why we need a "new, fair and secure monetary system, preferably decentralized and neither in the hands of politicians nor in the hands of an unelected central bank. The next monetary system will be digital - blockchain technology is "just about ideal" for this, he said.

Taxes without receipts
Friedrich also advocates a "simple and understandable tax system" that would save "thousands of jobs" of tax officials and tax consultants and a rat's tail of additional costs. In the future, wages and incomes should no longer be taxed, but only consumption should be taxed with a kind of flat tax for the poor and the rich: This consumption tax or value-added tax would be paid at every checkout. No one would have to collect receipts anymore. The tax return would thus be submitted practically at the cash register. The amount could take into account "how essential, healthy and sustainable a product is, where it comes from and so on." The environmental footprint could be captured in prices.

Micro tax instead of consumption tax
An alternative that would be just as simple and unbureaucratic as the consumption tax proposed here would be a microtax on all electronic payment transactions. It would also replace the value-added tax and relieve low incomes. A micro-tax would also cover the huge money flows of the financial world, such as high-frequency trading and derivatives transactions, which is not the case with a consumption tax.
Signatures are currently being collected for a corresponding popular initiative in Switzerland.

You can find all about the micro tax in the Infosperber DOSSIER "Micro tax on all money flows".

Crisis as a driver of change
According to Friedrich, only the coming crash will make us realize what is wrong and what is right. The crisis will become the "beginning of overdue changes for the better." For a long time, he says, we "only functioned like machines, like slaves, some of them excellently fed. Whether in Zurich or Stuttgart, "people are dying of diseases of civilization or stress, such as diabetes, heart attacks, cancer, depression and burnout." The wrong lifestyle starts with nutrition, he said. But physical and mental health is "the most important material asset we have."

The crisis relentlessly reveals that we have "exploited the world and ruined the environment just so that a few ... can get richer and richer and a few people can earn more and more money and put their feet on the table at the expense of the masses."

After the crisis, Friedrich prophesies "a golden age not only in terms of prosperity and society, but also humanly and spiritually." For now, however, Friedrich, who works as an investment advisor for private investors and companies, "urgently" advises people to "take a close look at their finances." Everyone should ask themselves whether the insurance policies, the paper assets or the portfolio still make sense.

Marc Friedrich: "The greatest opportunity of all time", FinanzBuchVerlag Munich, 2021, 25.50 CHF or 22 euros.

From the blurb:
"Economy, politics, work, society. Nothing will remain as it is or was recently. We are facing great upheavals and the greatest transfer of wealth in the history of mankind. The Corona pandemic is not the cause of the current crisis, but merely an accelerant. The real causes lie much deeper. We are in a cycle change.
We must not forget that crises are essential for humanity to progress. Only through a catharsis is man ready to initiate necessary changes. Crises are therefore also opportunities: now fortunes are made or destroyed for generations."
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