German Also Warns Crash On Way

Published / Last Updated on 11/10/2017

Germany Expat Financial AdviceGerman Also Warns Crash On Way.

Yet another warning of the severe risk of economic crash.

In leaving his position as German Finance Minister, after the German election, Wolfgang Schaeuble, has warned that debt is out of control yet again across the globe, with the risk of another ‘credit crunch crisis’.

We have continually warned that central banks cannot keep ‘printing money’ with quantitative easing, i.e. buying back government ‘debt’ (bonds and gilts), releasing money electronically into the economy (we assume they simply ‘printed’ it i.e. made it up) and now with the risk of not just inflation, but a financial bubble that will burst.

The European Central Bank (ECB) continues to pump €60bn a month into the European economy to bolster it.  To try and stimulate it, and what do we see European stock market rises.  The ECB meets again this month to decide whether to continue the policy.  Some are suggesting they may continue with QE beyond December 2017 and on until 2019.  All this means is that banks have more money and what do they do?  They lend it out to earn money.  The reality though is that it could all go ‘toxic’ as a lot of the debt is unsecured.    We are talking €TRILLIONS!

Credit is booming and whilst 10 years ago, it was toxic mortgage debt, where debts went bad, today it is not even secured on property.

  • The UK did the same, during the credit crunch crisis and then even more QE after the Brexit vote.  That’s £435bn of fake (in our opinion) additionally printed money floating around the economy.
  • The US did the same with €4.5trn (that’s trillion dollars) as at October 2017, but has now started to unwind that by $10bn a month.
  • Japan did it again in the equivalent of trillions of dollars.
  • China has huge debts at $28 trillion.  India is also starting to appear on the horizon.

Required Result: stimulate the economy, inflation goes back to normal levels, interest rates move back to normal.

Actual result:  Banking groups are hugely exposed to toxic debt across the globe and we fear for the future.  The risk is not just US and European debt as it was 10 years, it is now a real global problem that could trigger a collapse, and that is what Mr Schaeuble is warning about, adding to the warnings from the IMF and the World Economic Forum.

Warnings were around in 2007 and ignored before the 2008 crash, they are here again.