Malik's prognosis on the crisis since 1992

Malik emphasized the unique and biggest misallocation of economic and human resources in history due to the US management approach long before the subject became accute. He already published about the danger of the building crisis based on the single-minded orientation on financial figures and shareholder value back in the early 1990s - against all mainstream opinions.


In the following you will find Malik's prognosis for the crisis in a chronological order as well as occurences of the crisis that came true - as it was prognosed.

 

Malik's prognosis on the crisis since 1998

Malik emphasized the unique and biggest misallocation of economic and human resources in history due to the US management approach long before the subject became accute. He already published about the danger of the building crisis based on the single-minded orientation on financial figures and shareholder value back in the early 1990s - against all mainstream opinions.

 

Because of that, he has been developing tailor-made solutions to the challenges of the crises since the 1990s, that have been applied more than 500 times and guarantee new dimensions of functioning. 

Close all

03/2013 Malik Letter:   "Situation assessment 2013"

"Is the crisis over? It depends on your definition. Trillions of dollars of economic programs have bought policymakers some time. Unfortunately, the time has been largely wasted trying to repair the old systems instead of instituting fundamental reforms. Debt and liabilities have continued to mount. The economic debt crisis, in other words, is far from being under control. It may culminate in one of history’s greatest social catastrophes."

Read more in the Malik Letter

10/2012 Malik Letter:   "How the economic scenario has developed since"

In this letter, readers will discover a scenario that Prof. Fredmund Malik introduced in his management letter back in 2004, the core substance of which was also presented in his book Management – Das A & O des Handwerks ("Management – The Essence of the Trade"), which was published by FAZ-Verlag in 2005. For most executives, the scenario illustrated was completely unimaginable at the time it was published. Today, however, most of his prognoses depicted back then are already reality.

Read more in the Malik Letter

07/2012 Malik Letter:   "Deflation is gaining pace"

In this edition of the Malik letters, Prof. Fredmund Malik highlights some of the key facts from the first six months of the year that illustrate how wrongly today's economy assessed the crisis from the beginning and what the situation actually is.

His deflationary scenario is in full swing and is intensifying. The then relevant EU resolutions also did not bring about any considerable change, despite the fact that they were once again heralded as a clean break. In the short term, the financial markets responded positively before drifting back more dramatically than before. All crisis summits have seen resolutions passed that were lauded as the ultimate solutions. Not once has this actually been the case.

Malik highlights a selection of developments that have occurred since his assessment of the situation in January 2012 to illustrate how the current situation confirms his scenario. As a result, it is also becoming increasingly evident how alarmingly most economists have underestimated and misjudged the situation since 2008, and indeed long before then. However, it also illustrates the effectiveness of the new economic theory of ownership developed by two professors of economics, Gunnar Heinsohn and Otto Steiger, which dates back to the early 1980s.

Read more in the Malik Letter

02/2012 Malik Letter:   "Situation assessment 2012"

"Only radical, revolutionary new methods and tools can slow the fated course of the crisis, halt it and, to a large degree, even shift it around. Through the immense innovative power of our macro-change methods – the Syntegration process – and the ability of our management systems to realize the changes, a new and better world will be brought about soon enough to ward off the economic and social meltdown. Every week our revolutionary social technologies empower businesses and public organizations to function in a new and intelligent way. Anyone who holds back the application of these new methods and clings to old ways of thinking is like a physician who would let his patients die rather than give them the best in innovative therapies."

Read more in the Malik Letter

03/2011 Malik Letter:   "The Great Transformation21"

The direct financial and economic dimensions of the Great Transformation cannot be overestimated in terms of their significance and risk potential. They will shape events for many years because the most difficult phases of the crisis are not behind us, as most people seem to believe and as is reinforced by the media. On the contrary, the truly large turbulence is still ahead of us. But that will not lead to inflation, as most people fear. Rather, it will lead to one of the most severe deflations in history if only traditional economic means continue to be employed. The often drastic government austerity programs alone have a deflationary, economy-strangling effect.

Read more in the Malik Letter

12/2009 Malik Interview:   "Asia Talk"

In this video interview with Asia Talk, Beijing, Malik talks about the crisis in the US, in Europe and in China, clarifies why the crisis is proceeding so differently in the regions and why it is far from over. He recognizes the dangers of a debt maelstrom and deflation.

Correct: Media coverage:

 

Watch the interview

09/2009 Malik Letter:   "Crisis and change Part 1"

The crisis is not only a financial crisis, rather far more a crisis of management systems and methods. Business and society are going through one of the greatest transformations there has ever been historically. The "Great Transformation 21" can stretch over several years or it can happen very quickly. Only at the outset will it be about "the crisis", such as we understand it today. In the depths of society more is happening than at the surface. Malik recommends working from the assumption that an Old World is coming to an end, because a New World wants to come about – just like the caterpillar succumbs during metamorphosis because a butterfly wants to see the light of day. The crisis is the birth pains of the New World.

Read more in the Malik Letter

06/2009 Malik Letter:   "Fourfold Knowledge Equals Clarity"

In his 2009 Letter Malik warns of deflation. Is there going to be deflation? No, says Malik, deflation is not on the way: we are already in the middle of it. Deflation is in full swing, and it will last for as long as it takes to resolve the debt problem.

Correct: Today, we are experiencing recession and strong deflationary signals.

 

Read more in the Malik Letter

05/2009 Malik Letter:   "Global financial crisis – why?"

Prof. Dr. Gunnar Heinsohn shows why, despite zero interest rates, many companies will have to face bankruptcy before and after the crisis:

 

"In this crisis, ignorance of the economic system has lead to shots in the dark. In pure trial-and-error acts, immense amounts are dumped on insolvent banks that are unable to grant loans to enterprises because they cannot take on debt due to the loss of collateral. Even the choice of the lesser evil is only possible if the system is understood. In view of the lack of corporate collateral, what else can be done?

 

After the fundamentally correct state insurance of bank deposits, these banks should have been abandoned to their fate and a good bank should have been established alongside them using part of the hundreds of billions of government securities. Equity of 100 billion enables the build-up of claims worth 1 trillion against debtors. Such a new bank should have recruited the most talented experts from the failed institutions and started working for companies that need to invest in innovations to defend their property and that are even able to provide collateral. This approach is by no means unheard of. After all, more than 80 new banks have been established in the USA since 2008 whose main advantage is that they can serve their customers without toxic credits and marked down purchases."

 

Together with his late colleague, Professor Dr. Otto Steiger who passed away in 2008, Professor Dr. Dr. Gunnar Heinsohn created a radically new and revolutionary economic theory which is based on the possibility of lending money on private property - the so-called property economics. To this day, it is the only theory which explains economic activity in the true sense of the word. In selected Malik Lettes Prof. Heinsohn und Steiger show ways out of the crisis - their economic theory together with the Malik Systems® and Tools are the solution.

Read more in the Malik Letter

02/2009 Malik Letter:   "Situation assessment and prospects 2009"

Bail-outs for banks: whisky for alcoholics to stop the shakes. Immobilization is indeed correct as a prerequisite for genuine assistance, but there is as yet no sign of this genuine assistance. Without cybernetic systems that do for management what they do for technology in every organization, there will be a social catastrophe. Many of today's organizations are like paraplegics. The head thinks and the will decides. But the body cannot carry anything out.

Read more in the Malik Letter

04/2008 Malik Letter:  "The financial system and the dynamics of debt"

One of the biggest mistakes in evaluating the situation on the financial markets is the assumption that the stock price is in any way an indication of a company's real performance. The two are almost entirely unrelated. The economy can only be understood from the perspective of debt. Debt is the core problem, not declining prices. If the value of a collateralized asset is no longer sufficient to secure outstanding debt, the bank is entitled to demand additional security. This is specified by the clauses governing additional security and additional payments in the credit agreements. In order to withstand inherent difficulties, liquidity is necessary, namely money in the sense of cash.

Read more in the Malik Letter

08/2007 Malik Video:   "Interview with 'Meet the Economist', Shanghai"

In the interview, Malik emphasizes the danger that emanates from spreading the shareholder value concept. For Malik, it is certain: there is no shortage of capital. But there is a shortage of customers. Those with satisfied customers will also find shareholders. The same is not true in reverse. Malik thus advises focusing on customer value. He recommends differentiating between corporate capitalism and financial capitalism.

Watch the interview

 

06/2005 Business Week:   "A "Third Way" for Germany"

Malik espouses a new approach. About the "third way" he believes is more appropriate for European companies: "'blindly adopting' American models won't work". The debate about capitalism was preprogrammed. It was unavoidable that corporate governance based on shareholder value would lead to a backlash, to class conflict, and new militancy by labor unions. It's not just partisan tactics. The economy as portrayed by the media provokes deep feelings among the public about justice and decency and plain manners. The market system is a miserable system, brutal, ruthless, but all the other systems are worse. We also have to combat exorbitant pay for managers, and private equity should be more transparent. Reform should come from companies, which requires civil courage. It's time the business community made itself understandable to the public. They have completely failed so far. People are afraid of what they don't understand".

Read the article

03/2004 Malik Letter:   "Economic Situation Part 2"

In this 2004 Letter, Malik believes that America is the central point of imminent crises. The reason for this is the structural weaknesses of the US economy that have emerged over recent years. These are a result of the undesirable developments in economic policy and management, namely massively overvalued assets, the highest total indebtedness in the post-war era, grotesque dependence on consumption financed by credit, the lowest savings rate, the lowest net investment level of the post-war period, the greatest trade deficit, rapidly increasing foreign indebtedness, poor company results, the lowest profitability of the post-war period, rapidly rising unemployment, and a monstrously leveraged financial system.

 

"Wealth theory is based on the belief that for all eternity stock exchanges will only rise without suffering any appreciable reverses or – if a bubble bursts – that again and again there will be new speculative bubbles in a different sector of the economy that will produce high collateral values; after the shares bubble it was the bubble in bonds, and the latest speculative bubble is in US real estate and in the related refinancing and credit expansion."

 

Correct: In September 2008 the real estate bubble, that had been building in the US, burst causing the stock markets to crash

Read more in the Malik Letter

03/2004 Malik Letter:   "Economic Situation Part 1"

Back in 2004, the majority consensus considered the US economy to be healthy and strong and believes that it is far superior to all other economies. Malik considered this perception to be false and fatally deceptive, for two reasons: first, the published US numbers were wrong. Second, remarkably, no comparison was made to the progression of previous recessions and recoveries. If this had been done, one would've seen that the recovery up until that point had been disconcertingly weak. Third, and most importantly, the US economy had profound structural weaknesses that emerged during the years of undesirable development, through erroneous management and wrong economic policy.

 

Correct: Economist confirms Malik: US is polishing its balance sheet

 

Read more in the Malik Letter

09/2002 Business Week:   "Europe: The road to reform peters out "

In Business Week, Malik's critique of America is cited: "America is certainly no longer a role model and shouldn't have been in the 1990s." Read the article

09/2002 Malik Letter:  "Germany"

In the Malik Letter "Germany - Healthier than people might think" Fredmund Malik is of the opinion that as a matter of principle everyone should know how brittle the US economy is. People are spending money and consuming excessively - thinking the economy has entered another bull market after the last crisis. This leads to dangerous bubbles - and debt, one of the core reasons for the crisis.

 

Correct: People can't default on their piling debts in America, causing foreclosures in the real estate market. Multimedia series from the New York Times with articles on the subject "The Debt Trap" from 2008 and 2009 here.

 

Read more in the Malik Letter

01/2001 Malik Letter:  "Appearance and reality"

Uncertainty on the stock markets is increasing. The stock markets now reveal quite drastically how hollow the majority of the New Economy companies are. In reality, however, the problem is in no way only or primarily a problem of the New Economy. The so-called American economic miracle is an illusionary miracle. What really drove the financial economy in the latter half of the 1990s and triggered the stock market surges were neither real productivity gains, nor real profits or real growth. The illusions were what determined the actions of so-called investors. As unreal as the factors in the spotlight are, the more real is the actual significant driving force, namely debt. Read more in the Malik Letter

Close all