Corona Crisis: Markus Krall on “legalised balance sheet fraud”

In the Corona crisis, accounting fraud becomes “official”. It is only a matter of time before accounting fraud is legalized, says Markus Krall

Before the Corona crisis, hardly anyone would have thought it possible how quickly and fundamentally elementary principles of our commercial law were overthrown. Markus Krall speaks of the introduction of “legalised balance sheet fraud” in view of the leveraging of previously existing basic principles. For example, the temporary abolition of the obligation to file for insolvency. Before the Corona crisis, the delay in filing for insolvency was a criminal offence punishable by up to three years’ imprisonment.

Default tsunami

At present already about 30% of the loans are not being serviced. Millions of tenants are currently not paying their rent, says Markus Krall. And for the european banks, which have already been hit hard enough, this is another tsunami. Although banks in Germany, for example, are able to grant loans without risk in the Corona crisis because the state-owned KfW is liable for these loans as a subordinate creditor. (Which means nothing other than that KfW, and thus the German state, is virtually at the end of the queue when it comes to the question of who will still receive payments from a “residual mass” as a creditor). But this is only delaying the decline of retail banks without stopping it in the long term.

In order to save the banks, banking supervision will not be able to get around anything more than allowing banks to no longer book defaulted loans on their balance sheets, says Markus Krall. In and with the Corona crisis, balance sheet fraud will thus become “official”. It is only a matter of time before the bank supervisory authority will publicly announce this very balance sheet fraud.

Zombie banks?

As is well known, Markus Krall’s forecast of a near-term bank collapse was widely dismissed. But with and through the Corona crisis, his scenario is rapidly gaining in probability. However, since a collapse of large banks is not tolerable for politicians and supervisors, these banks will continue to be supported as zombies by banking supervision, central banks and politics. How? By money printed again and again. But will this be a “buy-in”? Will account balances be converted by forcing account holders to become shareholders in the bank? Or will there be a “buy-out“?

So what is in store for us in the context of the Corona crisis? When will deflation turn into inflation? Markus Krall’s statements on this subject in the following (german) interview:

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