Submitted by Thomas Kolbe,
Historically, the chemical industry has proven to be an excellent early indicator of severe economic downturns. Its present condition should serve as a warning: the climate-policy regime is at the beginning of its collapse. And Berlin’s fiscal bazooka—loaded with yet more debt—won’t change a thing.
Some readers will remember the bursting of the dot-com bubble in 2001. For five years, a relentless tech boom carried markets higher. The Nasdaq surged from one all-time high to the next in a frenzy that clouded the judgment of both institutional investors and retail traders. No one knew when the music would stop.
The Dot-Com Crash
But had investors aligned their behavior with developments in Germany’s chemical industry, they might have avoided the inevitable portfolio disaster. By mid-2000, chemical output in Germany had already fallen by six percent—a bad omen for the real economy, because chemicals are an early reflection of what is happening in the core industrial sectors: machinery, automotive, construction, and consumer goods.
Its deep integration into the value chains of the real economy makes the chemical industry a crystal ball with exceptional predictive sharpness.
And indeed, the following year the German economy drifted into recession. The U.S. economy weakened as well, immediately hurting German chemical exports. With the broader economy faltering, the stock-market dream evaporated. One pinprick, and everything collapsed. The blow struck directly at millions of small investors who paid their tuition for their first market “education” the hard way.
Markets are driven not only by sentiment but by productivity trends and money-supply dynamics. In the short run, they are expressions of liquidity conditions and mirror the credit cycle.
A Recession After Reunification
Let’s travel back another ten years—to late 1991, early 1992. The euphoria of German reunification had reached its preliminary economic peak. Government stimulus programs pumped credit into the construction sector, pushing money into inefficient, unnecessary infrastructure. An artificial post-reunification boom set in—only to be hit with its first major shock shortly thereafter.
At the turn of the year, Germany’s chemical industry slid into a sectoral recession and lost around seven percent of its real production volume over the next eighteen months. Once again, the chemical sector’s predictive power proved accurate: barely six months later, the overall economy followed it into recession.
Some 1.5 million people lost their jobs; GDP shrank 0.8 percent—and in 1994, markets slumped again.
Markets reacted to drastic tightening by the Federal Reserve, which attempted to rein in runaway inflation by squeezing liquidity. It marked the end of the business cycle—one that the chemical sector had correctly anticipated, once again, with lead time.
Recession or Structural Break?
After each downturn, Germany’s chemical sector reemerged more innovative and more export-competitive. It shed dysfunctional segments during recessions and then grew like a snake shedding its skin.
Both crises can also be read as monetary-policy phenomena. Centrally planned credit costs—set through interest-rate policy—created mild boom-bust cycles, a systemic flaw within an otherwise market-oriented system that could still absorb such central-bank interventions.
Which brings us to the present: Are we still following a classic business cycle—or have we already witnessed a structural break? The facts are clear. Since 2018, it is not only the chemical sector that has been collapsing. The entire foundation of industrial production appears to have cracked. Across all sectors, output is roughly 20 percent below 2018 levels.
Nothing in the current environment suggests this will change. No amount of artificial government credit can fill the gaping void in Germany’s industrial base—not through weapons contracts, not through subsidized green-sector patronage.
Green Tribute
Germany has entered an era of deindustrialization due to catastrophic political decisions. The numbers are unambiguous, even if corporate leaders such as BASF CEO Markus Kamieth refuse to say it openly—dependency on the state’s subsidy machinery trumps any notion of responsibility inside today’s corporate bureaucracy.
In Berlin, Brussels, Paris, and London, a corporatist mindset has taken hold. Political elites became intoxicated by the subsidy bonanza surrounding the Green Deal—an entire hallucinated green transformation built on CO₂ narratives and dumped onto taxpayers.
The continued decline of the chemical sector shows that industrial production in Germany is no longer viable under current conditions. Central-planning energy-market design generates costs that drive companies out of the country. Germany lost €64.5 billion in direct investment last year alone; this year, the figure will likely exceed €100 billion.
German society is impoverishing in fast-forward because its political class refuses to understand that industrial production is the true source of societal wealth—and because it remains convinced that a centrally planned artificial economy can replace productive enterprise.
Everything that depends on industry—complex value chains, services, suppliers, high-income jobs, even the bloated state budget—lives off the innovative strength and productive capacity of a free industrial sector.
Political Camouflage
If Germany’s green “degrowth chancellor” Friedrich Merz and his entourage now make cautious adjustments to the climate-socialist regime—floating a new EV subsidy, tying industrial electricity prices to “eco-investments”—this is nothing more than political camouflage. Policymakers are fighting desperately to preserve the green course. Merz is essentially an “autopen” of the Merkel-Scholz era—a green central planner in borrowed conservative clothes whose flock is abandoning him.
We are witnessing nothing less than a civilizational rupture—and the rise of a climate-socialist regime already lying in economic ruins before its architects could even reap an illusionary harvest.
The political response to rising criticism has been predictable and pathetic: repression, censorship, and intimidation—an admission of failure in the assault on personal liberty.
Markets should brace for high volatility, because Berlin and Brussels are tying their political survival to massive new debt issuance and an accelerating nationalization of the credit process.
The ongoing collapse of the chemical sector signals a political crisis—one that will not end until this new socialist experiment has completely failed. Until then, the German people will have to navigate an accelerating spiral of impoverishment.
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