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September 9, 2017 | Sweden’s Economy ‘Appears’ Strong…but is it?

Donald B. Swenson: Born January 24, 1943, Roseau, Minnesota. Graduated H.S. 1961, Moorhead High, Minnesota. Graduated College 1968, Moorhead State University, Minnesota. Designated member of Appraisal Institute (MAI), 1974. Employed with Western Life Insurance Company, 1968 – 71; Iowa Securities Company, 1971 – 73; American Appraisal Company, 1974 – 81. Part-time teacher/valuation consultant/bartender, 1979 – 2008 (taught workshops at Waukesha County Technical Institute, Wi. and Madison Area Technical College, Wi.). Retired 2008 (part time teacher/blogger), AZ. Self educated economist/philosopher/theologian:

Image result for sweden map

On the surface it ‘appears’ that Sweden’s economy is strong and growing at record levels. I have been traveling all over Sweden for the past 30 days. I see no real problems with spending, prices, and the general welfare of most people in Sweden (as of today). So, on the surface, all ‘appears’ good. But I do notice some underlying issues that could surface quickly to reverse this ‘appearance’. A growth rate of 4% is projected by most Swedish economists for 2017. This leads most of Europe and reveals that most everyone sees no serious problems on the horizon. So what could be the ‘black swan’ that changes this ‘appearance’ of growth and strength?

Like most Western countries, Sweden has a household debt problem that is growing and is out of control. Household debt in Sweden has increased substantially in recent years as the Riksbank has attempted to lower interest rates (now to a negative 0.35%). Borrowing for real estate properties has been especially heavy and house prices have increased at 10 to 15% annually these past 10 years. Stockholm has prices exceeding 100,000 krona/square meter of space and this means a growing percentage of home buyers are now priced out of the markets. Can this continue into 2018 and after?

Debt and a growing lack of increasing income for most households is now the problem. I see cranes everywhere in Stockholm, Malmo, and Gothenburg and this means that construction is strong at the ‘moment’. The policy of the Riksbank to lower interest rates into a negative realm has allowed all this price appreciation in real estate to occur. The policymakers recognize the problem (it seems) yet they continue with their QE policies and negative interest rates. This has reached a threshold level which will soon be reflected in a slow down and then a consumer recession in 2018.

The immigrant situation has been absorbed for the moment also. Current polices are allowing immigrants to assimilate and/or set-up their own colonies within the Swedish State. This was obvious in the three biggest cities of Stockholm, Gothenburg, and Malmo. I also noticed that at nearly every Maxi and Willy’s (Sweden’s supermarkets for food, etc.) there were immigrants panhandling for pengar (money). It appears that immigrants from Bulgaria and Romania are mostly involved in this scheme. So, overall, I sense that few Swedes are complaining about their situation at the moment.

The policies of the Riksbank, however, will eventually surface and reveal that Swedish household debt is unsustainable. When this becomes a real issue is when the slowdown and reversal of trend happens. When will the Riksbank’s policies change from accommodation and excess to caution and higher rates? I sense that a threshold level of household debt is near. Negative interest rates must eventually be reversed. Higher rates will be the ‘black swan’ for Sweden. This trend change is likely to happen in 2018. So beware Sweden. All is well at the ‘moment’ but this could all change in a few months. Reality continues in spite of current optimism. Enjoy today! I am:

Some additional images for your consideration:

Image result for stockholm real estate prices

Image result for stockholm real estate prices

Image result for stockholm real estate prices

Image result for stockholm real estate prices

Image result for stockholm real estate prices

I noticed that the desire to SELL real estate and commercial properties is growing among my Swedish friends and relatives. These Swedes appear to recognize that now is the time to sell prior to the coming recession/slowdown. Prices are near the top or at the top and anyone with understanding should realize that the negative interest rate market will reserve eventually. Watch the policies of the Riksbank. My sense is that Sweden is in a bubble within real estate and also within household debt. This means a slowdown/recession is near (say 2018). 

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September 9th, 2017

Posted In: Kingdom Economics

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