The Nordic Ticking Time Bomb

Is America following a trajectory of decline like The Roman Empire? Glen W. Bowersock has remarked, “we have been obsessed with the fall: it has been valued as an archetype for every perceived decline, and, hence, as a symbol for our own fears.” That seems to describe the left’s thinking. They want to believe America is Rome 2.0 because the want America and the wealthy to have the same fate. The left obsesses over crisis and failure, waiting for the shoe that will never drop.

While everyone has their own anecdotal evidence of America being in decline, the preponderance of data suggests America is head and shoulders above the rest of the world in a wide variety of metrics, such as the size and resilience of our economy, military strength, ceaseless innovation, a tireless consumer, super-effective fed policy, political and societal stability, high living standards, insatiable demand for our currency, etc.

A common retort is that the Nordic countries and Canada have better healthcare, education and living standards; however, what is overlooked is that these are also very small countries relative to the U.S. and they also have incurred a lot of debt, rendering them vulnerable to a possible debt crisis. It’s easier for large economies such as the U.S. or Japan to run up a lot of debt than smaller economies such as Greece, Spain, Italy and Portugal (PIGS). Very large economies have reserve currency status, allowing the issuance of debt at low yields and little inflation. The advantage that the PIGS have is that they are part of the Eurozone, so the healthier countries such as Germany were able to bail them out. The Nordic countries don’t have such a lifeline, instead; they each have their own currency existing as independent sovereign entities. Presently, the Nordic countries have about 1/2 the debt-to-GDP ratio as the USA. More onerously, the household debt-to-GDP ratio for the Nordic countries is much higher than that of the U.S.:

From Bloomberg:

In Denmark, consumers owe their creditors 321 percent of disposable incomes, a world record that the Paris-based OECD said in November demands a policy response. In Sweden, debt by that measure is close to 180 percent, a level the government and central bank say can’t be allowed to rise. Norway’s central bank has struggled to find a policy mix that addresses its 200 percent private debt burden.

This debt is sustained by rising real estate prices, some of which is being used to pay for medical related expenses. This is because the universal healthcare of these countries tends to be of low quality with long waiting lists and citizens are opting for the better-run private alternatives.

All three Scandinavian nations have grappled with overheated housing markets since the global financial crisis started more than half a decade ago. In Denmark, a property boom that peaked in 2007 burst a year later. In Norway, the housing market is showing signs of deflating after prices doubled over the past decade. In Sweden, apartment prices have almost tripled nationwide since 2002, while house prices have more than doubled and are still rising.

So while the left never passes on the opportunity to anticipate America’s decline or to wax poetic about the alleged superiority of the Nordic economies, they ignore the potential storm clouds on the horizon.

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