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Could Europe be Saved the Swedish way?
Chart Englund.
As Europe’s Economy is falling, and several countries basically are bankrupt, an effect by taking on too much debt, while the Economy abruptly slowed, why not take a look at how Sweden solved the Banking Crisis in the early 90?s. Sweden, now the Tiger of Europe, dealt with the Banking Crisis in a very organized and effective fashion. The Swedish way has a lot to teach the politicians of Europe, who give us conflicting messages on a daily basis. Below a great summary of the Swedish Crisis, what caused it and how Sweden solved it, and became one of the most healthy Economies of the World.
By Peter Englund;
The article analyses the Swedish banking crisis in the early 1990s. Newly deregulated credit markets after 1985 stimulated a competitive process between financial institutions where expansion was given priority. Combined with an expansive macro policy, this contributed to an asset price boom. The subsequent crisis resulted from a highly leveraged private sector being simultaneously hit by three major exogenous events: a shift in monetary policy with an increase in pre-tax interest rates, a tax reform that increased after tax interest rates, and the ERM crisis. Combined with some overinvestment in commercial property, high real interest rates contributed to breaking the boom in real estate prices and triggering a downward price spiral resulting in bankruptcies and massive credit losses. The government rescued the banking system by issuing a general guarantee of bank obligations. The total direct cost to the taxpayer of the salvage has been estimated at around 2 per cent of GDP.
Further reading here.
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Oh yeh lets use the Swedish model for Europe to escape the debt spiral unscathed. Great advice, we might as well just start the Crusades again, because that will be the result.
There simply has to be a default on Greece...first. Not at 20% but at 50%. If Spain or Italy then goes into default...haircut them as well.
The only way out is to liquefy the bad debt at a market price. Yes there should be claw backs and compensation cuts for all the top bankers and their lieutenants.
Doubtful that socialist, semi facsist Europe can accomplish this. Therefore they will print because they can.
German austerity aside, the IMF and other shadow institutions are already checking backgrounds and personal lives of any who might stand in the way of the BIG PRINT.
Sweden can maybe use the same model when it's current housing bubble bursts. It's built on quicksand and people are using the "traditional" bubble tools, interest only, financing consumption by the paper profits etc. With a banking sector of roughly 400% of GDP and big exposures in Baltic states as a cherry on the steaming pile, it'll be a nasty ride.
Didn't Reinhardt & Rogoff calculate Sweden's bailout cost as around 70% of GDP? It seems the author may be somewhat "blue eyed".
What is this?! Providing real solutions to this crisis! Go away! You are ruining perfectly good DOOM level crisis.
The Swedish "tiger economy" is built on a housing bubble that is about to pop (it didn't in 2008, for some reason), so that's a bit of an illusion. The banking crisis of the 90s was rather well-handled, though, so there may be something to learn there. Provided, of course, that anybody can be bothered to read the lengthy report that was linked. The author of the post clearly didn't, as no particulars are mentioned.
Sweden is doing much better than the rest of Europe. Their tax rates are lower than most people think. The just need to rid themselves of that islamo problem in Malmo.
I live in Sweden. We pay out the ying-yang.
Uppsalla has that problem as well.....
...Only if the "Swedish way" includes a lovely masseuse and a warm towel.
http://www.kawprairie.org/Websites/kawprairie/Images/Silent%20Auction/Th...
Otherwise, "Next ?"
good one...LOL!!! Giving a new definition to the words. As in giving the tax payers a "Swedish Massage."
2% of GDP seems pretty small compared to what the USA did--more like 10%. of course Ireland when it took the bank's balance sheets directly cost...was it 30%? that seems like a bad idea. And of course in the USA "we know who you are." who are "they" in the form of finance in Europe? In other words "we don't want to bail out your tax haven." I would start by creating an FDIC for all of Europe myself.
Mr Schauble told Washington to mind its own businesss after President Barack Obama rebuked EU leaders for failing to recapitalise banks and allowing the debt crisis to escalate to the point where it is "scaring the world".
"It's always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the US government," he said.
http://www.telegraph.co.uk/finance/financialcrisis/8793010/Germany-slams...
The Americans have one big credit card debt to pay off, though...
"deregulated"
Deregulation is the cancer of the banking system. Clinton and Rubin should be hung for what they did in 1999.... We NEED to hold our bankers on a tight leash.
It's them or us!
I don't know if kinky sex is the answer... but I did stay at a Holiday Inn last night
Surely, you are not disparaging the cult classic, Three Swedes at a Pump? ;)
Ditto. The taxpayer bailed out the banks, and we know where that has gotten us. How about just taking the 2B2Fails BK like we did for GM, but not like GM, because GM is functionally nationalized to an extent. These banks are the walking dead, kept alive by tanna leaves from the FED, let them all die, including the FED. Everyone can be replaced, the banks and the FED. The New American Revolution is upon us, and its either the banks, or us. The only question is how do you want it to be, the banks running us and our government (like now), or us running oiur government and the banks, and you only get these 2 choices.
GM workers were just given a $5,000 sign on bonus and guaranteed pay raises....
Most of the workers won't get annual pay raises under the contract. But they'll get signing bonuses, profit-sharing checks and other payments totaling at least $11,500 during the next four years. GM has also promised to add at least 5,100 jobs.
After tax, hat's about 50 cents an hour over 4 years. Not enough to keep up with inflation. There's only 50,000 of them. Individual bankers get bigger bonus than all of them combined.
Thanks for the reality perspective...
Yeah, make the taxpayers bail out the banks. How original!
Also, the Stockholm market is down 24% YTD. Hardly a tiger.
Yeah, make the taxpayers bail out the banks. How original!
Except that's the opposite of what happened. The two defining characteristics of how the problem was fixed was:
1) Bleed the investors dry BEFORE using a single tax krona to bail out any bank. The terms for the bail out were so harsh that one of the major banks (SEB) had a change of hearts and managed to raise new capital from private investors instead.
2) Anti-Keynesianism. The government / central bank said fuck GDP, unemployment and house prices, we'll not only balance the budget, we'll run a 2% surplus (on average). They've been sticking to that ever since and the national debt is down to something like 35% of GDP.
After two years of mild deflation and crashing house prices, real growth started coming back, and the Swedes have lived happily ever after, pretty much. This is from memory, I was in Sweden during some of this. I didn't click the link above. There is however now a housing bubble yet to pop, especially in Stockholm.
Also, the Stockholm market is down 24% YTD. Hardly a tiger.
GDP and unemployment numbers are pretty impressive. But maybe you agree with Bernanke that the true measure of an economy is the stock index?
Crisis was in 97 not this year. They aren't printing as much money as US and Europe to inflate stocks.