Yesterday we read with great amusement a piece in which Bloomberg explained how "Sweden has flirted on and off with deflation over the past five years. Governor Stefan Ingves and his colleagues have unleashed unprecedented stimulus to get price growth back toward the 2 percent target, cutting rates to negative and buying government bonds."
It showed the following chart of Swedish "inflation" to justify its claim:
We found this funny because just a day prior profiling Sweden and its -0.35% interest rate, the same Bloomberg looked at fellow NIRPinian Denmark, which has an even more negative rate of -0.75%, where inflation is also supposedly negative, and yet where it found the following paradox:
"Property prices in Copenhagen have risen 40-60 percent since the middle of 2012, when the central bank first resorted to negative interest rates to defend the krone’s peg to the euro."
This is all properties, not just luxury triplex apartments in downtown Copenhagen. This is the very definition of a housing bubble, and others have realized it.
The Danish regulator this month warned Danske Bank against pursuing a growth strategy in Sweden as the housing market there shows signs of imbalances. Price developments are now “highly distressing,” Klas Danielsson, the chief executive officer of Sweden’s state mortgage bank, SBAB, said on Thursday.
And here is even Bank of America also admitting what is so glaringly obvious, "economist" has become a synonym for idiot:
House prices have continued to rise amid negative rates in Denmark and Sweden. In the case of Denmark, house price gains appear to have accelerated this year.
But.. but... deflation:
Oh wait, that deflation of course excludes the hyper-inflation of such "irrelevant" assets as housing, rent and financial assets (and in the US, tuition, food, and medical costs). Remember: the only prices that matter to central bankers in their quest to see who can push rates to -100% first, are the ones that they themselves decide matter, and nothing else, such as the hedonically adjusted MSRPs of 85 inch LED TVs, which supposedly consumers buy 3 times a day. Sadly, one can't live under a TV (if they keep getting bigger, that may be possible soon).
So congratulations Europe: you find yourself in the unenviable position of having "tumbling prices" offset by home price hyperinflation. Why? The answer is shown in the yellow line in the charts below.
So thank you central bankers: if your mission was to crush the middle class and destroy the economy, burying it under tens of trillions of debt form which there is no escape, you succeeded.