Now when stock market futures seem to be on the upswing I thought I might provide you a little morsel of comedy from Sweden.
You see, today was the day when the government budget for the next four years got laid out, to go up into a vote in the legislative chambers later this year, proposed by the new, centre-left-green government. The best thing I can say about it is probably that “at least it is better than I expected”. If you’re from outside Sweden, the financial direction of the country is laugh-worthy, if you’re in it it’s probably pretty tragic. Me? Well imagine seeing a close friend trip over in a really funny way and laughing hard about it, but feeling bad about doing so when you realize that they are bleeding and need medical attention.
Sweden went from having one of the world’s (and certainly Europe’s number 1) most respected government treasury handlers, to getting… someone who believes that 100% housing loan-to-value ratio is a Good Thing! This in an economy where housing prices has gone up by over 100% in 10-12 years and people have on average 180% loan-to-income ratios, 400% if you own your housing. Home loans are 30% tax deductible, 85% is the current max LTV ratio and there currently is no mortgage requirement legally, although many banks require that independently. That’s a joke in its own right, but I don’t know why I expect them to start allowing PIK loans (aka negative mortgaging) soon…
Even more hilarious is that in the lead-up to this, the new finance minister went out on a press conference tour to declare “the state coffers empty, the barn hollow and the tables cleaned”, stating that the Swedish economy is essentially on the precipice of ruin. Take a look for yourself! The government is indebted to 41% of GDP! There’s a 1.1% budget deficit! Massive holes exist in the government services because government spending has only gone up by 17% over the last 8 years! (It is up by 0.2% as a percentage of GDP from 52.7% to 52.9%.) When confronted by economists and journalists saying that this would be remarkable numbers for any economy, the response is “The barn is five meters high and I’m expected to be thrilled over it only being stacked with two meters of IOU’s when I open the door?”
Yes, unemployment in Sweden is pretty high, but that is not a reason to completely stop tracking employed persons. (Sweden has had a pretty interesting way of directing a lot of people away from work into unemployment benefits due to sicknesses, where in many cases the symptoms include incredible efficiency at carpentering, household services and giving people rides in cars. No money is ever exchanged for this, promise.) The former government aimed at putting more people into work, not just reducing unemployment, but now let’s stop collecting employed people data altogether!
if 40% government debt to GDP is bad… what about the 45% your own party left the economy standing at? (Or in barn-meters of IOU stacks if that’s easier to understand, that’s 2.25 rather than 2!) How is it that one of the most credit-worthy nations in the world coupled with a 1.2% 10Y government bond yield has government finances that are completely broken and in tatters? Is a 1.1% GDP budget deficit a gaping hole since your own party couldn’t manage better in either 2004 or 1996-1998? Denial is a type of lunacy and you’re denying that the only chance this snowball country has had in financial hell has been your political opponents.
Here’s the thing: you won an election from a position of opposition. You have a different policy that, in implementation, will require lots of money. I can buy, respect and accept that. I agree with you that Swedish education needs reform (but I couldn’t possibly disagree more with you on how that reform should look), the current “private actor in public services” system is stupid as hell (but that doesn’t mean that the profit motive is the problem and that saying that no more dividends to book equity than the bank prime rate can be distributed is smart), and our pension system needs to be better, both in funding and in giving retirees a cash flow that can be lived off (which doesn’t mean that removing pension fund savings tax deductions and increasing payout levels is a smart idea). I could go on. Your banking tax proposal however is probably an unjustifiably stupid idea if clients can simply have the choice of shifting their money elsewhere.
Do your job. Ask for a mandate for reform, you won it in the polling booth and I can’t really see you not getting it. Fight for large spending increases to push through your policies that I so despise. Don’t for a second claim that the only country in Europe that managed to lower its’ government debt after the financial crisis struck and never violated the EU Stability Pact of 3% Government Deficit over GDP is on the “precipice of ruin” and requires stringent budgets to remain afloat. Don’t worry, after a few years of people who cannot compare current numbers to those from eight years ago and with no memory of any housing bubble ever being in charge, you will get there. You’re just not there yet.
I have a choice of which country I want to direct my tax payments to in where I apply for jobs. Yours is on the list of easy ones to go into if I felt like it. The finance student in me simply can’t allow people who are this reckless with money and financial data to manage a single cent of money I help earn if I can help it. I would much rather help countries that are on the right path and have shown a comparative skill in prudent money management. Only then can I really laugh at your financial folly with the same glee you reserved for Wall Street in the Great Financial Crisis of 2008. Losing a lot of other people’s money and causing a lot of economic misery is super funny, right?