People worry about a US recession, but looking at Sweden shows it’s possible to handle tough times. Sweden’s house debt is high, rates hit 12%, and housing dropped 30%, but confidence stays strong. Despite big hits, they haven't had a recession. The global economy has changed with new forces, so don’t just compare it to the past.
When people are hyperventilating about the chance of a U.S. recession, I tend to do international comparisons.
Sweden is an economy far more vulnerable to higher rates. Household debt to income is very elevated and mortgages reset every 6 months, for fast pass thru of policy
Like the rest of the world, it had a surge in inflation that peaked at 12% in late 2022.
As a result, policy rates were jacked up by 400 bps in a year, and they've now cut them by 50 bps.
Due to the faster pass through of rates to mortgages, the housing market had a swift and violent correction of 30%. It has since bounced about 12%.
Higher rates led to a swift fall in retail sales, and a large rise in unemployment to 9.2%.
Bankruptcies spiked, but have recently started to fall.
Mortgage rates remain near their highest levels of the cycle.
In spite of all that bad news, business and consumer confidence have been rising all year.
Despite 400 bps of hikes, a rise to 9% unemployment, a 30% collapse in housing, a fall in household consumption, Sweden has still not had a technical recession!
If all of that still didn't cause a recession, why are people hyperventilating about the US economy?
The answer is the global economy has changed. Stop looking at this through a 2010-2019 lens and you will understand that structural forces like demographics, and the massive wealth creation, have changed the economy in ways we are still understanding.
The end.
When people are hyperventilating about the chance of a U.S. recession, I tend to do international comparisons.
Sweden is an economy far more vulnerable to higher rates. Household debt to income is very elevated and mortgages reset every 6 months, for fast pass thru of policyLike the rest of the world, it had a surge in inflation that peaked at 12% in late 2022.
As a result, policy rates were jacked up by 400 bps in a year, and they've now cut them by 50 bps.Due to the faster pass through of rates to mortgages, the housing market had a swift and violent correction of 30%. It has since bounced about 12%.Higher rates led to a swift fall in retail sales, and a large rise in unemployment to 9.2%.Bankruptcies spiked, but have recently started to fall.Mortgage rates remain near their highest levels of the cycle.In spite of all that bad news, business and consumer confidence have been rising all year.Despite 400 bps of hikes, a rise to 9% unemployment, a 30% collapse in housing, a fall in household consumption, Sweden has still not had a technical recession!
If all of that still didn't cause a recession, why are people hyperventilating about the US economy?The answer is the global economy has changed. Stop looking at this through a 2010-2019 lens and you will understand that structural forces like demographics, and the massive wealth creation, have changed the economy in ways we are still understanding.
The end.
yes
When people are hyperventilating about the chance of a U.S. recession, I tend to do international comparisons.
Sweden is an economy far more vulnerable to higher rates. Household debt to income is very elevated and mortgages reset every 6 months, for fast pass thru of policy ... Like the rest of the world, it had a surge in inflation that peaked at 12% in late 2022.
As a result, policy rates were jacked up by 400 bps in a year, and they've now cut them by 50 bps. ... Due to the faster pass through of rates to mortgages, the housing market had a swift and violent correction of 30%. It has since bounced about 12%. ... Higher rates led to a swift fall in retail sales, and a large rise in unemployment to 9.2%. ... Bankruptcies spiked, but have recently started to fall. ... Mortgage rates remain near their highest levels of the cycle. ... In spite of all that bad news, business and consumer confidence have been rising all year. ... Despite 400 bps of hikes, a rise to 9% unemployment, a 30% collapse in housing, a fall in household consumption, Sweden has still not had a technical recession!
If all of that still didn't cause a recession, why are people hyperventilating about the US economy? ... The answer is the global economy has changed. Stop looking at this through a 2010-2019 lens and you will understand that structural forces like demographics, and the massive wealth creation, have changed the economy in ways we are still understanding.
The end.
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