Sweden is heading for economic disaster

Sweden is heading for economic disaster
Sweden's credit-driven economic boom begins to give way, according to new figures from Statistics Sweden. Now the heavily indebted welfare country is heading towards lower growth, bad times and probably a serious crisis.

GDP figures continued to fall during the second quarter. Compared with the strong growth during the 2015 asylum chaos it is a sharp deterioration. As the government believed the unrestricted immigration would be extremely beneficial, it sold bonds to the Riksbank worth SEK 200 billion in order to finance the loan. The generous policy which drove growth to the economy has now ended.

GDP growth has dropped over the past five years, and in the second quarter it was 0.5 percent.

"Economic development is still domestically driven with residential [speculation] in the lead, however, the previous strong growth of household consumption has dropped. Exports fell for the second consecutive quarter," summarizes the SCB in a press release.

A country can not ultimately make a living on a housing market. Someone must eventually create the prosperity that everyone else wants to live on, and that prosperity is created - sadly but true - almost exclusively in the industry.

The recipe is thus simple: The country must stop borrowing and stop consuming. And start saving and producing.

Such a shift is of course difficult, and the only successful example in Europe can be said to be Estonia, which did what the left said was impossible and saved to get itself out of a financial crisis.

Soon it will probably be time for Sweden to halve the real-estate prices and significantly reduce costs. But just as Cyprus, Greece and Portugal, the Swedish politicians are unlikely to implement these changes on their own initiative, but rather be forced into it by a financial crash.

When will this crash come? The short answer is, of course when interest rates begin to rise. Sweden can not even in theory retain its nearly free housing loans and its negative interest rates when the outside world's price of money starts to take off. The Federal Reserve has already begun to increase, and after the US, the European Central Bank ECB soon follows.

A quarterly growth of 0.5 percent should under normal circumstances not be a sign that a crisis is in sight. But the Swedish situation has become such that the country is dependent on an ever-growing credit bubble and constant high conjectures: As soon as something goes down, just a little bit, the bubble bursts and the show is over. Ask yourself what would happen with an interest rate of 5 percent or a confirmed drop in prices of homes of 10 percent. Both figures are fully normal and likely, and must sooner or later occur even in a perfect economy. But Sweden could not cope with any of them.

Former Minister of Finance, Anders Borg, predicted last spring that the economic crash in Sweden comes in 2018. The evidence suggests that he, who more than any other has created the current economic mess, actually is right.

Read: Sweden to become a Third World Country by 2030, according to UN

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