11 ms·

Why northern Europe is so indebted (2021)

100 points by disadvantage 4y ago

layer8 4y ago
May load faster: https://archive.ph/J72Cl https://archive.ph/J72Cl
layer8 4y ago
(2021), according to archive.org and the comment on the article page.
jahnu 4y ago
More on Danish mortgages from last year https://www.washingtonpost.com/business/denmarks-mortgage-market-is-luring-global-investorsheres-why/2022/08/12/e5cef430-19ff-11ed-b998-b2ab68f58468_story.html https://www.washingtonpost.com/business/denmarks-mortgage-ma...
thedudeabides5 4y ago
Maybe it has something to do with the negative interest rates?
cronin101 4y ago
This is such a non-story, mainly driven by the fact that home ownership in Nordic countries is ubiquitous (80% of Norwegians OWN their primary dwelling) combined with the high medium incomes resulting in those houses being quite expensive. I’d really recommend not trying to draw any deeper conclusions from this data. Edit: by “own” I mean “have a non-paid off mortgage”, the tax on net wealth here actually disincentives paying off a mortgage early vs “leveling up” your debt/house.
- robomartin 4y ago
  > 80% of Norwegians OWN their primary dwelling I see your clarification. Question: In Norway, if you pay-off your mortgage, do you still owe annual taxes on your property? If so, how much? What happens if you don't pay property taxes? One of the things that has always bothered me about home "ownership" is that, from my perspective, at least in the US, you never really own your home. You can pay off your mortgage, of course. However, if you stop paying property taxes you can lose your property in a forced sale. That is not my definition of owning something. If it can be taken away, you do not own it. We have somehow been led to believe we can own property. I don't think that's the case. If you own your property it should mean that you can live there with zero income and have nothing to pay anyone except for the things you want to pay for (power, gas, connectivity, whatever). Someone might say: We need taxes to pay for X. Well, sure. I get that. We should get that money through other means, not through a system where people work their entire lives to pay off a mortgage only to discover they will have to keep paying to "own" that home for the rest of their lives. Perhaps the distinction should be your residence vs. investment/rental property. Not sure. Haven't through it through much deeper than that.
  - yokoprime 4y ago
    > if you pay-off your mortgage, do you still owe annual taxes on your property Depends on where you live. Some counties has property taxes, others do not. One reason for why Norwegians have lots of debt is that its subsidized since you can write off parts of the interests from your taxes. Also there is taxes on wealth, i.e the tax system incentivizes having debt.
  - JUNGLEISMASSIVE 4y ago
    [dead]
  - TheCoelacanth 4y ago
    Property owners benefit more from local tax spending than anyone else. Why shouldn't they pay for it? We already subsidize home ownership by quite a bit. We don't need to subsidize it more.
    - dataflow 4y ago
      > Property owners benefit more from local tax spending than anyone else. Why shouldn't they pay for it? Couldn't you use the same argument to say that poor people should pay more in taxes because they benefit more from it?
      - TheCoelacanth 4y ago
        That's nonsense. The richest people benefit the most from having a stable government with well-funded police protecting their property.
        dataflow 4y ago
        It's not nonsense, you just looked at the extreme case on the other side. You can try to make arguments like that for the "richest" people, but what about everyone else? Someone making $1 below the Medicaid income limit should pay a ton more in taxes than someone making $1 above it because they get back a lot more in return?
- refurb 4y ago
  > 80% of Norwegians OWN their primary dwelling You have to be careful with that statistic. It's not that 80% of Norwegians own their own home, it's that 80% live in a home that is owned someone in the household. So if you have a single parent, who owns a home, with 3 adult children living in one house, that statistic would say those 4 people have a 100% rate of homeownership. All countries measure it this way. For example, Singapore has a rate of 91%. However, adults tend to live with their parents until they get married. They'd love to move out before that, but rents are sky high in Singapore, so people tend to just live with their parents. It's also pretty common to have multi-generation households.
  - vegardx 4y ago
    If that's the case then I'd assume that the "real" number would be significantly higher, given that Northern europeans leave their parental home at very young age, compared to most of the world. I could only find updated statistics from the EU[0], so there's no data on Norway, but if memory serves me right, Norway has even lower age than Sweden. [0] https://ec.europa.eu/eurostat/statistics-explained/index.php?oldid=494351 https://ec.europa.eu/eurostat/statistics-explained/index.php...
smcl 4y ago
Not Northern Europe, but Czech Resident here. There has been an explosion in house prices here, a truly wild one. I bought my place for 3.6m CZK about 7 years back and according to a recent valuation practices is "worth" nearly double this now. It is fucking wild, and tbh I kind of hate it.
- chrisco255 4y ago
  In US markets, prices have basically tripled from what they were 7-9 years ago.
  - rootusrootus 4y ago
    That is not accurate, though in some specific regions it may be true. Overall, prices right now are just a little above twice what they were at the low point in 2012 [0]. From 7-9 years ago, even at the high point we were less than double. [0] https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA
  - legitster 4y ago
    Uh... big asterisk here depending on where you live.
    - betaby 4y ago
      Is it? It 'feels' like true for places where most of the population lives.
      - ghaff 4y ago
        Almost certainly not true of where I live in the western exurbs/suburbs of Boston. Maybe in the city though even that seems high.
      - chrisco255 4y ago
        It's true for places that people are actually moving to, like Florida, where prices literally tripled, and Texas, where it's more like 2.5x (but higher in metro regions like Austin): https://www.statista.com/statistics/1100168/single-family-home-prices-florida/ https://www.statista.com/statistics/1100168/single-family-ho... https://www.noradarealestate.com/blog/texas-housing-market/ https://www.noradarealestate.com/blog/texas-housing-market/ But across the country the median is more than double from what it was.
sohtym 4y ago
Seems a bit general. Sweden is very much in debt because of the housing market. 15 years ago there were little regulation. You could get a 100 year mortgage with a variable rate and no money down. At the same time the government sold large amounts of public housing at below public market rate. Interest rates went from ~4% to ~1.5%. With no wealth or property taxes, but with tax deductions for renovations and interest rate payments. Most apartment buildings are co-ops, where the co-op have loans as well. Gradually there have been more regulation, but most still have variable rate mortgages which they are personally liable for and with no real a way to declare bankruptcy. Now interest rates will probably reach 4% again so hang on I guess.
- belter 4y ago
  300 to 400 year mortgages, on a fixed rate, sounds like my kind of deal...
- dijit 4y ago
  Last time I looked at statistics Swedens debt to GDP was 35%, one of the lowest I saw, which doesn’t really make sense to me when I consider the weakness of the currency, but then again I am just a humble engineer and I have no clue about these things. UK is close to 100% debt to GDP at the moment, the highest in recorded history.
  - engineeringwoke 4y ago
    The big issue in northern Europe is private debt, not government debt. Totally reasonable to not know
    - JUNGLEISMASSIVE 4y ago
      [dead]
  - bobthepanda 4y ago
    One of the benefits of a high tax regime is that it’s not hard to not need to borrow money if you’re smart about it. I follow some stuff about public transit, and Sweden has lower construction costs than the UK by an order of magnitude.
cmrdporcupine 4y ago
The explanation here still wasn't clear to me after several readings. They're showing that a bias towards social spending on the elderly was co-related with higher overall debt. But I'm unclear on their explanation. Given they're talking about mortgage debt in particular, would like to see plotted against housing prices. Especially curious if certain kinds social spending helps shore up baseline housing prices by increasing aggregate spending, by putting more cash in the system but also by reducing foreclosures/bankruptcies. And most importantly, if seniors can stay in their homes longer -- because of adequate pension systems -- that means less houses dumped on the market. "Selling the family home so I can afford to retire" (aka downsizing) is a pretty common maneuver in the Anglo-American economies [where pensions are dubious]. When all the baby boomers finally liquidate their real estate assets, it should be interesting to see what happens to housing prices. in North America
- plastic3169 4y ago
  I read it like welfare spending towards young caused the higher debt taking. Countries which had the bias towards elderly don’t encourage to take loans. Also I’ve found that housing prices follow closely the ability to take loans up here.
matsemann 4y ago
When you live in a stable society and have gotten a free education and a nice job, it makes sense to get a loan to buy a place to live and start paying a mortgage instead of debt. Contrast with a society where the average education might be lower, less people having a stable job in a slow labor market, and if you lose your job there is no safety net. Hard to get a loan, so end up renting for longer, and in turn have a lower average debt. Debt can be a proxy for a well working society, as you have the means to invest in your future, not just putting out short term fires.
- dmos62 4y ago
  That's what the article said. Mortgage debt can be a proxy for privilege, while consumer debt can be a proxy for need.
- ajsnigrutin 4y ago
  Also, most europeans tend to settle down, and not move across the continent every few years, so buying instead of renting makes even more sense, since you'll be staying in that house probably for the rest of your life.
  - Hamuko 4y ago
    Where the hell are people "moving across the continent every few years"?
    - labster 4y ago
      The US and Canada.
    - djbusby 4y ago
      USA. Eg: Seattle has lots of out-of-state migrants, as does SFBay, Boston and NY.
      - Hamuko 4y ago
        What's the source for that? Doesn't sound right when I've seen claims such as "nearly 72% of Americans live in or close to the city where they grew up" [1] and "the typical adult lives only 18 miles from his or her mother" [2]. [1] https://www.prnewswire.com/news-releases/what-percentage-of-americans-currently-live-in-the-town-or-city-where-they-grew-up-300952249.html https://www.prnewswire.com/news-releases/what-percentage-of-... [2] https://www.nytimes.com/interactive/2015/12/24/upshot/24up-family.html https://www.nytimes.com/interactive/2015/12/24/upshot/24up-f...
kevmo 4y ago
"Debt, n. An ingenious substitute for the chain and whip of the slavedriver." - Ambrose Bierce, Devil's Dictionary
- TheCoelacanth 4y ago
  Oh, yeah, those poor enslaved Nordics. They've got it so rough. Definitely in the bottom 200 countries in the world.
  - bigpeopleareold 4y ago
    Yet, wherever you are, the worst kind of debt is a real drag once you realize you were not so smart with some spending :/
deleted 4y ago
[deleted]
mikaeluman 4y ago
Change the title name to be more approptiate. This is about private debt, not total debt. "Why Northern Europe is so indebted" sounds like clickbait...
- nonethewiser 4y ago
  “Northern Europeans” would be more accurate
DavidVoid 4y ago
As always with debt, how bad it is very much depends on the interest rate of the loans. I bought an apartment here in Sweden a couple of years ago with the minimal required down payment (kontantinsats) of 15%, but 20% of my debt is still my student loan that currently has an interest rate of 0.59% (it was 0% a few years ago). I will say that the housing loans here have one potential issue though: it's very common to have a variable (or only 2 year fixed) interest rate on your loan, so Swedish borrowers will notice increased interest rates much sooner than borrowers in countries where 5+ year fixed rates are common. Around 80% of new loans for house purchases here have their initial rate fixed for only 1 year or shorter [1]. [1] https://sdw.ecb.europa.eu/quickview.do;jsessionid=3DC3C894DAB6BA2FFAF04380E0AE09BA?SERIES_KEY=304.RAI.M.SE.SVLHPHH.U1.MIR.Z https://sdw.ecb.europa.eu/quickview.do;jsessionid=3DC3C894DA...
- nonethewiser 4y ago
  What are the interest rates now? Presumably they are significantly higher than a few years ago. Although maybe there is a delay.
  - DavidVoid 4y ago
    They're higher, but still nowhere near what they were in the 80s and 90s (10+%). The Riksbank policy rates is currently 3% [1]. Interest rate on housing loans is roughly 4% at the moment for both floating and fixed rates, it's up from 1.5% in 2020. [1] https://www.riksbank.se/en-gb/statistics/search-interest--exchange-rates/policy-rate-deposit-and-lending-rate/ https://www.riksbank.se/en-gb/statistics/search-interest--ex...
- jopsen 4y ago
  I live in Denmark, got 15 year mortgage at 0.5% (1% including fees).. But the variable mortgages are a bit sketchy, they could very well be a bomb under housing market -- and could cause prices to collapse.
adaml_623 4y ago
I really don't like the graphs / diagrams in that article. I feel they need units on the graphs. And figure 2. is based on data from 2007 And figure 3. is comparing very different things on the same diagram. If this were an undergraduate project I would not give it a pass.
- gus_massa 4y ago
  In Figure 3, what are the units of the vertical axis??? a) Million Dollars? Billions? Trillions? b) Idem c) Percent of the population? Is .6 on the left a 60% of the population or .6% of the population? d) Percent of the welfare budget? Is .6 on the left a 60% of the budget or .6% of the budget?
nonethewiser 4y ago
Many of the reactions here seem rather defensive. Observing that mortgages are the main driver isn’t some takedown of the article. It makes the exact same observation.
- bkor 4y ago
  > It makes the exact same observation. I find it highly difficult to figure out what the article is trying to say. This especially as it's trying to say something about private debt vs the welfare system. I don't understand what the article is trying to say, especially the link between welfare system vs mortgages vs debt.
  - nonethewiser 4y ago
    What I got out of it is that mortgages are the main driver and that they see a correlation between welfare benefiting young people and higher debt. By contrast countries where the welfare is more focused on the elderly there is less household debt.
viking1066 4y ago
It would make sense to correct for home ownership rate. With higher rates of home ownership, a higher debt is justified. For example USA and Germany seems to have about the same level of household debt, but USA has 65% home ownership rate, while Germany has only 51%. https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate https://en.wikipedia.org/wiki/List_of_countries_by_home_owne... The other interesting thing is that South Europe in general has a longer history of financing public works like churches, than Northern Europe, but in terms of household debt, that relationship seems inverted.
mikl 4y ago
Maybe over a decade of near-zero interest rates could have something to do with it? The cheaper it is to borrow money, the more people borrow, unsurprisingly. This is what’s been driving the massive rises in property prices the last many years. It’s straight out of “Economic Bubble Creation 101”.
VWWHFSfQ 4y ago
It's my understanding that the northern European countries have very low immigration rates which means that their existing (mostly native) population is entirely responsible for their economic growth. That population grows old and fewer and fewer young people are available to contribute to the state-funded "welfare" to support their parents retired lifestyles. So the debt accrues and the country eventually becomes a "welfare state" with young people paying 50-60% of their income to taxes.
- whitemary 4y ago
  Your theory fails because northern European countries have significantly higher fertility rates than the US. See: https://www.cia.gov/the-world-factbook/field/total-fertility-rate/country-comparison https://www.cia.gov/the-world-factbook/field/total-fertility... > Total Fertility Rate (TFR) is a more direct measure of the level of fertility than the crude birth rate, since it refers to births per woman.
  - refurb 4y ago
    If you're worried about population decline, it's birth rate you want to look at, not TFR.
    - whitemary 4y ago
      If you're comparing 2 different countries without the exact same populations, you need TFR. And that is the case here. I am utterly amazed at the lengths you people go to reinforce your delusions. Sorry to break it to you but libertarianism is a childish utopian fantasy.
      - refurb 4y ago
        The personal attack is unwarranted. And I'm not sure what libertarianism has to do with math. If you're worried about population decline, it's birth rate (birth per capita) that matters, not TFR. It doesn't matter if your TFR is higher, but your replacement rate is lower.
deleted 4y ago
[deleted]
ramesh31 4y ago
The answer is because it can be. The Euro is a global reserve currency.
- TheCoelacanth 4y ago
  Norway, Sweden and Denmark aren't on the Euro. Netherlands seems to be the only country on the Euro that they're counting as northern Europe.
jakub_g 4y ago
What is the unit of the X axis on those graphs? Is it % relative to something? (% of GDP? % of something else?) Or absolute values of some sort?
mo_42 4y ago
I was getting some ideas from the text. Scandinavian countries have probably the world's best institutions. I'm talking here specifically about courts, laws, police. Also lack of corruption, excellent education, and a good labor market. In a world like this, debt becomes really just a number on paper. They can take huge mortgages and pass them on to their children (alongside with the property of course).
bigpeopleareold 4y ago
> If we consider consumer credit, the welfare-debt theory makes sense again. While consumer credit is more the exception than the norm in Europe, and almost absent in the Nordic countries, it is common in Anglo-liberal countries (UK, US and Canada) where it is used by families as a substitute for poor welfare provision. Hmm - in Norway here, it's common to see advertising for credit (lots for fixed unsecured loans.) Basically all the grocery store chains except one have their own loyalty credit card. I never watched an episode, but there is a show called Luksusfelle which tries to help people reform their out-of-control finances - I think more than once, credit cards were mentioned. I mean, it's not like the US and the regulatory environment is more consumer-friendly than the US, but I cannot imagine it as non-existent as it is said here. I am not being coldly statistical here, but it really doesn't match up with a lot of the anecdotal experiences I have.
dusted 4y ago
One of the larger crimes here in Denmark, is that debt for example for homes are tax deductible, so basically, it allows banks to make more profit, by letting the state cover some of the expense of taking out a loan. There's an old song "if you have money, you can buy, if you don't you can leave", people need to sing this to their kids a bit more often. We're an incredibly wealthy society, and yet, most people chose to live above their means.. Loaning money for cars and homes instead of simply buying cheaper ones. The last house I bought, I paid in cash, because it cost less than the down payment for many of the homes other people in my income bracket typically buy. The last car I bought cost less than the service-check for the tesla that some of the other people in my income bracket.. Living below ones means in Denmark is trivial, and yet, people feel they're too good to live within their means, it's a cultural problem.

100 points by disadvantage 4y ago

layer8 4y ago

May load faster: https://archive.ph/J72Cl https://archive.ph/J72Cl

layer8 4y ago

(2021), according to archive.org and the comment on the article page.

jahnu 4y ago

More on Danish mortgages from last year https://www.washingtonpost.com/business/denmarks-mortgage-market-is-luring-global-investorsheres-why/2022/08/12/e5cef430-19ff-11ed-b998-b2ab68f58468_story.html https://www.washingtonpost.com/business/denmarks-mortgage-ma...

thedudeabides5 4y ago

Maybe it has something to do with the negative interest rates?

cronin101 4y ago

This is such a non-story, mainly driven by the fact that home ownership in Nordic countries is ubiquitous (80% of Norwegians OWN their primary dwelling) combined with the high medium incomes resulting in those houses being quite expensive. I’d really recommend not trying to draw any deeper conclusions from this data. Edit: by “own” I mean “have a non-paid off mortgage”, the tax on net wealth here actually disincentives paying off a mortgage early vs “leveling up” your debt/house.

robomartin 4y ago
> 80% of Norwegians OWN their primary dwelling I see your clarification. Question: In Norway, if you pay-off your mortgage, do you still owe annual taxes on your property? If so, how much? What happens if you don't pay property taxes? One of the things that has always bothered me about home "ownership" is that, from my perspective, at least in the US, you never really own your home. You can pay off your mortgage, of course. However, if you stop paying property taxes you can lose your property in a forced sale. That is not my definition of owning something. If it can be taken away, you do not own it. We have somehow been led to believe we can own property. I don't think that's the case. If you own your property it should mean that you can live there with zero income and have nothing to pay anyone except for the things you want to pay for (power, gas, connectivity, whatever). Someone might say: We need taxes to pay for X. Well, sure. I get that. We should get that money through other means, not through a system where people work their entire lives to pay off a mortgage only to discover they will have to keep paying to "own" that home for the rest of their lives. Perhaps the distinction should be your residence vs. investment/rental property. Not sure. Haven't through it through much deeper than that.
- yokoprime 4y ago
  > if you pay-off your mortgage, do you still owe annual taxes on your property Depends on where you live. Some counties has property taxes, others do not. One reason for why Norwegians have lots of debt is that its subsidized since you can write off parts of the interests from your taxes. Also there is taxes on wealth, i.e the tax system incentivizes having debt.
- JUNGLEISMASSIVE 4y ago
  [dead]
- TheCoelacanth 4y ago
  Property owners benefit more from local tax spending than anyone else. Why shouldn't they pay for it? We already subsidize home ownership by quite a bit. We don't need to subsidize it more.
  - dataflow 4y ago
    > Property owners benefit more from local tax spending than anyone else. Why shouldn't they pay for it? Couldn't you use the same argument to say that poor people should pay more in taxes because they benefit more from it?
    - TheCoelacanth 4y ago
      That's nonsense. The richest people benefit the most from having a stable government with well-funded police protecting their property.
      - dataflow 4y ago
        It's not nonsense, you just looked at the extreme case on the other side. You can try to make arguments like that for the "richest" people, but what about everyone else? Someone making $1 below the Medicaid income limit should pay a ton more in taxes than someone making $1 above it because they get back a lot more in return?
refurb 4y ago
> 80% of Norwegians OWN their primary dwelling You have to be careful with that statistic. It's not that 80% of Norwegians own their own home, it's that 80% live in a home that is owned someone in the household. So if you have a single parent, who owns a home, with 3 adult children living in one house, that statistic would say those 4 people have a 100% rate of homeownership. All countries measure it this way. For example, Singapore has a rate of 91%. However, adults tend to live with their parents until they get married. They'd love to move out before that, but rents are sky high in Singapore, so people tend to just live with their parents. It's also pretty common to have multi-generation households.
- vegardx 4y ago
  If that's the case then I'd assume that the "real" number would be significantly higher, given that Northern europeans leave their parental home at very young age, compared to most of the world. I could only find updated statistics from the EU[0], so there's no data on Norway, but if memory serves me right, Norway has even lower age than Sweden. [0] https://ec.europa.eu/eurostat/statistics-explained/index.php?oldid=494351 https://ec.europa.eu/eurostat/statistics-explained/index.php...

smcl 4y ago

Not Northern Europe, but Czech Resident here. There has been an explosion in house prices here, a truly wild one. I bought my place for 3.6m CZK about 7 years back and according to a recent valuation practices is "worth" nearly double this now. It is fucking wild, and tbh I kind of hate it.

chrisco255 4y ago
In US markets, prices have basically tripled from what they were 7-9 years ago.
- rootusrootus 4y ago
  That is not accurate, though in some specific regions it may be true. Overall, prices right now are just a little above twice what they were at the low point in 2012 [0]. From 7-9 years ago, even at the high point we were less than double. [0] https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA
- legitster 4y ago
  Uh... big asterisk here depending on where you live.
  - betaby 4y ago
    Is it? It 'feels' like true for places where most of the population lives.
    - ghaff 4y ago
      Almost certainly not true of where I live in the western exurbs/suburbs of Boston. Maybe in the city though even that seems high.
    - chrisco255 4y ago
      It's true for places that people are actually moving to, like Florida, where prices literally tripled, and Texas, where it's more like 2.5x (but higher in metro regions like Austin): https://www.statista.com/statistics/1100168/single-family-home-prices-florida/ https://www.statista.com/statistics/1100168/single-family-ho... https://www.noradarealestate.com/blog/texas-housing-market/ https://www.noradarealestate.com/blog/texas-housing-market/ But across the country the median is more than double from what it was.

sohtym 4y ago

Seems a bit general. Sweden is very much in debt because of the housing market. 15 years ago there were little regulation. You could get a 100 year mortgage with a variable rate and no money down. At the same time the government sold large amounts of public housing at below public market rate. Interest rates went from ~4% to ~1.5%. With no wealth or property taxes, but with tax deductions for renovations and interest rate payments. Most apartment buildings are co-ops, where the co-op have loans as well. Gradually there have been more regulation, but most still have variable rate mortgages which they are personally liable for and with no real a way to declare bankruptcy. Now interest rates will probably reach 4% again so hang on I guess.

belter 4y ago
300 to 400 year mortgages, on a fixed rate, sounds like my kind of deal...
dijit 4y ago
Last time I looked at statistics Swedens debt to GDP was 35%, one of the lowest I saw, which doesn’t really make sense to me when I consider the weakness of the currency, but then again I am just a humble engineer and I have no clue about these things. UK is close to 100% debt to GDP at the moment, the highest in recorded history.
- engineeringwoke 4y ago
  The big issue in northern Europe is private debt, not government debt. Totally reasonable to not know
  - JUNGLEISMASSIVE 4y ago
    [dead]
- bobthepanda 4y ago
  One of the benefits of a high tax regime is that it’s not hard to not need to borrow money if you’re smart about it. I follow some stuff about public transit, and Sweden has lower construction costs than the UK by an order of magnitude.

cmrdporcupine 4y ago

The explanation here still wasn't clear to me after several readings. They're showing that a bias towards social spending on the elderly was co-related with higher overall debt. But I'm unclear on their explanation. Given they're talking about mortgage debt in particular, would like to see plotted against housing prices. Especially curious if certain kinds social spending helps shore up baseline housing prices by increasing aggregate spending, by putting more cash in the system but also by reducing foreclosures/bankruptcies. And most importantly, if seniors can stay in their homes longer -- because of adequate pension systems -- that means less houses dumped on the market. "Selling the family home so I can afford to retire" (aka downsizing) is a pretty common maneuver in the Anglo-American economies [where pensions are dubious]. When all the baby boomers finally liquidate their real estate assets, it should be interesting to see what happens to housing prices. in North America

plastic3169 4y ago
I read it like welfare spending towards young caused the higher debt taking. Countries which had the bias towards elderly don’t encourage to take loans. Also I’ve found that housing prices follow closely the ability to take loans up here.

matsemann 4y ago

When you live in a stable society and have gotten a free education and a nice job, it makes sense to get a loan to buy a place to live and start paying a mortgage instead of debt. Contrast with a society where the average education might be lower, less people having a stable job in a slow labor market, and if you lose your job there is no safety net. Hard to get a loan, so end up renting for longer, and in turn have a lower average debt. Debt can be a proxy for a well working society, as you have the means to invest in your future, not just putting out short term fires.

dmos62 4y ago
That's what the article said. Mortgage debt can be a proxy for privilege, while consumer debt can be a proxy for need.
ajsnigrutin 4y ago
Also, most europeans tend to settle down, and not move across the continent every few years, so buying instead of renting makes even more sense, since you'll be staying in that house probably for the rest of your life.
- Hamuko 4y ago
  Where the hell are people "moving across the continent every few years"?
  - labster 4y ago
    The US and Canada.
  - djbusby 4y ago
    USA. Eg: Seattle has lots of out-of-state migrants, as does SFBay, Boston and NY.
    - Hamuko 4y ago
      What's the source for that? Doesn't sound right when I've seen claims such as "nearly 72% of Americans live in or close to the city where they grew up" [1] and "the typical adult lives only 18 miles from his or her mother" [2]. [1] https://www.prnewswire.com/news-releases/what-percentage-of-americans-currently-live-in-the-town-or-city-where-they-grew-up-300952249.html https://www.prnewswire.com/news-releases/what-percentage-of-... [2] https://www.nytimes.com/interactive/2015/12/24/upshot/24up-family.html https://www.nytimes.com/interactive/2015/12/24/upshot/24up-f...

kevmo 4y ago

"Debt, n. An ingenious substitute for the chain and whip of the slavedriver." - Ambrose Bierce, Devil's Dictionary

TheCoelacanth 4y ago
Oh, yeah, those poor enslaved Nordics. They've got it so rough. Definitely in the bottom 200 countries in the world.
- bigpeopleareold 4y ago
  Yet, wherever you are, the worst kind of debt is a real drag once you realize you were not so smart with some spending :/

deleted 4y ago

[deleted]

mikaeluman 4y ago

Change the title name to be more approptiate. This is about private debt, not total debt. "Why Northern Europe is so indebted" sounds like clickbait...

nonethewiser 4y ago
“Northern Europeans” would be more accurate

DavidVoid 4y ago

As always with debt, how bad it is very much depends on the interest rate of the loans. I bought an apartment here in Sweden a couple of years ago with the minimal required down payment (kontantinsats) of 15%, but 20% of my debt is still my student loan that currently has an interest rate of 0.59% (it was 0% a few years ago). I will say that the housing loans here have one potential issue though: it's very common to have a variable (or only 2 year fixed) interest rate on your loan, so Swedish borrowers will notice increased interest rates much sooner than borrowers in countries where 5+ year fixed rates are common. Around 80% of new loans for house purchases here have their initial rate fixed for only 1 year or shorter [1]. [1] https://sdw.ecb.europa.eu/quickview.do;jsessionid=3DC3C894DAB6BA2FFAF04380E0AE09BA?SERIES_KEY=304.RAI.M.SE.SVLHPHH.U1.MIR.Z https://sdw.ecb.europa.eu/quickview.do;jsessionid=3DC3C894DA...

nonethewiser 4y ago
What are the interest rates now? Presumably they are significantly higher than a few years ago. Although maybe there is a delay.
- DavidVoid 4y ago
  They're higher, but still nowhere near what they were in the 80s and 90s (10+%). The Riksbank policy rates is currently 3% [1]. Interest rate on housing loans is roughly 4% at the moment for both floating and fixed rates, it's up from 1.5% in 2020. [1] https://www.riksbank.se/en-gb/statistics/search-interest--exchange-rates/policy-rate-deposit-and-lending-rate/ https://www.riksbank.se/en-gb/statistics/search-interest--ex...
jopsen 4y ago
I live in Denmark, got 15 year mortgage at 0.5% (1% including fees).. But the variable mortgages are a bit sketchy, they could very well be a bomb under housing market -- and could cause prices to collapse.

adaml_623 4y ago

I really don't like the graphs / diagrams in that article. I feel they need units on the graphs. And figure 2. is based on data from 2007 And figure 3. is comparing very different things on the same diagram. If this were an undergraduate project I would not give it a pass.

gus_massa 4y ago
In Figure 3, what are the units of the vertical axis??? a) Million Dollars? Billions? Trillions? b) Idem c) Percent of the population? Is .6 on the left a 60% of the population or .6% of the population? d) Percent of the welfare budget? Is .6 on the left a 60% of the budget or .6% of the budget?

nonethewiser 4y ago

Many of the reactions here seem rather defensive. Observing that mortgages are the main driver isn’t some takedown of the article. It makes the exact same observation.

bkor 4y ago
> It makes the exact same observation. I find it highly difficult to figure out what the article is trying to say. This especially as it's trying to say something about private debt vs the welfare system. I don't understand what the article is trying to say, especially the link between welfare system vs mortgages vs debt.
- nonethewiser 4y ago
  What I got out of it is that mortgages are the main driver and that they see a correlation between welfare benefiting young people and higher debt. By contrast countries where the welfare is more focused on the elderly there is less household debt.

viking1066 4y ago

It would make sense to correct for home ownership rate. With higher rates of home ownership, a higher debt is justified. For example USA and Germany seems to have about the same level of household debt, but USA has 65% home ownership rate, while Germany has only 51%. https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate https://en.wikipedia.org/wiki/List_of_countries_by_home_owne... The other interesting thing is that South Europe in general has a longer history of financing public works like churches, than Northern Europe, but in terms of household debt, that relationship seems inverted.

mikl 4y ago

Maybe over a decade of near-zero interest rates could have something to do with it? The cheaper it is to borrow money, the more people borrow, unsurprisingly. This is what’s been driving the massive rises in property prices the last many years. It’s straight out of “Economic Bubble Creation 101”.

VWWHFSfQ 4y ago

It's my understanding that the northern European countries have very low immigration rates which means that their existing (mostly native) population is entirely responsible for their economic growth. That population grows old and fewer and fewer young people are available to contribute to the state-funded "welfare" to support their parents retired lifestyles. So the debt accrues and the country eventually becomes a "welfare state" with young people paying 50-60% of their income to taxes.

whitemary 4y ago
Your theory fails because northern European countries have significantly higher fertility rates than the US. See: https://www.cia.gov/the-world-factbook/field/total-fertility-rate/country-comparison https://www.cia.gov/the-world-factbook/field/total-fertility... > Total Fertility Rate (TFR) is a more direct measure of the level of fertility than the crude birth rate, since it refers to births per woman.
- refurb 4y ago
  If you're worried about population decline, it's birth rate you want to look at, not TFR.
  - whitemary 4y ago
    If you're comparing 2 different countries without the exact same populations, you need TFR. And that is the case here. I am utterly amazed at the lengths you people go to reinforce your delusions. Sorry to break it to you but libertarianism is a childish utopian fantasy.
    - refurb 4y ago
      The personal attack is unwarranted. And I'm not sure what libertarianism has to do with math. If you're worried about population decline, it's birth rate (birth per capita) that matters, not TFR. It doesn't matter if your TFR is higher, but your replacement rate is lower.

deleted 4y ago

[deleted]

ramesh31 4y ago

The answer is because it can be. The Euro is a global reserve currency.

TheCoelacanth 4y ago
Norway, Sweden and Denmark aren't on the Euro. Netherlands seems to be the only country on the Euro that they're counting as northern Europe.

jakub_g 4y ago

What is the unit of the X axis on those graphs? Is it % relative to something? (% of GDP? % of something else?) Or absolute values of some sort?

mo_42 4y ago

I was getting some ideas from the text. Scandinavian countries have probably the world's best institutions. I'm talking here specifically about courts, laws, police. Also lack of corruption, excellent education, and a good labor market. In a world like this, debt becomes really just a number on paper. They can take huge mortgages and pass them on to their children (alongside with the property of course).

bigpeopleareold 4y ago

> If we consider consumer credit, the welfare-debt theory makes sense again. While consumer credit is more the exception than the norm in Europe, and almost absent in the Nordic countries, it is common in Anglo-liberal countries (UK, US and Canada) where it is used by families as a substitute for poor welfare provision. Hmm - in Norway here, it's common to see advertising for credit (lots for fixed unsecured loans.) Basically all the grocery store chains except one have their own loyalty credit card. I never watched an episode, but there is a show called Luksusfelle which tries to help people reform their out-of-control finances - I think more than once, credit cards were mentioned. I mean, it's not like the US and the regulatory environment is more consumer-friendly than the US, but I cannot imagine it as non-existent as it is said here. I am not being coldly statistical here, but it really doesn't match up with a lot of the anecdotal experiences I have.

dusted 4y ago

One of the larger crimes here in Denmark, is that debt for example for homes are tax deductible, so basically, it allows banks to make more profit, by letting the state cover some of the expense of taking out a loan. There's an old song "if you have money, you can buy, if you don't you can leave", people need to sing this to their kids a bit more often. We're an incredibly wealthy society, and yet, most people chose to live above their means.. Loaning money for cars and homes instead of simply buying cheaper ones. The last house I bought, I paid in cash, because it cost less than the down payment for many of the homes other people in my income bracket typically buy. The last car I bought cost less than the service-check for the tesla that some of the other people in my income bracket.. Living below ones means in Denmark is trivial, and yet, people feel they're too good to live within their means, it's a cultural problem.