Regulators are “Worried”- but it is way too Late

We have discussed the immense credit bubbles in Scandinavian countries in these pages several times in recent years. As it turns out, they have now become even bigger. The euro area debt crisis has had a number of side effects. One of them is that not only Switzerland, but also other countries in Europe outside of the euro zone have tried their best to keep their currencies from appreciating. This is based on the erroneous mercantilist notion that having a strong currency is somehow “bad”.

In Denmark the central bank's benchmark lending rate has been stuck at minus 0.75 percent since February. Denmark's households are incidentally the most leveraged in the world, with household debt amounting to over 530 percent of the country's economic output.

Denmark's central bank benchmark rate – stuck at a negative 75 basis points 

Denmark's three month interbank lending rates stand at minus 20 basis points, because banks can still earn a positive spread with the benchmark rate at minus 75 basis points 

Not surprisingly, Denmark's housing bubble, which had actually begun to look a bit frayed around the edges, has recently revived with great gusto. The same is happening in Norway and Sweden, two countries in which household debt, mortgage credit and house prices are likewise chasing one record after another. Regulators in these countries – this is to say, members of the same class of bureaucrats that is responsible for creating these bubbles with ultra-loose monetary policy in the first place, are now declaring themselves to be “worried” about the monsters they have let loose. According to the Financial Times: