Keep an eye on northern Europe. A storm may be brewing.

In the far north of Sweden, the sun doesn’t set at all in June, but the region is in complete darkness during January. The northern hemisphere has just passed over its solstice and daylight will now dissipate for the next six months. The Swedish economy is also showing signs that it too may be fading into the darkness.

The most recent consumer confidence survey in Sweden revealed a nation increasingly concerned about their own personal finances as the housing market slumps. The National Institute of Economic Research’s consumer confidence indicator fell to the lowest level in two years. The Swedish housing market boomed between 2013 and 2017, but now the tell-tale signs of bust are apparent. Although house prices have stabilized after dramatic falls in the second half of 2017, the annualized rate-of-change has become increasingly negative since January. Social mood is waxing negatively (the stock market is down 9% since November 2017) and nationalist voices are emerging; there is even criticism of Sweden’s fabled social security system’s ability to cope given the influx of immigrants. Swedes are seeing their assets falling and that is feeding through to their appetite for debt. The chart below shows that major financial institutions’ lending to Swedish households has been slowing on an annualized basis since 2016. This is disinflation of credit. Deflation of credit occurs when the rate becomes negative.

Professor Steven Keen, one of the leading economists in the world and one of the few who saw the 2008 credit crisis coming, highlights both Sweden and Norway as being at risk of credit deflation. Both countries have high private-debt levels, and credit accounts for a healthy chunk of total demand in the economy.

Oh, and then there’s the small matter of a looming, global trade war. Sweden is home to some major global traders such as Ericsson, Volvo, Ikea and H&M, and global trade accounts for around half of Sweden’s Gross Domestic Product. The Swedish krona has crashed with the trade-weighted index down over 6% since January. The protectionist genie is out of the bottle and it’s unlikely to go back in anytime soon. With money market rates already negative, Sweden’s central bank (the world’s first, fresh from celebrating its 350th anniversary) has nothing left in its locker to fight a depression.

It seems increasingly likely that Swedes are preparing for a big freeze.

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