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So, will we get a Royal Swedish Shitpile(TM) too?

That is, a domestic subprime crisis?

I don't think it'll be a subprime crisis as such, no. Too much regulation and oversight for that. And we'll probably not see any derivatives scams blow up too messily either, judging by the bank failures in Denmark so far.

But Sweden does have a liberalist government that's giving handouts to homeowners and blowing hot air into a housing bubble (or at least were before the summer break - things might be a tiny bit different now).

In Denmark (recall that we've had a liberalist government for the last seven years instead of the last two, so the process is far more advanced here than in Sweden), it's the commercial borrowers that have killed the bankrupt banks.

The logic goes something like this: Liberalist governments downsize property taxes and deregulate casino loans. That creates a bubble on the real estate market. Various and sundry real estate developers base their business model on the bubble continuing (in some cases by mistake, in others by deliberately engineering outright Ponzi scams). Banks see the huge growth in these firms during the bubble years. Banks lend huge sums to dodgy firms. Bubble bursts. Banks go belly-up.

This is, I think, a somewhat different beast from what happened in the US and UK. As far as understand, in Anglo-land, the story goes: Governments remove the rules forbidding banks from engaging in pyramid scams (or just systematically fail to enforce them). Banks engage in pyramid scams. Bust happens. Banks go belly-up.

So the Shitpile(TM) appears to be at one remove from the Scandinavian banks themselves, whereas it's been injected intravenously into the Anglo banking system. Which would explain why it's only the small and poorly run banks who go belly-up in Denmark at the moment.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Oct 6th, 2008 at 04:57:54 PM EST
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