Denmark: Debt Bomb, Waiting for an Inflationary Spark

Denmark: Debt Bomb, Waiting for an Inflationary Spark:

From the outside looking in, the Danish economy appears as blissful as the country itself, which usually tops “The Happiness Index.” The unemployment rate ticked down to 4.2% in the most recent release from 4.3% in 2016. Denmark, ranked 20th in economic complexity in 2015, has a mostly even trade balance, and $50K GDP per capita in 2016, making it among one of the richest nations in the world.

Moreover, Danish GDP-per-capita growth led in the Nordics for the past ten years, from 2007 to 2016: Denmark +28.5%, Sweden +22.0%, Norway +14.6% Finland +12.2%. Although Denmark exports substantial agricultural and natural resource-based products, they are also major players in pharmaceuticals and machinery. Top companies include AP Møller-Mærsk, Novo Nordisk, Vestas, and Danske Bank, representing shipping, pharma, clean energy, and finance.

Drowning in Debt

Nevertheless, the recent prosperity comes with a cost; one that must be paid by future generations. While the party was fueled by artificially low-interest rates (those below the rate of inflation), a debt bomb has been building, waiting for an inflationary spark to set off a crisis. The Danes out-borrow everyone, including the Americans.

This chart from the OECD (National Accounts at a Glance) shows total household debt as percent of net disposable income in 2015. The top five: Denmark, Netherlands, Norway, Australia, and Switzerland:

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H/t reader squodgy:

“Screw the Danes. They buy sweet F.A. of UK.”

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