Why northern Europe is so indebted (2021)
theloop.ecpr.eu
theloop.ecpr.eu
UK is close to 100% debt to GDP at the moment, the highest in recorded history.
I follow some stuff about public transit, and Sweden has lower construction costs than the UK by an order of magnitude.
When there is war, financial crisis, etc, money seeks the safest harbor. The safest harbor in the world today is the US. Rising interest rates, war in ukraine, competition with china, etc means that the world is buying treasuries. Demand for dollars goes up, demand for most other currencies goes down.
If there is a significant crisis in the world and the dollar doesn't gain in strength, then we'll know a paradigm shift has occurred.
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.
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.
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.
We already subsidize home ownership by quite a bit. We don't need to subsidize it more.
Couldn't you use the same argument to say that poor people should pay more in taxes because they benefit more from it?
No. Their wealth doesn’t come from government provided services.
Clearly the wealthier you are, the more benefit you are getting from taxes because the government stops everyone else from taking your wealth.
For whatever it’s worth it looks like at least Sweden and Norway have property taxes. Didn’t check others.
China is an example of a country without them. Except you can’t own land in China. Your house is effective leased from the government. So not exactly an improvement.
What happens if you don't pay this? Can they take your home away and sell it? They can do that in the US, BTW.
But I don't really see how that could happen if you didn't also have a mortgage. You would easily be able to finance this, unless your property was also pretty much worthless. And if it was practically worthless you'd either not pay any property tax at all, due to deductibles, or pay basically nothing.
In Norway property tax (where applicable, it's up to local government) is measured as a percentage of the taxable value of primary residence. Usually 0,2 per mille or around that. The taxable value is less than the property value. It's a progressive scheme, everything below 10MNOK is measured as 25% of property value (marked value-ish), and 75% for everything over 10MNOK. For secondary houses the taxable value is set to the property value.
I think we should tax land, but not buildings. Land shouldn't be horded and should be distributed to folks who are best to make use of it for societal's benefit.
The idea of building enough nest egg for retirement doesn't make sense to me, especially if we take the long term perspective. It only make sense because we age over time and thus get weaker and frail. If we were always healthy as a horse, then we would have periods in which we work for our living, but not permanent retirement.
land under cities and any density populated areas is area of human civilization, but usually not humane civilization, people tend to fix human artificially created problems with artificially created solutions usually creating new problems later
land shouldn't be hoarded if every national has his own piece of it guaranteed (only inheritable) then there is no legitimisation for hoarding more
but the piece should be big enough to let person feed himself from it
then the rest can be city land for lending by nation to companies and all the rest is the shared coowned land like forests for mushroom collecting, limited hunting or fishing
If no corporation or foreigner can hoard your land you fixed most of the problem already
we decide our health and lifespan with everyday choices at shop and choosing place of living, working and it's water, air and soil quality
ofc some of us get born with a better starting point but that's what maintaining common standards is for
saving in inflative currency is irrational itself
retirement system is a lottery game to keep people focused on working and paying taxes only, schooling to make obedient workers and alimentary system is a divorce maker to break society into individual atoms
it's to block any need to group spontaneously, plan own future yourself, organise organically and oppose actual system
people use their things best for themselves never for societal benefit especially that there is no one universal definition of societal benefit
if every person has own idea about it it means you would give big share to some individual(s) who would build their idea of societal benefit that could contradict majority's sense of their benefit and common benefit
btw if you make it uncommon it by definition becomes non common
but I still like your sense of need of meritocracy and helping those more capable - still most important part lacking here is keeping them bound with bottom of pyramid they come from and serve, sharing fruits if their skills so the bottom would proliferate yielding new exceptional units lifting everything up continuously.
... that you pay for the necessary law enforcement, justice, defense, etc.
Why do you expect those to be free?
I did not say anything about anything having to be free.
Since you brought it up. No, they are not free. We have to pay for them. My point is that I should be able to own my paid-off home. The government should not be able to take my property away because of taxes.
Payment for the services you mention should have no connection to home ownership. Everyone uses them. Everyone pays for them equally (with some consideration for low income individuals).
We need to stop thinking about taxing everything from farts to homes to pay for the running of society. Send everyone a bill on a monthly, quarterly or annual basis. We all pay for it. Don't tax my farts.
If you don't own property, you might still benefit from these services. But they don't affect your net worth.
Depends on where you live. Property values could actually increase! Portland, Oregon, for example.
Disclaimer: Since so many these days have lost the capacity to recognize and accept it...that was a lame attempt at humor. Please don't lose your shit over it. This is called a "joke". Jokes were an accepted form of social interaction many decades ago.
Suppose you own a home, free and clear, no mortgage, no property taxes.
Once a quarter, you receive a tax bill (calculated in whatever equitable way you prefer) to cover your share of the upkeep of our shared society.
What action do you propose society take if you choose not to pay that bill? There's basically three routes here:
1) Take no action. The quarterly tax system becomes a voluntary system, and those who continue to choose to pay feel more and more bitter towards those who don't.
2) Debtors prison. You owe money to the government, and they are permitted and expected to imprison you until payment is made (which, if you were relying on income for that payment, might pose challenges).
3) Confiscating your real wealth. If you do not voluntarily pay your quarterly tax, the government can compel you to, by taking it in the form of assets you hold.
Our current society has recognized (3) as the least bad option of the above. With your proposed movement to quarterly tax bills, but without a change in this overarching policy… the government will still take your house if you do not pay your taxes, even if those taxes are not "property" taxes and do not scale with the value of the property. What else can they take, in the end?
You are missing an entire family of methods that would work quite well and not lead to the kinds of problems periodic billing would engender.
Sales tax, VAT, etc. is one form of this.
And then, of course, there's income tax.
We have somehow lost control of the simple idea of the "village" getting together to pay for stuff by exploding into a system of thousands of different taxes nobody can keep track of. The end result is massive waste of resources, bad management, substandard results and large government organizations that are mostly incompetent at nearly everything they do.
My street has been repaved twice in 25 years. They tell me they are planning on repaving it yet again next year. This street is 25 years old. It was as close to perfect as one could get when I moved in, months after the built it. It was just as perfect just before they repaved it (twice). It is perfect now. And yet, they are going to do it again.
The financial waste on this one street alone is nothing less than vomit-inducing. They are doing this to keep unionized government-agency workers employed. Oh, yes, they tore-up and rebuilt our perfect sidewalks a few months ago. Absolutely and utterly unnecessary.
While I do recognize the idea of sending people a bill for taxes isn't great, sometimes I wish we had that, maybe for a year or so.
Why?
People have no clue whatsoever about how much of their money is being consumed by hundreds, if not thousands, of taxes they encounter on a daily basis. It would be fantastic to see one lump-sum bill show-up every month. I guarantee you voting decision would change radically after just a few months of that. What they are doing to the population through this explosions in taxes should be criminal.
I am replying to your comment proposing periodic billing…
A comment on HN isn't a full study of all available options and ideas along with comparisons of their effectiveness, consequences and probabilities of success.
Besides, given the impossibility of property taxes ever going away, this is very much on the category of...
Just because things need to be paid for doesn't mean it has to be through a property tax.
Many states have some method of limiting increases, which helps you budget for the future costs, as long as the rules don't change. Some states, I think Nevada is one, have a program where you can pay an actuarial estimate and be set for the rest of your life as long as you don't move. Many states have programs where you can defer property tax payments until you move or die. Many also have programs specifically to low income seniors and people with disabilities.
> Some states, I think Nevada is one, have a program where you can pay an actuarial estimate and be set for the rest of your life as long as you don't move.
And, you can always have a tiered system, for example, 0% on the first 1 million, then 0.5% on the next 500k, etc. that way at least people can downsize to something that they can own.
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.
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...
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.
https://www.statista.com/statistics/1100168/single-family-ho... https://www.noradarealestate.com/blog/texas-housing-market/
But across the country the median is more than double from what it was.
I'm from slovenia, former yugoslavia, and the situation here is the same, making it practically impossible for an average couple to buy anything here (and we're worrying about the demographics, lol).
Back in yugoslav times, government built large apartment building complexes, by basically finding an empty field at the end of the city, saying "this is a city, farms should be outside the city, not within it", and building a complex of apartment buildings, and then another, and then a school/kindergarden, and then two or three more. And by complex I mean literally tens of 5+ story apartment buildings. Since it was socialism, those apartments would be rented out to workers by the government.
On the other hand, people who wanted a house (instead of an apartment) could buy a plot of land, and build houses themselves... and i mean literally themselves... some of them would even dig the basement level by themselves, ask friends for help, every friday after work go to a buildng materials store, fill up their car with a few bags of cement and bricks, lay a layer of two down, and then wait for the next weekend. Fascade, insulation, sometimes even the upper floor could wait for better times, while people moved into the ground floor. Dealing with permits and papers was a thing "to deal with later".
Then came independence, the government didn't want to deal with so many apartments and sold them to renters for a price of a mid-range car.
And the current generations? Fucked. Like totally.
A field right next to the roundway around the city? Sure [1]. Next to highrises? Sure [2]. New large apartment complexes? Nope. want to buy a few houses and build a larger apartment building? You better literally be friends with the mayor, since zoning doesn't allow more than two-floor two-apartment buildings. Want to build on an empty field? Nope, zoning doesn't allow it.
People complain we literally need tens of thousands of new apartments, and all that's being built is ~4 "luxury" apartment buildings in relatively shitty locations (but still better than nothing) and every now and then someone gets a blessing from the mayor to build a 6-8 apartment building in a place where an old house once was. ...and then those apartments are bought up for way above what they're worth by people who then rent them out via airbnb.
What if you're magically somehow able to aquire some land where it's allowed to build stuff? Permits and other papers take years. Want to build yourself? Nope, no way. Want friends to help? If they're not licenced contractors and giving out receipts, they're considered as working illegaly and inspections check those things a lot.
Add to this some NIMBYism, where the neigbor complains if you're building a house there, and the situation is even worse.
And public housing? The government built one complex of those, and the build-price was higher than retail price a few years before it was built (like 2800eur/m^2)... because well, government and corruption.
So yeah...
In the end, this is how you get revolutions and terrorism... You're a good worker, save money, save 10k eur in a year (a lot for most), and the apartments you were looking at are 30k more than last year. Why bother? People have nothing left to lose, because the average rent is above average pensions, so without something huge changing soon, a lot of people will be homeless and literally without anything to lose anymore.
[1] https://goo.gl/maps/iL7962VtEzThwgAb8 [2] https://goo.gl/maps/6Do3W3KWXWKpxw1DA
(compared to eg. manhattan or some other locations, where there's literally no more place to build, not even up in some areas)
Finland for example has like 3-5 areas where prices are going up or are stable. In others like dying towns and such housing is sometimes essentially worthless. Or even negative value. Like there are row houses(a special company owned by tenants/individual landlords), can't get loans for needed renovations. Because value of building is less than the renovations cost.
https://www.washingtonpost.com/business/denmarks-mortgage-ma...
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=3DC3C894DA...
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--ex...
But the variable mortgages are a bit sketchy, they could very well be a bomb under housing market -- and could cause prices to collapse.
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_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.
> 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.
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.
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.
Your understanding is wrong, immigration is rampant in Sweden with around 150.000 people (about 1.3% of the population) coming in every year. Some 25% of the population was born outside of the country by now, this number is only growing. Germany and the Netherlands also see very high migration although the numbers are a bit lower seen relative to the population. While these newcomers do contribute to a younger population they also have made the male-female distribution quite lopsided since the vast majority of migrants is male. Sweden now has the same problems as China has there with about 116 males for every 100 females in the 16-18yo age bracket - these numbers may be off by a bit (i.e. the difference may have grown) since I last checked these statistics a few years ago. Unfortunately the employment statistics do not look good for these newcomers which have trouble getting into the Swedish labour market with its high requirements on education which actually only increases the problems the country has in keeping the welfare state up and running. Pension ages are going up to compensate for this which goes against what the population was told when they were faced with a large influx of newcomers who were supposedly 'necessary for the future of the welfare state'. Had this been the case that welfare state would be a Ponzi scheme and any newcomer who was foolish enough to fall for the lure would end up working for benefits he would be sure never to get. In reality it is those who have already worked to build up the welfare state who get to pay for a large fraction of the newcomers - e.g. Somalian immigrants to Sweden are only ~20% self-supporting with the rest depending on government benefits, 37% of migrants from Africa and the Middle East - who make up the majority of non-EU migrants coming to Sweden - were self-supporting in 2016 with the other 63% being dependent on government benefits. The Swedish welfare state will need to be reformed or it will not survive.
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
Also I’ve found that housing prices follow closely the ability to take loans up here.
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.
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.
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?
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.
[1] https://www.prnewswire.com/news-releases/what-percentage-of-...
[2] https://www.nytimes.com/interactive/2015/12/24/upshot/24up-f...
> Where the hell are people "moving across the continent every few years"?
Because the answer is right here, on this very website. They are asking us* to prove our existence.
Perhaps it'd be more correct to call it incongruity. Perhaps also more correct to have replied directly to the "Where the hell...?" comment as opposed to this one. I hope this isn't a segue into an "Alanis Morrissette isn't ironic" internet conversation.
* - some of us
This is a strawman.
Second, that is not evidence in the slightest of people doing this "every few years". Hell, most people don't want to move locally that often, let alone an expensive and very disruptive long distance move.
This is geoblocked in slovenia, but the google summary says:
> Using 2007 ACS data, it is estimated that a person in the United States can expect to move 11.7 times in their lifetime
If we neglect the student ages for those without student housing or living nearby, most people here move from their parents to their own place, maybe again if they're renting, and then to a "better place" if they can afford one later on. 11.7 times is way above what most people here do.
80 years of life, 11.7 movings, 6.8 years between moving. Realistically more often than that during younger years, since I'd guess retired people move less often.
But a mortgage is debt … ?
I’m not sure this accounts for it. Paying a mortgage “instead” implies it’s merely a replacement. But in reality the debt is 2-4x higher than other OECD countries.
This stat makes it sound rather unsustainable:
>Four in 10 mortgage borrowers in Sweden are not paying off their debt, and those that are repaying the principal do so at a rate that would on average take nearly a century.
https://www.cnbc.com/amp/2014/08/24/swedish-household-debt-s...
I believe this is no longer true. Since 2016 there is an amorteringskrav (amortization requirement) on housing loans. All new housing loans with a loan-to-value ratio of 70% or higher must pay off at least 2% of the loan per year, and if you're below 70% then you must pay off at least 1% per year until you're below 50%. You must also pay an additional 1% per year if you've borrowed more than 4.5 times your yearly salary (excluding taxes).
When you buy a house/apartment it's most common to have an initial loan-to-value ratio of 85% (since you're only allowed to get a housing loan for up to 85% of the property's value).
The education isn't free. It's covered by taxes so you, and everyone else, pays for it for a long time. There's quite an expense to have the instructors, buildings, etc.
I'm glad you think the people who haul away garbage, are plumbers, are electricians, etc have nice jobs. Those jobs exist and people do them in those stable societies.
> paying a mortgage instead of debt
A mortgage is a form 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.
This is where things get weirdly complicated. Where I live there are safety nets. The state has said that only about 10% of what's available is used. Where there are safety nets many people don't try to use them. I know people who complained about a lack of safety nets and didn't take advantage of the ones available to them.
> Hard to get a loan, so end up renting for longer, and in turn have a lower average debt.
It's far more complex than that. For example, businesses are buying homes up for far more than asking price and what most people can pay. So they can turn around and rent them. This is all driving up the asking price for homes.
> 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.
This really depends on where debt is. In the US a lot of debt is to fuel consumerism. Or, to have more things now. A lot of the parts of society drive people to this. It's become cultural.
That's just directly vs indirectly, isn't it?
Hopefully it leads to higher income jobs which leads to more taxes paid by the (now) student in the future, leading to more money that can be spent on educating even more people...
It's stability of ability to service debt that matters, not the debt itself.
High debt / income ratio at the micro level is bad, of course.
Educational attainment in the Nordic countries isn't actually that good. It might have been at one point. These days I think it sometimes looks good because some statistics count having any experience at higher levels, which having cost-free education facilitates. If you instead look at actual degrees the Nordic countries are average among OECD countries.
Bachelor's degrees
OECD Average 18%
Iceland 21%
Denmark 20%
Norway 20%
Sweden 18%
Finland 20%
Source: https://www.oecd-ilibrary.org/sites/b35a14e5-en/1/3/2/1/inde...
At least in Finland, the educational attainment peaked with the people born in the late 70s. As higher education continues to grow in many (most?) peer countries, young Finns are no longer particularly highly educated, which may become a problem in the future.
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.
"Why Northern Europe is so indebted" sounds like clickbait...
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”.
- Ambrose Bierce, Devil's Dictionary