Exchange traded funds that track Scandinavian or Nordic countries have attracted investors with their stable triple-A credit, but some are growing wary, pointing to the region’s rising household debt and potential housing bubble as a cause for concern.
Denmark, Finland, Norway and Sweden sport stable AAA credit ratings, which have driven down borrowing costs and fueled consumer borrowing, reports Peter Levring for Bloomberg.
Now, the International Monetary Fund and Organization for Economic Cooperation and Development argue that the country’s household debt levels pose a threat to stability.
“You wonder if that’s a crisis waiting to happen,” Nobel Laureate Paul Krugman said in the article. “I’m not sure, but it’s nervous-making.”
For instance, in Denmark, consumers owe 321% of disposable income, a world record. In Sweden, debt is close to 180%. In Norway, private debt hovers around 200%.
Meanwhile, the three countries have seen their housing markets jump since the global financial crisis in 2008.