(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
Cheap credit over many years has led to debt rises, misallocations and inflation in welfare goods throughout the industrialized world. Price levels and wages in countries such as Greece, Portugal and Spain are going down, largely due to the imbalance in competitiveness between the eurozone countries. The alternative is that the cost level had to increase 50 – 70 percent in countries such as Germany. It is excluded for German competitiveness. Finally, the market settles this imbalance as a result of politicians and the central bank's long-standing credit party. It looks like a soaking wet sponge full of credit, inflated commodities, services, salaries and mispricing. In a zero-interest regime, artificial bubbles are created in the economy – housing bubbles and stock exchange bubbles – which burst as market forces squeeze everything out of the sponge.
Breakdown. The road to disaster is short in the housing market. Imagine a house with a market value of NOK 10 million, which is mortgaged with 95 per cent. Then the market falls by 25 percent. The bank asks you to cover the SEK 2 that is missing in equity. Imagine that the mortgage rate rises to a normal level of six to seven percent, and that you have to pay twice as much interest expenses. Imagine that you cannot cover the equity requirement or the increased interest expenses, and that inflation reduces your purchasing power by five percent, and that you do not get this compensated with higher wages. What if the housing market falls by 000-000 percent? How long will it take for the property to be forcibly sold? To understand the losses that banks are inflicting, you can multiply the example by hundreds of thousands of homes, as well as all other types of overvalued assets financed by banks and financial institutions without adequate collateral and reserve capital. The consequences for banks and the financial market in such a scenario are disastrous.
To put the figures in perspective, an analysis of the US housing market shows that a 25 percent fall in value relative to housing debt of about $ 11 trillion means a loss of about $ 2,8 trillion. Available capital / cash in the US banking sector is approximately two trillion dollars. It involves a financial collapse. If we look at the UK, France and Spain and keep other indebted European countries out, a 25 per cent fall in value will mean the eradication of the European banking sector.
In Norway, huge sums are in the hands of a comprehensive state apparatus with no concept of how to build and maintain viable businesses – or handle the people's money. The state operates with a deficit of 13–14 per cent (this is 5–6 per cent of our gross domestic product (GDP)). The government's pension obligations exceed the value of the Petroleum Fund, and the undercoverage increases day by day. The backlog in requirements for public maintenance is equivalent to half an oil fund, and we waste about 40 billion every year due to public tender rules. 35 per cent of the state budget goes to social security expenses, and every fourth boy goes straight from upper secondary school to NAV. Welfare-minded municipal politicians have invested billions of taxpayers' money in projects that do not provide returns, such as dead capital in cultural centers and other prestigious social benefits. At Tjøme, the gross debt burden is around 400 per household. Tjøme is similar to a bankruptcy estate, and many other municipalities as well.
Public disasters. Constantly new regulations and bans have led to a cost level that is around 60–70 per cent higher than our trading partners. Norway is expensive and lacks competitiveness. In a world where almost all assets fall in value and the ghost of deflation threatens, Norway is probably the country that is hardest hit – because this is where the fall height is greatest. 85 per cent of Norwegians' debt is related to their own housing, and a housing collapse will hit the population hard.
The American economist and author Bill Bonner has stated that too much of something good always ends in disaster. The statement fits well with the Norwegian welfare state: one example is the ungovernable NAV, another is the health service, which demonstrably provides poorer health services than Switzerland at three times as high a price.
According to Bonner, public disasters have some basic similarities:
1. Disaster is a product of rational thinking, that is, of well-meaning, intelligent people. 2. The disaster is always the result of large-scale planning, most often supported by the police and government. 3. The feedback loop is turned upside down – instead of reacting rationally to the budget gap or system failure, the pain caused by the problem is shifted to others, so that those responsible can continue as before with their harmful pattern of action.
Increasing demands. The systemic crises have their own internal justice by creating "zoombies" – people who earn status-wise or financially from value-degrading activities.
It always starts with good intentions: You establish a good health care system, a good working life and good social security, pension and sick pay schemes. The first investment gives a good return on invested capital. Secondly, the return is gradually reduced. When the return is negative, the crisis and loss drain increase, as we see in the health service and in NAV. Responsibilities do not work, as we see in parts of the state administration.
The catastrophe is inevitable because it is rational, well-meaning people who control it all, and because the system rewards those who profit from it, ie the zombies.
In this administrative state, ever greater demands are placed on public services and regulations. Welfare goods are financed by taxes, fees and debts, and gradually the price of services and the cost level in society rise. A vicious circle is created with persistent inflation of goods and services, wages, holidays and leisure and a high level of costs. The result is goods and services that society cannot pay for without increasing taxes and fees and raising more and more loans. The state is a solid loss-making enterprise.
What if the housing market falls by 40-50 per cent? How long does it take before the home is forcibly sold?
Statistics from the OECD show that the public sector in Norway has grown from about 29 per cent in 1960, to about 50 per cent today, measured as a share of gross domestic product (GDP). In comparison, the figure for the United States is about 27 percent in 1960 and about 40 percent today. A study by John W. Dawson and John J. Seater (Federal Regulation and Aggregate Economic Growth) concludes the following for the United States: If government regulations had remained at the 1949 level, US GDP would have been $ 54 trillion instead of $ 18 trillion. This means that the average American would have had almost one million kroner more to live on every single year.
