Re: Does Debt Matter

[Dennis R Redmond <dredmond@xxxxxxxxxxxxxxxxxxxxx>]

On Wed, 29 Oct 1997, S R Larsson wrote:
> It deserves to be pointed out also that deflation has its own diabolic
> effects. Sweden (our beloved example of galactic misery cause by galactic
> ignorance) has been on a deflation tour for a year now. As a consequence,
> no corporations invest for domestic production, since the value of the
> products let out tomorrow will be too low to pay for the investment as
> financed today.

This seems consistent with Sweden's welfare cuts and high interest rates
(short rates were way too high in 1995 and 1996, and only recently were
lowered to tolerable levels). On the other hand, the Economist claims
that Swedish wage growth is one of the highest in Europe, an apparent
contradiction (either the LO is on the ball, or else the Economist doesn't
know what it's talking about, and is just trying to smear what's left of
the Swedish model -- it wouldn't be the first time the London financiers
got it wrong). I'd be interested to hear how monetarism is playing out in
Scandinavia these days. Are they taking the axe to the welfare state in
Denmark too? Or has 14% unemployment in Finland and Norway's oil surpluses
kept the monetarists at bay? One final question: is Scandinavian capital
investing heavily in the Baltics, or is this mostly hype?

-- Dennis