Swedish politics and interest rates…

Intellectual inbreeding is common in Swedish Universities according to the major Swedish newspaper, SvD, that has reported on ”Academic tribalism” in Swedish universities according to Mr. Bo Rothstein, professor of political science at the University of Gothenburg. “You are foreclosed in your own institutions that are populated by like-minded people and thus do not expose themselves to the critical examination that is necessary.”

The same criticism has been claimed here in Finland, where hug budget cuts have been made in tertiary education. You can expect to see further discussion on this topic from a number of Finnish professors in the coming weeks.

The new government in Sweden is beginning to find its feet as in fighting between the smaller parties in the government starts – so far these flare ups are rather modest. A more important challenge for the government there will be the inevitable increases in interest rate increases and their impact on housing loans which are really long. Many households have 60 year mortgages which are repaid very slowly. When interest rates are low or close to zero then personal consumption can boost the economy. But Sweden has a very independent Central bank and they have their own currency that has been devalued by some 20% this last decade to keep exports selling. Low interest rates and a strong demand for urban housing have boosted house prices and mortgage volume has soared. The Finnish born central banker, Mr. Stefan Ingves, an austerity man, has been forced to increase interest rates, and further rate increases are on the way. There can be no doubt that when rates go above 4% or 5% many families will see that their purchasing power will be severely curtailed as their monthly loan repayments increase! Then the Social Democrats & Co. will face plenty of angry voters…

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