{"id":23100,"date":"2017-03-05T12:22:25","date_gmt":"2017-03-05T17:22:25","guid":{"rendered":"http:\/\/olduvai.ca\/?p=23100"},"modified":"2017-03-05T12:22:25","modified_gmt":"2017-03-05T17:22:25","slug":"are-100-year-mortgages-next-effects-of-negative-real-interest-rates-on-nordic-housing-bubble","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=23100","title":{"rendered":"Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2017\/03\/04\/negative-real-interest-rates-on-nordic-house-price-bubble-100-year-mortgages\/\">Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>Wage Growth vs. Housing Price Growth<\/strong><\/p>\n<p>By Nick Kamran, an American living in Oslo,\u00a0<a href=\"http:\/\/lettersfromnorway.com\/\" target=\"_blank\">Letters from Norway<\/a>:<\/p>\n<p>Historically, central banks throughout Europe had one mandate: price stability. They did not worry about employment or economic growth, only currency integrity. Setting interest rates to contain inflation ensured that a Krone or a Euro would purchase tomorrow what it could today. Nevertheless, since the ebbing of the 2008 financial crisis, The ECB, of which Finland is a member, officially\u00a0<a href=\"https:\/\/www.ecb.europa.eu\/mopo\/intro\/objective\/html\/index.en.html\">added<\/a>\u00a0full employment and economic growth to their mandate. The\u00a0<a href=\"http:\/\/www.norges-bank.no\/en\/about\/Mandate-and-core-responsibilities\/Monetary-policy-in-Norway\/\">Norwegian<\/a>,\u00a0<a href=\"http:\/\/www.riksbank.se\/en\/Press-and-published\/Speeches\/2016\/Skingsley-Developing-the-central-bank-mandate\/\">Swedish<\/a>, and\u00a0<a href=\"http:\/\/www.nationalbanken.dk\/en\/financialstability\/Pages\/default.aspx\">Danish<\/a>\u00a0Central Bank\u2019s followed suit, stating that they would consider \u201cother factors\u201d than inflation when basing an interest rate decision.<\/p>\n<p>Hence, instead of remaining impartial \u2014 leaving it to lawmakers, markets, and the public to deal with the prevailing interest rate \u2014 the central banks became involved in policy making. Adding employment and economic growth to their mandate equates to the National Institute of Standards changing the definition of the meter to help an engineering firm, working on a major bridge project, meet budgetary and timeline constraints. In addition to creating a dilemma, the additional mandates made central banks appear politically biased.<\/p>\n<p><strong>The Conundrum<\/strong><\/p>\n<p>In an attempt to balance, what central bankers perceive as two opposing forces, inflation and unemployment, they chose economic stability over maintaining price stability. The other option, raising rates would have led to greater short-term unemployment. The central banks pushed benchmark rates all the way down, nearing zero in\u00a0<a href=\"http:\/\/www.norges-bank.no\/en\/Statistics\/Interest-rates\/Key-policy-rate-monthly\/\">Norway<\/a>\u00a0(.5% \u2013 Key Policy Rate ) and\u00a0<a href=\"http:\/\/www.nationalbanken.dk\/en\/marketinfo\/official_interestrates\/Pages\/Default.aspx\">Denmark<\/a>\u00a0(.05% \u2013 Discount Rate), hitting it in\u00a0<a href=\"https:\/\/www.ecb.europa.eu\/stats\/policy_and_exchange_rates\/key_ecb_interest_rates\/html\/index.en.html\">Finland<\/a>\u00a0(ECB at 0% \u2013 Refi Rate) and going negative in\u00a0<a href=\"http:\/\/www.riksbank.se\/en\/Interest-and-exchange-rates\/\">Sweden<\/a>\u00a0(-.5% \u2013 Repo Rate).<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble Wage Growth vs. Housing Price Growth By Nick Kamran, an American living in Oslo,\u00a0Letters from Norway: Historically, central banks throughout Europe had one mandate: price stability. They did not worry about employment or economic growth, only currency integrity. Setting interest rates [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[14950,14952,2339,14951,1241,6118],"class_list":["post-23100","post","type-post","status-publish","format-standard","hentry","category-economics","tag-100-year-mortgages","tag-letters-from-norway","tag-mortgages","tag-nick-kaman","tag-norway","tag-wolf-street"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23100","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=23100"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23100\/revisions"}],"predecessor-version":[{"id":23101,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23100\/revisions\/23101"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=23100"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=23100"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=23100"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}