MONEY The Economy

Think the Fed Should Raise Rates Quickly? Ask Sweden How That Worked Out

Raising interest rates brought the Swedish economy toward deflation Ewa Ahlin—Corbis

Some investors are impatient for the Fed to raise interest rates. They may want to be a little more patient after hearing what happened to Sweden.

If you’re a saver, or if bonds make up a sizable portion of your portfolio, chances are you’re not the biggest fan of the Federal Reserve these days.

That’s because ever since the financial crisis, the nation’s central bank has kept short-term interest rates at practically zero, meaning your savings accounts and bonds are yielding next to nothing. The Fed has also added trillions of dollars to its balance sheet by buying up longer-term bonds and other assets in an effort to lower long-term interest rates.

Thanks to some positive economic news — like the recent jobs report — lots of people (investors, not workers) think the Fed has done enough to get the economy on its feet and worry inflation could spike if monetary policy stays “loose,” as Dallas Fed President Richard Fisher recently put it.

If you want to know why the argument Fisher and other inflation hawks are pushing hasn’t carried the day, you may want to look to Sweden.

Like most developed nations, Sweden fell into a recession in the global financial crisis. But unlike its counterparts, it rebounded rather quickly. Or at least, that’s how it looked.

As Neil Irwin wrote in the Washington Post back in 2011, “unlike other countries, (Sweden) is bouncing back. Its 5.5 percent growth rate last year trounces the 2.8 percent expansion in the United States and was stronger than any other developed nation in Europe.”

Even though the Swedish economy showed few signs of inflation and still suffered from relatively high unemployment, central bankers in Stockholm worried that low interest rates over time would lead to a real estate bubble. So board members of the Riksbank, Sweden’s central bank, decided to raise interest rates (from 0.25% to eventually 2%) believing that the threat posed by asset bubbles (housing) inflated by easy money outweighed the negative side effects caused by tightening the spigot in a depressed economy.

What happened? Well…

Per Nobel Prize-winning economist Paul Krugman in the New York Times:

“Swedish unemployment stopped falling soon after the rate hikes began. Deflation took a little longer, but it eventually arrived. The rock star of the recovery has turned itself into Japan.”

And deflation is a particularly nasty sort of business. When deflation hits, the real amount of money that you owe increases since the value of that debt is now larger than it was when you incurred it.

It also takes time to wring deflation out of the economy. Indeed, Swedish prices have floated around 0% for a while now, despite the Riksbank’s inflation goal of 2%. Plus, as former Riksbank board member Lars E. O. Svensson notes, “Lower inflation than anticipated in wage negotiations leads to higher real wages than anticipated. This in turns leads to many people without safe jobs losing their jobs and becoming unemployed.” Svensson, it should be noted, opposed the rate hike.

image (8)
Sweden

Moreover, economic growth has stagnated. After growing so strongly in 2010, Sweden’s gross domestic product began expanding more slowly in recent years and contracted in the first quarter of 2014 by 0.1% thanks in large part to falling exports.

As a result, Sweden reversed policy at the end of 2011 and started to pare its interest rate. The central bank recently cut the so-called “repo” rate by half a percentage point to 0.25%, more than analysts estimated. The hope is that out-and-out deflation will be avoided.

So the next time you’re inclined to ask the heavens why rates in America are still so low, remember Sweden and the scourge of deflation. Ask yourself if you want to take the risk that your debts (think mortgage) will become even more onerous.

TIME movies

Watch a 72-Minute Teaser for a Month-Long Movie, If You Dare

Ambiancé
A scene from Ambiancé Anders Weberg

But the movie's it's promoting is WAY longer

An hour and change is on the short side for a feature-length movie — but it’s unheard of for a teaser.

Until now.

Swedish artist Anders Weberg has recently unleashed upon the world a 72-minute teaser for his not-quite-upcoming film Ambiancé. The clip, if you can call it that, will be live on Vimeo until July 20. (It went up last week — hat-tip to the Guardian for catching it today.) The teaser, which is pretty much abstract or mysterious images set to modern music, “has the intent to convey the mood and tempo from the full piece,” Weberg writes on his website, the aptly named thelongestfilm.com.

The teaser isn’t actually that long, proportionately: it’s less that 1% of the length expected for the finished project, a 30-day-long film that will be completed at the end of the year 2020. (A similarly paced teaser for a two-hour movie would be just 12 seconds long.) The concept for Ambiancé is nothing if not ambitious: Weberg plans to show it once and then destroy it, which will be the end of his “relation with the moving image as a means of creative expression.”

Another, longer trailer is due in 2016.

TIME intelligence

WikiLeaks Teases ‘Very Important Secret Document’ Release

Julian Assange
WikiLeaks founder Julian Assange speaks to the media inside the Ecuadorean embassy in London on June 14, 2013. Anthony Devlin—AFP/Getty Images

While Julian Assange gives journalists some World Cup predictions

Two years after WikiLeaks founder Julian Assange walked into Ecuador’s embassy in the U.K. seeking asylum, his whistleblowing group says it is set to release new classified documents pertaining to “international negotiations.”

WikiLeaks offered little detail on its forthcoming release except to say it contains information pertaining to around 50 countries, including Canada.

In a conference call with journalists from the Ecuadorean embassy in London on Wednesday, Assange — who remains publisher of the secret-spilling group — offered no indication that he intends to travel to Sweden to submit himself for questioning by prosecutors over allegations of sexual misconduct made roughly four years ago.

Prosecutors have declined offers to meet with Assange at the Ecuadorean embassy in the U.K., his attorney said Wednesday. According to WikiLeaks, “new information” pertaining to the Swedish investigation will be revealed next Tuesday, though the group would not offer further details.

Assange has not been guaranteed safe passage to Ecuador, which has granted him asylum amid a presumed U.S. Department of Justice investigation into WikiLeaks, and has spent two years confined to Ecuador’s British embassy.

Assange’s supporters say the U.K. has spent about $10 million just on policing the embassy in order to apprehend Assange should he leave its confines. He admitted to journalists this week that he had managed to watch the World Cup from his embassy home.

“The reception in this building is quite difficult, but perhaps it makes it a bit harder for the bugs to transmit through the walls as well,” he said, apparently referring to surveillance devices. Assange said his sporting loyalties now lie with his hosts, unsurprisingly. “Of course, Ecuador undoubtedly deserves to win the World Cup and has a pretty decent team,” he said. “But I think there’s such prestige riding on the issue for Brazil that they are the most likely victors.”

In his comments Wednesday, Assange called on U.S. Attorney General Eric Holder to drop any investigation into WikiLeaks or resign. He also said he believes Edward Snowden’s asylum in Russia will be renewed should the NSA leaker reapply.

MONEY First-Time Dad

What?! How Can Child Care Cost as Much as the Rent?

Or, why my family might move to Sweden. The first in a series of dispatches on being a new dad, a Millennial, and (pretty) broke.

I was born in 1986, my wife the year before. Our son was born this year. That means that we are Millennials, we entered the job market when the economy went to hell, and we will spend hundreds of thousands of dollars over the next two decades caring for our son.

Throw in a two-bedroom apartment in the Crown Heights neighborhood of Brooklyn ($2,000 a month) and an Amazon Prime account, and it is expensive being us. That’s what this space will detail: the travails of being young, a family, and (relatively) poor, all at once.

The Talk

Child care is one of the first conversations a newly pregnant couple needs to have—for the obvious reason that paying someone (or, gasp!, a daycare center) to mind your child for a third of the day not only chips away at your perceived parental self-worth, but it is also insanely expensive. Like, really expensive. One daycare center near our house costs the same as our rent.

So, naturally, that was not our first conversation, not even close.

Baby Pie Chart
Note: Numbers vary by night

Despite the fact that I report on personal finance and knew better, we went months avoiding the discussion. It’s just not a fun conversation to endure, and perhaps I was hoping that the situation would be resolved deus-ex-machina style, maybe with a tidy inheritance from a flush octogenarian on my wife’s side of the family.

Whenever the topic did pop into my head, I would have two competing reactions: sheer panic and indignant rage. The panic stemmed from the expense of it all, while the indignant rage was born from the fact that we would have to bear that expense because we lived here, well, in America.

In Sweden right now there’s a couple (let’s call them William and Alice) that just had a baby. William and Alice’s Stockholm apartment looks similar to ours—we both have cribs from Ikea, except they can pronounce the name—and they are just as excited for their new family. (Maybe they too had an intimate, shotgun wedding.) But there is one aspect of William and Alice’s marriage that is wholly dissimilar to ours: They will not have a prenatal chat about child-care costs.

Average weekly child-care costs
Notes: Based on 2013 dollars; for families with working mothers. Sources: Pew Research Center and U.S. Census Bureau

That’s because William and Alice get a combined 480 days off from work (60 of those days are reserved for William), paid for by the good people of Sweden. After that, William and Alice’s little tyke will be scooped up by Sweden’s Educare–a kind of daycare and preschool wrapped up in one–for less than $200 a month.

My wife received about two months of paid time off. I got two weeks. Our respective companies—businesses that have nothing to do with child care—set policies and foot the bill. And we’re lucky. I cannot imagine having a child while working as waiter or a janitor or a medical assistant.

Eventually we did have the conversation–sort of. She would take an additional couple of months off, and we’d pay for it by using up pretty much all of our emergency savings. But come July she’s going back to work (Mrs. Tepper is a teacher at a charter school and makes much more than I do), and we’re going to have figure something out.

Maybe we’ll shell out the $2,000 a month for daycare. Or move to Sweden.

TIME sweden

Pirate Bay Co-Founder Arrested in Sweden

Peter Sunde, one of the co-founders of the file-sharing website The Pirate Bay, waits at the Swedish Appeal Court in Stockholm on Sept. 28, 2010.
Peter Sunde, one of the co-founders of the file-sharing website The Pirate Bay, waits at the Swedish Appeal Court in Stockholm on Sept. 28, 2010. Jonathan Nackstrand—AFP/Getty Images

One of the founders of the file-sharing website was arrested for evading an eight-month prison sentence for copyright breaches

After living on the run for almost two years, a co-founder of file-sharing website the Pirate Bay was arrested in Sweden to serve a sentence for violating copyright laws, Swedish police announced Saturday.

Peter Sunde was sentenced in Sweden in 2012 and has been wanted by Interpol ever since, Reuters reports.

“He was given eight months in jail so he has to serve his sentence,” said Carolina Ekeus, spokeswoman for the Swedish National Police Board. Ekeus said police arrested Sunde in the southern Swedish county Skane on Saturday. Swedish media reported that Sunde might have been living in and appealing from Germany prior to his arrest.

Sunde and three other people connected to the Pirate Bay were sentenced to a year in prison with a $4.8 million fine, though an appeals court later increased the fine to $6.9 million and cut down the prison sentences. The charges against the site were first filed by Swedish film and music companies.

Despite the legal troubles facing the Pirate Bay, the website is back up and running after a short period of going off-line. It claims it is under new ownership.

[Reuters]

TIME Appreciation

This Is the World’s Most Accurate Depiction of IKEA

And now we just want some meatballs

If you’ve ever set foot inside an IKEA, then you know that this is a spot-on representation of the store’s layout:

Blueprint of Ikea

 

TIME Food & Drink

IKEA Will Soon Serve Vegetarian Meatballs

NETHERLANDS-IKEA
Marcel Antonisse / AFP / Getty Images

IKEA is developing an eco-friendly "green" version of their patently delicious Swedish meatball dish, a highlight for many making a trip to the massive furniture store, that will be completely meat-free. They have not set a date for the unveiling yet

Everyone knows that the best part of a trip to IKEA is taking a break to eat those delicious signature meatballs. That experience has heretofore excluded vegetarians, but soon, the Swedish furniture chain will begin offering a meatless option.

IKEA is developing this eco-friendly “green” version of the Swedish dish to cut carbon emission and tackle climate change, the Guardian reports. Each year, IKEA sells an estimated 150 million meatballs, which are made from beef and pork. The concern is that the farming process leads to high carbon dioxide emissions — so creating ‘veg balls’ would reduce IKEA’s carbon footprint.

The company hasn’t announced an official date, but we should expect the veg balls — along with a new chicken version — next year. Don’t panic, though. The original meatballs aren’t going anywhere.

TIME Bizarre

Family Finds Terrifying 16-Inch ‘Ratzilla’ in Their Kitchen

WARNING: it's super gross

+ READ ARTICLE

A Swedish family had to call an exterminator after finding a massive 16-inch “Ratzilla” devouring food leftovers from the trash under the sink. To help, pest control had to bring a heavy duty trap since other traps weren’t big enough.

Even the family cat, Enok, had refused to enter the kitchen while the giant rat was in residence, Erik Korsas, the home owner, told BBC News. Since the incident, the kitchen has been repaired and the family’s cat has not been bothered by rats of any size, Korsas said.

TIME

Sweden’s ‘Hannibal Lecter’ is Set Free

This picture taken on October 21, 2013 in Falun shows Sture Bergwall, a Swedish man long considered Scandinavia's most notorious serial killer. Henrik Montgomery—AFT/Getty Images

After convincing the Swedish public for over two decades that he was a serial rapist and murderer, Sture Bergwall, a.k.a. Thomas Quick, was released on Wednesday

It was a caper that defied all logic.

The story of a man who raped children, murdered eight people, and cannibalized at least one of his victims, had appalled and captivated Sweden for two decades, and kept him locked away for as long. But on Wednesday, Sture Bergwall, who formerly went by the name of Thomas Quick, finally saw the light of day as a free man, with his confessions to those crimes discredited. It has left a whole country wondering how it could all have gone so wrong.

“It’s the judicial scandal of a century,” says Dan Josefsson, who was nominated to Sweden’s foremost non-fiction award Augustpriset for his book on Sture Bergwall, Mannen Som Slutade Ljuga (“The Man Who Stopped Lying,” to be published in English by Granta in 2015). “And it all has to do with a therapeutic idea that was in fashion in the nineties.”

Bergwall’s plan was born in 1991, when he was about to be released from Säter psychiatric ward, to which he was sentenced after a botched bank robbery. A long-time drug fiend, estranged from the outside world, Bergwall figured he’d be better off remaining in the clinic and started confessing to one murder after another.

“It’s fairly typical for a mixed-substance addict as Bergwall to lie to gain privileges,” says Josefsson. “He started telling the psychologists what they wanted to hear, and he was rewarded with drugs and encouragement.”

The therapeutic model that dominated the Säter facility at the time held that crimes could be inspired by repressed childhood memories. Allowed library access, Bergwall began reading up on famous, unsolved murders and claimed responsibility for them, fabricating justifications for those horrible deeds by citing repressed memories of sexual abuse as a child. He soon became the clinic’s star patient, reveling in the attention and comparing himself with Hannibal Lecter, Anthony Hopkins’ cannibalistic character in The Silence of the Lambs. Even worse, his so-called repressed memories were given enormous weight in the criminal investigations and trials that followed.

Bergwall frequently misstated details regarding the victims’ appearances, the murder weapons used and the sequence of events. Yet, those statements were taken as proof of his repression of painful memories, and Bergwall willingly played along. At one time, when asked why he said a victim had blonde hair instead of black, he replied that the agony of his recollections had made him reverse the colors as a kind of psychic self-defense.

“Police and prosecutors were completely into the idea too, even though it lacked scientific credibility,” says Josefsson. “It became a sect-like phenomenon where every piece of information was twisted to confirm their belief.”

Throughout the years, several commentators have published their doubts, but it wasn’t until 2009 that an appeal process was commenced. By that time, Bergwall had been convicted for eight of the more than thirty murders he had confessed to. However, he had also began to recover his mind, thanks to a doctor who began reducing Bergwall’s extremely high doses of medication. On Nov. 26, Bergwall was declared not guilty in the last of the eight cases, and will from Mar. 19 continue with an outpatient program at the clinic.

“The real victims in this systemic collapse are the relatives of the murdered,” says Josefsson. “They had to sit through the trials and listen to this man orate about the heinous things he supposedly did to their children – it’s practically psychological terror. At the same time, the real murderers have been able to breathe out.”

The Swedish government has appointed a commission to investigate what systemic failures led to this judicial catastrophe, although it won’t look into individual culpability. Bergwall, now 64, has said that he will write about his experiences at Säter. He already released a book in 2011, together with his brother Sten-Ove, called Thomas Quick is Dead.

TIME Advertising

Now This is One Hair-Raising Billboard

+ READ ARTICLE

Swedish pharmacy Apotek Hjärtat teamed up with innovative advertising agency Clear Channel to make this quintessential hair product commercial in Stockholm’s subway. Doesn’t it just blow you away?

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