Bubbles are generally impossible to see on the way in, and blindingly obvious in hindsight. But when an economy boasts the rich world’s biggest household debt burden, the stakes couldn’t be higher.
In Denmark, borrowers on average owe their banks about three times their disposable incomes (an OECD record). The country went through its most recent boom-bust cycle in 2006-2008, when home prices slumped more than 20 percent from peak to trough, triggering Denmark’s worst recession in a generation. Now, prices in Copenhagen are higher than at the frothiest point of the previous boom. Nordea, the Nordic region’s biggest bank, says there’s reason to fear this might be the next bubble.