Photographer: Freya Ingrid Morales
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They're Richer Than Ever in the Land of Negative Interest Rates

Danes have another reason to be happy: they’re richer than ever before.

After more than half a decade of negative interest rates, rising property values in Denmark have left the average family with net assets of 1.9 million kroner ($314,000), according to the latest report on household wealth.

“Right now, net assets are at a record-high level,” said Tore Stramer, an economist at Nykredit in Copenhagen. “So the good news of the day is that the average family has never been richer.”

Happiest People on Earth Are Set to Spend Most in Over a Decade

Denmark’s Negative Rates:

The country uses monetary policy to peg the krone to the euro. As demand for AAA-rated krone assets has grown, the central bank has had to push rates well below zero, and lower than the ECB’s. Denmark’s benchmark deposit rate first went negative in mid-2012, and Nordea says it probably won’t climb above zero until 2020.

Denmark’s deposit rate is minus 0.65%, the ECB’s is minus 0.4%

Record-low interest rates have also coincided with labor shortages in Denmark. Helge Pedersen, the chief economist at Nordea in Copenhagen, says a higher proportion of people than ever before is likely to be at work in 2018.

“Everything indicates that already now a new employment record is being set in Denmark,” Pedersen said in a note.

With everything pointing up, Stramer at Nykredit says Danes are also set to spend at the fastest pace in 12 years in 2018.

The last time Denmark enjoyed a similar boom was in 2006. Back then, demand was fueled by borrowing, leaving households particularly vulnerable when the global financial crisis hit two years later. Home prices plunged more than 20 percent from peak to trough.

That experience left Danes “shell-shocked,” said Louise Aggerstrom Hansen, an economist at Danske Bank. So this time, they’ve been “consolidating their finances, bringing down debt,” she said.

In other words, instead of inflating debt levels, negative rates in Denmark have coincided with debt reduction. The ratio of bank loans to GDP is at 108 percent, compared with a peak of 154 percent in 2008, according to BMI Research.

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