Can Flappy Bird Navigate Low Interest Rates?

Swedes, some of the biggest savers in Europe, are starting to put aside less and borrow more as they realize credit may never be as cheap as it is now. It's an unwelcome change in national habits.
This is not a game.

Flappy Bird, the infamously super-addictive game by Vietnamese developer Dong Nguen, was maddeningly hard to play. It's thus appropriate that a Swedish bank has put out a clone called Flappy Saver: Low interest rates are making it maddeningly hard to get Swedes to save.

Nobel laureate Paul Krugman has singled out Sweden's central bank, the Riksbank, in his criticism of "sadomonetarist" policies. In April, he slammed the Riksbank's interest-rate increases for turning Sweden from the "rock star" of European economic recovery into a version of pre-Abenomics Japan, complete with deflation. Earlier this month, the Swedes did an about-face and slashed the key interest rate by 0.5 percent to 0.25 percent. Krugman celebrated: "Actually, the drama of this U-turn may be a very good thing, since it might convince investors that this is a real regime change."

Even before the U-turn, though, low interest rates were turning Swedes from some of the world's most assiduous savers into big borrowers. Household debt grew at an annualized rate of 5.4 percent in June, the fastest in almost three years, according to Statistics Sweden. The Riksbank expects total household debt in Sweden to reach 185 percent of disposable income in 2017, up from the current 173 percent. The Organization for Economic Cooperation and Development expects Swedes to save just 11.9 percent of their household income next year, down from 12.2 percent in 2013. There is no point in trying to save when banks pay zero interest on some savings accounts and it's cheap to borrow.

Flappy Saver is the invention of Ikano Bank AB, part of Ikano SA, which was set up by Ingvar Kamprad, the billionaire founder of Ikea. A winged piggy bank subs for the bird in the logo. The obstacle course it has to run consists of spending temptations such as jewelry stores. There's a $15,000 prize for the highest scorer in the form of an Ikano deposit. The bank does offer competitive interest rates: from 0.7 percent on a savings account to 1.65 percent on some deposits. That beats the inflation rate, which was 0.2 percent in June following five straight months of negative or zero price growth. Still, it's not much of an incentive to save. It's as hard to get people to put aside money on these terms as it is to play Flappy Bird.

Central banks that aren't "sadomonetarist" -- and that's most of them these days -- do more than stimulate demand and make it easier for heavily indebted individuals and companies to bear that burden. They change national habits and can make even the most frugal people start spending borrowed money. The risky behaviors in the U.S. that caused the 2007-2008 mortgage crisis didn't develop in a year or two: The seeds were sown in part by Bill Clinton-era policy makers who hoped to stimulate homeownership among the working poor.

Northern Europeans have natural defenses (also known in some quarters as common sense) against taking out mortgages with no down payment, and they can't believe yet that the lax monetary policies are here to stay. Given another year or two of near-zero rates, they might start forgetting that it was ever otherwise. Raising rates, then, after people become mired in debt will be sadistic indeed.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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