As a matter of fact, since 1982 the total real return on shares (the inflation-adjusted price level including reinvested dividends) has risen in Sweden at an average annual rate of around 16%. That is around two and a half times more than the trend rate since 1918. After 1982 the total real return in the United States has also been appreciably above the trend rate since 1871 (Fig. 1).1  Total annual real return on shares USA 1871-1999, index: S&P 500 1870 = 100 Sweden 1918-1999, index: normalised to 1928 level of S&P 500 1000000 USA 100000  Sweden Trend 6%  10000 1982-1999 Sweden 16% USA 15%  1000  100 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Sources: Global Financial Data, Frennberg & Hansson, Affärsvärlden and Statistics Sweden  1  Note that the chosen initial year has consequences for the trend rate of return; the path shown in the figure should therefore be seen as an approximation. 1  BIS Review 137/1999  The price-earnings ratio for the Stockholm Exchange is currently around 30 according to Affärsvärlden. This means that the price of an average share portfolio is equivalent to around thirty times the annual earnings. The ratio in the United States is even higher, around 35 (Fig. 2).
Today, however, the situation in Sweden does not resemble what happened in the second half of the 1980s. Asset prices have certainly risen strongly in recent years but credit has not grown to the same extent. It seems that, at least to date in the present upswing, Swedish banks and their customers have taken a different line on the provision of credit and borrowing. Everyone is hopefully more accustomed to a deregulated credit market than was the case in the late 1980s. Still, it is important to be alert to the future path of asset prices and credit aggregates, as well as to the underlying forces at work in the Swedish economy. Real assets prices and total lending 270  1,6  240 1,4 210 180  1,2  150 1,0 120 0,8  90 1970  1975  1980  1985  1990  1995  Ass et p rice in d ex: 1980= 10 0 (left scale) L en d in g in p e r c en t o f G D P (rig h t s cale) S ource : R iksbanke n  capital in an economy is dependent on the level of output and how this income is shared between labour and the owners of capital.