Today is May 17th, Norway’s national day, celebrating its independence from Sweden in 1905. I have today posted a article on Der Invest Informer about how Norway, being the world’s third largest oil exporter with its de facto forced savings policy of recycling all oil revenues in foreign securities contrbute to global imbalances.
Source link: http://archive.mises.org/5057/how-norway-contributes-to-global-imbalances/
How Norway Contributes to Global Imbalances
Previous post: Terminating Net Neutrality
Next post: The Rust Belt v. Taxes
{ 8 comments }
and what’s wrong with saving?
Forced savings.
Why does Norway insist on sending the capital out of the country? Seems like, if they were a little more inward-looking, the fjords would be lined w/ Au.
I imagine that the oil revenue is developed from royalty payments…does the Kingdom of Norway own a chunk of Statoil, as well?- I didn’t check the capitalization structure of that otherwise publicly traded OilCo.
Also, I was surprised to learn that Statoil only produces 60% of Norway’s oil…
I’m not sure if I find much, about this, troubling. I’d only be questioning their investment strategy and hope they are hedged, for downside protection, on their paper holdings.
I am with you that the state of Norway ought to leave the oil industry to the market — I believe in the separation of state and economy — but what are “global imbalances” and why are they bad? The article just claims that this “forced savings” causes “global imbalances” without saying what those global imbalances are, neither saying how this “forced savings” causes this phenomenon. Is this really “forced savings?” Is it even savings at all?? You have some interesting stats and claims in your article, but I must say it is ultimately pointless.
I think in this instance global balances are a code word for LOSSES!!!!!
My interpretation is: That despite the billions in profits they have gotten from OIL, although with a state owned company you never really know the profit, the government has foolishly squandered the money in investments in countries like the US where the currency value has declined more than the investments have gained.
So the only solution is for Norway to sell shares in its oil companies to investors and let them realize and invest the profits.
Forced savings are savings imposed by government which the Norwegian government creates by taking all of the revenues it receives from the Norwegian oil industry (both by taxation and partial ownership of it) and using it to acquire foreign securities.
By global imbalances, I refer primarily to the U.S. housing bubble and savings shortfall created by the Fed and aggravated by the actions of some other governments, including that of Norway.
You raise a interesting point in one regard. What would be a apropriate national investment for Norway? They will get a fixed reward for North Sea oil, then go back to insignificance. Should they purchase a caribean Island or two? Increase thier exposure to international business? Or, as sugested, line the fjords with gold? Interesting question.
So Norway is lucky with its oil but that does not necessarily make it a clever nation. Investing in foreign “paper” is potentially dnagerous especially when it is used to raise funds for debt strapped nations and corporations who are trying to stay afloat. The situation is analagous to building a hospital for a terminally ill patient and from whom we are happy to receive IOU’s while he is still alive. Good luck Norway.
Comments on this entry are closed.