Norway Enters The Currency Wars

Tyler Durden's picture

While the G-20 and the G-7 haggle among each other, all (with perhaps the exception of France) desperate to make it seem that Japan's recent currency manipulation is not really manipulation, and that the plunge in the Yen was an indirect, "unexpected" consequence of BOJ monetary policy (when in reality as Richard Koo explained it is merely a ploy to avoid the spotlight falling on each and every other G-7/20 member, all of which are engaged in the same type of currency wars which eventually will all morph into trade wars), Europe's energy powerhouse Norway quietly entered into the war. From Bloomberg: "Norges Bank is ready to cut interest rates further to counter krone gains that interfere with the inflation target, Governor Oeystein Olsen said. “If it gets too strong over time, leading to inflation that’s too low, we will act,” Olsen said yesterday in an interview at his office in Oslo.

The problem for Norway is that on one hand it, too, seeks to boost its export-business in an imitation of the beggar-thy-neighbor policies adopted by every other government, or artificial monetary union, with a printing press, while on the other, its property market which is overheating due to Norway's perceived status as one of Europe's safest money parking locations (alongside Switzerland) will merely heat up even more should the Norges Bank cut rates as it appears set to do, in order to preserve its front in the global currency war.

Olsen and his colleagues are torn between protecting exporters through lower rates that stem krone gains, and a policy that addresses an overheated property market. Western Europe’s largest oil exporter, which boasts the biggest budget surplus of any AAA rated nation, has emerged as a haven from the euro area’s debt crisis.


The krone sank as much as 0.6 percent against the euro following Olsen’s comments. Versus the dollar, it dropped as much as 1.4 percent. The krone was little changed at 7.3939 per euro as 11:57 a.m. today.


“A pronounced weakening of growth prospects, or a krone that is too strong, may over time lead to inflation that’s too low,” Olsen also said in the text of his annual speech held yesterday in Oslo. “Such development would be counteracted by monetary policy measures.”

Some will see in Norway's actions the germ of the same ruinous policies enacted by Ben Bernanke:

Low interest rates and falling unemployment have boosted private borrowing, with household debt estimated to swell to more than 200 percent of disposable incomes this year, according to the central bank. House prices, which rose an annual 8.5 percent last month, have surged almost 30 percent since 2008, almost doubling in the past decade. “Household debt and house prices are still moving up,” Olsen said. “These are the key reasons why the key policy rate hasn’t been lowered further.”


The dilemma has spurred debate on the extent to which monetary policy should target asset bubbles, or whether rates are too blunt a tool. The central bank will start advising the Finance Ministry on how much extra capital banks need to hold in their counter-cyclical buffers next month. That follows a proposal to triple minimum risk weights on banks’ mortgage assets to 35 percent and a separate recommendation to limit the use of covered bonds to finance mortgages.


Although growth in our part of the world is weak and real interest rates are low, many banks are still operating with high return targets, which could lead to excessive short-term risk taking,” Olsen said. “Banks and their owners should accept that return on equity will be lower, but also safer in the years ahead.”

Yet while hurting domestic home buyers, a weak FX policy will certainly help home sellers and everyone else looking to flip assets for a quick gain - a process that has taken the entire developed world by storm once more - and will most certainly aid exporting mega corps such as Norsk Hydro.

Companies such as Norsk Hydro ASA, Europe’s third-largest aluminum maker, have struggled to adjust to a stronger krone, which is pushing up export prices even as demand from Europe declines. The krone reached a record on a trade-weighted basis yesterday. Demand has left the currency 41 percent overvalued versus the dollar this year, topping 12 major currencies, according to calculations from the Organization for Economic Cooperation and Development.


Olsen also said yesterday the bank has no plans to talk the currency “up or down” and no “specific” level for what too strong means.

We may have heard that one before.

“It’s appropriate to use a few years to bring up inflation,” Olsen said. “Prices for Norwegian goods have increased considerably more than consumer prices, reflecting the improvement in Norway’s terms of trade. Incomes, output and employment are rising at a solid pace.”

Few years? Hasn't Mr Olsen heard that in Japan Abe plans on talking up the USDJPY by some 20% in a matter of months, and at last check economy minister Amari had a 13,000 Nikkei target by the end of March. Surely if a central bank does not stick to such a ridiculous hourly schedule it will lose all credibility. Or something.

As for Norway, its formal entry into the global FX war will likely take place next month:

The bank left its benchmark interest rate at 1.5 percent for a fifth meeting in December and signaled it may raise rates as early as next month to cool record debt growth.

The conclusion:

Norway’s politicians, central bankers and business leaders have joined forces in a push to weaken the currency. Kristin Skogen Lund, chief executive officer of the Confederation of Norwegian Enterprise, said krone gains were the “main” reason Norway’s exporters have a cost disadvantage.

And with that we return to the regularly scheduled C-grade gameshow infomercial straight from the G-20, titled: "The FX price is wrong; or let's lie to everyone just a little more."

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Fredo Corleone's picture

Does this mean King Oscar brisling sardines are going to go up in price ?

A Lunatic's picture

You can beat this inflation by simply switching over to Fukushima brand sardines. For a limited time only you can get a  free glow in the dark shark tooth in every can........

knukles's picture

Now, as a dedicated sardine connoisseur, I pay particularly close attention to all things Norwegian.  Including the blonde ones.  But this really has me confused.

“If it gets too strong over time, leading to inflation that’s too low, we will act,

That statement makes no fucking sense.
A strong currency begets lower domestic inflation as the price of imports on a relative basis rises.... leading to deflationary pressures thereby inducing a Lower Currency Value to boost exports and goose the general level of prices.

See, this is the shit that explains a whole buncha problems.  To wit:

1. That politicians anywhere can't even explain what they're not talking about let alone understand it,

2. No wonder the whole world is fucked up with folks like this at the helm

3.  Shoulda entrusted the explanation to Mandy Bigtits when she has to sneeze because when she makes one of those cute girlish squeezing squeaking sneezing sounds her titties giggle and wiggle all over like a bowl of Jello pouring over the sides of the serving dish and nobody pays any attention to what she says because they're watching her tits anyway

4.  She doesn't know anything anyhow so just watch her tits jiggle and worry about the sardine and fish smells

5.  Explains why the last can of skinless and boneless King Oscar sardines in olive oil that I opened had hair growing on them

Fucking criminal.
Criminal, I say.

Whata wonderful world.

We're all gonna die painfully from this shit.  Can we not just be fucking left alone?

Buckaroo Banzai's picture

They won the Harlem Shake war, why not try currency war?

disabledvet's picture

Central Banker definition: "never saw a bubble he didn't want to a) create and b) destroy. "Lunatics with money." Europe is better off with Kings and Queens. "it's what works in the absence of a legal system"...especially when talking wealth preservation. and remember "when prices collapse...that trillion dollar deficit suddenly becomes...A TRILLION DOLLAR DEFICIT." industrial production has surged in the USA oh these many years...but "oil output" is amazingly considered "an industrial good"...which says to me "those industrial goods are very valuable indeed."

Orly's picture

Not necessarily.  In anaylsis offered by Andy Xie of Caixin Online a couple of weeks ago, he put forth that relative dollar weakness is a double-whammy on emerging markets like Norway:

"In a dollar bear market, the liquidity goes into emerging economies, causing their currencies and asset prices to appreciate. The double gains attract more inflow, eventually causing inflation.

These economies lose competitiveness along the way. It isn’t noticed when asset appreciation supports domestic demand. When the dollar changes direction, so does liquidity. The virtuous cycle on the way up becomes a vicious one on the way down.

The emerging economies already suffer inflation. The liquidity outflow leads to currency depreciation, which worsens inflation. "

So the Norwegians are in the "virtuous" part of the cycle now in that Krona gains spark domestic inflation (more money chasing fewer goods...). They also know that when the tide turns back, the cycle could get "vicious."  Luckily for them, they are a net exporter of petroleum, quite unlike Japan, so it will be easier to keep the currency in check. 

It just seems like they are trying to keep an even keel on thier money.


DanDaley's picture

It just seems like they are trying to keep an even keel on thier money.


"Keel" being a Norwegian word, ironically, I guess they know what they are doing.

CheapBastard's picture

"Flip that Huset !!"


When they start having "Flip that House" seminars over in Nroway I will drop everything and go. Can you imagine the chicks at those seminars ?! I'll sutff a few herring in my coat pocket...the women there love that sea captain smell.....

knukles's picture


And be wondering which one of them didn't bathe this week.
You know, French sanitary standardas and all that.
Well come on, it is Europe FFS

Fredo Corleone's picture

"Sea captain smell"

Is this a new body spray offering from Axe ?


AssFire's picture

Blindman at the fishmarket- "Good morning ladies."

francis_sawyer's picture

It's just a case of envy because the Swedes were cornering the world market on Surströmming...


ThirdWorldDude's picture

I recommend you to never serve surströmming to non-Swedish guests because it might permanently destroy their appetite for fish.

francis_sawyer's picture

damn nasty shizz... When the Knights who say "Ne" wanted Brave Sir Robin & Company to cut down the mightiest tree in the forest with... a Herring!... Little did they know how easy that would be... Just open a can of surströmming & place it underneath any size tree & the tree will be felled within minutes...

knukles's picture

Reminds me of one of the girls I took out in college.  All my roomies and mates used to call them "Knukie's little piggies".  I guess I couldn't see them too well nor I don't have a clue what they looked like, but I did manage to do something with 'em.  The doc at the infirmary used to roll his eyes and go get the blood draw equipment when ever he saw me... even before he asked ma any questions.
Ah, but I digress.

I have eaten that shit.
Outside as recommended
If you can get past the smell, the taste is near heavenly.

Why is this reminding me of Mandy Bigtits and Paul Krugman?
No, I seriously have no clue.

francis_sawyer's picture

What kind of sardines would you recommend most highly kuncks?...


Lately ~ I've just been eating SEASON Brand [because the price innt all that bad]... But I suspect they're the 'beer of champagnes' in th sardine world... I don't know any better

knukles's picture

I actually prefer the SEASON brand.
But then again, I'm particular to the skinless boneless in oil.  And seems to me theirs are always nicely cleaned and packaged... sorta tidy like... and the sardines themselves are nicely sized.  If looking for the more traditional with skin and not boned, the King Oscars seem to be on the smaller side ... a bit more dainty.

That being said, whilst meandering about in lesser known shops, often the fruit and veggie guys owned by 1st gen folks (anything but the high end stuff) I'll try some off brand imported Moroccan, etc. for yucks. 

I stay away from the specialty snob stores.  Overpriced, no substance.  Most the regular stuff out there is just fine.

But like I say, SEASON is good by me.
Heck, more important is if making a sandwich, the quality of the onion and mustard selections dominate the sardine "brand".

You've got me hankerin' for a smelly sandwich, my man.

francis_sawyer's picture

Yeah ~ that's the thing that got me onto SEASON... [skinless & boneless]... I like that convenience... I usually eat'em with plain crackers & mustard...


But, but... They're distributed by MANISCHEWITZ... End of the world!... francis_sawyer is a farce... [I wish they would stick to sardines & leave central banking alone]...

richard in norway's picture

Norway is stuck between a rpck and a hard place, house prices are still going up at a bubble like rate and lenders are being stupid, all the sub prime kind of nonsense is starting to happen here, but a rise in interest rates would send the kroner up and kill all the export industries apart from oil and gas. Seems like there is no choise but to feed the bubble until it pops

Marco's picture

They can just print Kroner to buy Dollars and Euros instead of messing with the interest rate ... but then they'd get accused of currency manipulation. The only way you're really allowed to manipulate the currency is in a way which speculators can easily take advantage of ... TPTB will allow other measures in a pinch, but you better drop your interest rates as well if you know what's good for you.

IMO Norway should implement a negative income tax ... at that point they can just leave their currency alone for the most part and affect relative wage levels purely through "taxation" without causing unemployment. Given the oil wealth in Norway the negative parts of negative income tax (wage inflation at the low end) hardly seem a problem.

PersonalResponsibility's picture

Jesus fucking Christ don't say that!

Super Broccoli's picture

damn and i wanted to swap bonds against krones !!!! what am i gona do now ?

knukles's picture


It's exactly this kinda shit makes ya getchur ass handed to ya in markets these days.
Anybody long Kroner is gonna get Monkey Hammered tonight.

Reminds me exactly of a big assed long position I was riding in Swissy some time ago, making a fucking bundle betting that all of Europe was gonna be swapping every Euro they could into Swiss francs to escape the lunacy of the ECB, et al.

And then fucking Swiss go bugger all with that 1.20 peg shit
Swissy dollar got hammered some 6% in moments
Get yer ass handed to you with political and central bank subterfuge.

Immoral of the Story:
Never Ever Trust a Central Bank

Orly's picture

...and always use a stop-loss.

Yen Cross's picture

 I nominate Orly, for the sarcastic quote of the day! :-D

knukles's picture

My ego and arrogance blinded me to such trivial matters such as no cost downside protection, much to the dismay of my pocket book and decidedly victimization type role assigned to myself by myself blaming everything on the Swiss in the absence of having been properly prepared.

You speaka da truth.

Orly's picture

Yeah but it ain't like I haven't learnt my lesson getting blow-torched before...more times than I care to admit.


disabledvet's picture

"he works for the Bankers...not the Government." this is ESPECIALLY true in Switzerland which "for all intents and purposes has no Government." Having said that..."they ain't got nothin' on Ben Bernanke." this guy has THEORIES. Is that Party about to come to an end?

otto skorzeny's picture

another socialist ponzi scheme that would have failed years ago if ben shalom's cheap $ wouldn't have driven oil to $97 a barrel. these countries were better off if it weren't for the discovery of liquid black death.

AssFire's picture

the discovery of liquid black death...

I was working in the North Sea in the late 80's shortly after Piper Alpha...Lots of safety training to go offshore... unfortunately a girl in my course  harbored non-ocean crabs in her black Norwegian wool. Such a different time, the 80's big hair era.. If I ever saw a bush like hers today I would freak out. But being horney as shit at that age, neither that nor her hairy armpits could slow me down. Rich people don't get crabs- they get lobsters.

I have no point here, just sharing.

francis_sawyer's picture



When I tell people that ~ they just stare at me with blank faces...

I love to try to make people understand how much 'asphalted over' land would be required, [in terms of horses, pastures, stables, farms, etc.], to service the island of Manhattan... TODAY... The mostly just look at me & go 'huh wha'?...

Xibalba's picture

The little horn from the ocean rises up!

schatzi's picture

Well that fucking sucks. Beginning last year I sold part of my shitty Euros to buy Norwegian Krone. If they start doing any depreciation in earnest, I'm fucked.

Yen Cross's picture

   Try (sek/nok, nok/sek depending on how your platform lists the base currency)... I've been doing pretty well with that trade.

 It's like watching paint dry, but a decent hedge against (cl). 

deepdish's picture

I would not worry too much. There will be some volatility due to words, but I am pretty sure the actions will not be entering a currency.

Everyone in our country are concerned with the housing prices and the fear of a bubble evolving. The Norges Bank can not cut its interest rates now, when they are starting to succeed in making the average working Norwegian more afraid of the housing prices and the future without oil revenues. We actually see people shopping less (numbers show that the shopping numbers are disappointing), less people take loans without paying down and the banks have become stricter in giving away loans (people now must have at least 15% equity).


The poltiitians and the Central Bank have set two priorities:

1) Putting breaks on the housing market

2) Adressing an increasing public sector and the costs associated with it (specially the pension costs). This one is not so much on the ruling labor party's agenda, but it will be on the agenda of the right wing coalition who will win elections in the autumn.

HoldingHemen's picture

So in a policy that may be characterized as being contractionary, what role plays an expansionary fiscal state budget? Hypocratic fuckn socialist douchbag government! The fact is that politicians and their non-consistent beliefs are causing volatility in FX unlike in any other financial market! And for the record; any talk of CB independence is bull shi* talk!

fonzannoon's picture

schiff must be ready to have a total stroke. gold miners crushed, gold and silver monkey hammered. foreign currencies each taking their turn committing suicide and shorting treasuries has done nothing but blowtorch people. 

But Ford, GE and Bank of anything are kicking ass.

He must be losing his mind.

Orly's picture

You may fall out when I say this, fonz, but keep in mind I am a technical chartist.  It's what I do.  Technicals, not "shiny" stuff.

Gold is ready for a rebound.  The pair has broken 2 standard deviations below its 28 week moving average, the CCI has hit extreme levels and reversing.  There is a bullish harmonic pattern that has formed on the Weekly chart and the G20 has said that global Central Banks will co-operate to ramp this thing higher.

Immediate upside target $1666, with the potential to complete the harmonic pattern and close the Bollinger band on the opposite side, leaving a potential upside target of $1698-1715.

Thought you'd like to know.


fonzannoon's picture

Orly I know two things. first, i never had you pegged as a gold bear or hater. I truly think you just call it like you see it, right or wrong you do the best you can at just reading the tea leaves and leave emotion out of it.

Second, I have no clue anymore. I was asking Yen questions last night like a first grader because I am lost at sea. I think it is hysterical that Kito was so awful wrong betting hard against QE3 and we ended up with QE4 as well as 3. yet he was dead on right saying gold would drop.

i get that all these currencies are banging off each other. I did believe they could all do that while at the same time all dropping against gold. So much for that.

Debt and deficits don't matter, until they do. That can be a long ways away for the US. But I don't know how much longer they can keep telling everyone they are going to end QE soon because of the recovery and let rates start to rise when everyone knows that can never happen.

Orly's picture

It has been my contention all along- rightly or wrongly, as it remains to be seen- that gold is a "risk-on" play.  Free money moves into the commodity sector and leaves very weak hands trying to make a buck.  How many paper gold holders are true believers is anyone's guess but I would put my money on the "not a lot" section.

Having said that, it can be assumed that the holders of physical gold are the true believers and if the global economy as we know it does indeed collapse, they will be proved right in the end.

Right now, there is a distinct dichotomy at work in the precious metals sector and that fact should be taken into account when assessing the viability of trading gold and silver.


fonzannoon's picture

at this point it seems pretty much accepted that by trading the paper market, you know full well you have no access to the actual underlying metals. I can only conclude that anyone doing that is a weak hand that will be long gone if things continue to stay ugly or stawks continue to outperform.

There is something so incredibly scary about watching these markets slowly grind higher each day as any dip gets magicallh erased. It just does not have that euphoric feeling. it has the opposite. It just seems like there is a belief that if we can punch through some level then we can rocket higher. I guess we shall see.

When everyone realizes Zirp/nirp is here to stay or if anyone really gives a crap is what i sit back and wait for.

Orly's picture

If you're a historian of the markets, what was really creepy was the entire 2006 move in SPX.  I was just getting into options and was thinking that there had to be some corrective move somewhere, some time...any time.

I got blistered all year as my SPY puts fell worthless over and over again.  You'd think I would have learned, but it didn't make any sense whatsoever.  Have a look at the chart in 2006 and you'll see what I am talking about.

I believe the same thing is going to happen again in 2013.  With the G20 giving the go-ahead for "co-operation" between central banks, the market is just going to grind higher every single day without even a hint at correction.

I think your feeling is justified now as it was in 2006.  There was no feeling of euphoria.  In fact, they kept using the words "wall of worry" to explain an umitigated ramp higher, which, I believe was the precursor and the "prime in the pump" for what came a year later.  It was all done on purpose and it was my first true exposure to how manipulated things are.

fonzannoon's picture

I remember 06 well. I bought my house at the end of 06 because I threw in the towel waiting for the big tank. People talk about getting blowtorched on here. nothing like getting blowtorched on the biggest purchase of your life. 

the problem is, if we get another 07/08 that means fed policy has failed. so what do you do when fed policy fails? Double down on the printing? is that the answer?

ThirdWorldDude's picture

"The bank left its benchmark interest rate at 1.5 percent for a fifth meeting in December and signaled it may raise rates as early as next month to cool record debt growth."


Raise rates? Hell, I didn't know Norwegian CB was more concerned about it's overindebted citizens & savers than about corporative gains & trade balances.

Or, maybe it's just a lapsus calami and what Mr. Olsen really said/ wanted to say is "lower rates", in which case he better gets on with the program pretty fast since his neighbours Denmark and Sweden are so far #winning...