Norway Pushes Panic Button: "We're In A Crisis Now, We Can't Deny That"
We’ve spent quite a bit of time documenting Norway’s precarious balancing act in the face of slumping crude prices.
On the one hand, falling crude puts pressure on the krone which essentially allows the Norges Bank to compete in the regional currency wars without resorting to the same type of deeply negative rates as the ECB, the Riksbank, the Nationalbank, and the SNB. In short, a falling krone preserves export competitiveness in a world gone Keynesian crazy.
At the same time, falling crude puts enormous pressure on the country’s economy, which is heavily dependent on oil production
Additionally, collapsing crude revenue means the country will soon be forced to drawdown its $830 billion sovereign wealth fund (the largest in the world) to plug the various budget leaks caused by “lower for longer.”
Now, Norway has declared that its oil industry has entered a “crisis.”
“[The] industry is in a crisis now, we can’t deny that,” Bente Nyland, director general of the Norwegian Petroleum Directorate, told Bloomberg who reminds us that “Norway depends on oil and gas for about one-fifth of its economic output and nationwide, the petroleum industry has cut almost 30,000 jobs.”
The government last year announced plans to boost spending on the way to shoring up the flagging economy and officials says those measures - which are part of the reason why Norway will pull money from the SWF - should be sufficient to offset the pain from lower crude prices. “Finance Minister Siv Jensen says budget proposals put forward last year already contain ‘a lot of expansion’ and will help stem job losses,” Bloomberg continues, before noting that “the question is how quickly the economic adjustment brought on by a weaker krone will manifest itself.”
Yes, that is the question. Of course that’s partly a function of how monetary policy plays out for Norway’s trade partners. Like Europe for instance. And Sweden, which is Norway’s fifth largest export destination.
As a reminder, the Riksbank is effectively beholden to the ECB. If Draghi eases, so too must Stefan Ingves. This means that when it comes to whether a weaker krone helps Norway's non-oil industries, it's essentially a matter of whether the depreciation in the krone tied to falling crude is enough to offset any upward pressure on the currency tied to further easing by the ECB.
Of course that leads us to an absurd paradox: the lower oil goes, the stronger the disinflationary impulse in Europe and the more deflation Europe has, the more Draghi eases. In other words, the idea that falling crude prices will help support the krone is to a certain extent self-defeating in the current monetary policy regime.
In short, while we've seen some NOK weakness over the past 12 months, the currency "just can't get weak enough," to quote Bloomberg.
And because Norway's debt-to-GDP ratio is just 29%, QE isn't possible.
In the end then, you can expect the highlighted number in the following screengrab from the Norges Bank's webpage to go markedly lower if Mario Draghi decides he isn't done playing Krugman:
By the way, if the rest of 2016 ends up looking anything like the first two weeks, Norway can go ahead and forget about squeezing a respectable return out of its SWF this year. The less it returns, the less able it will be to offset the money being pulled out to shore up the budget and provide fiscal stimulus.
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Uhhhh, Ummm, know of any other countries that would love to have a debt - to - GDP ratio of 29% and a SWF that has stashed away $180,000 per citizen? Like maybe - nearly EVERY other country?
I think the term we are all searching for that European countries are sliding towards in response to the migrant influx is Fascism...
Fascists saw World War I as a revolution that brought massive changes in the nature of war, society, the state, and technology. The advent of total war and total mass mobilization of society had broken down the distinction between civilian and combatant. A "military citizenship" arose in which all citizens were involved with the military in some manner during the war.[5][6] The war had resulted in the rise of a powerful state capable of mobilizing millions of people to serve on the front lines and providing economic production and logistics to support them, as well as having unprecedented authority to intervene in the lives of citizens.[5][6] Fascists view World War I as having made liberal democracy obsolete, and regard total mobilization of society under a totalitarian one-party state as necessary to prepare a nation for armed conflict and to respond effectively to economic difficulties.[7] Such a state is led by a strong leader — such as a dictator and a martial government composed of the members of the governing fascist party — to forge national unity and maintain a stable and orderly society.[7] Fascism rejects assertions that violence is automatically negative in nature, and views political violence, war, and imperialism as means that can achieve national rejuvenation.[8][9][10][11]
Maybe unemployment in Northern European countries could be assisted by having them work as trainers for all the Refugees.
The Refugees are apparently in need of training on how to act in a civilized society.
The trainers who are best would be given the more advanced training classes: Training the western political class to not start wars to begin with..
Every single article on zerohedge has to deal with mud people, aryans and jews. Every single one.
Payback time ...send gas back to 50 cents a gallon
U.S. Labor Secretary Thomas E. Perez, would probably not view this as 'relevant news', because...well just because he is too busy revelling in his latest 'added fake jobs report'.
http://www.philly.com/philly/business/20160109_Feds__Economy_added_292K_...
Strange that after the huge drilling operation (and workforce thereof) portraid across the N. American continent and all the jobs recently lost (2015 yr.) as the oil & gas boom is now bust, no such graph as this article provides the Norwegians from Mr. T.E. Perez...a simple graph that correlates job losses and the price of oil.
wwxx
Officials hope a weaker krone can serve as a shock absorber ..."
That i don't understand. reshuffle currencies dosn't help. If export will be easier, import wil be dearer.
Change the valuation of a currency leads only to swift price adaption... so what is the benefit of doing so ? Nothing.
On the contrary. some goods are contractual bonded and price adaption is not possible. Business could go broke o that.
Long term contracts suffer more that short ones. And for every contract special agreements are defined to maximum losses due to currency fluctuations.
So while success is limited, unability of price adaption may drag down the economy.
Thats why i don't understand why governments think they could benefit the economy by lowering their currency. Changing valuations lead only to price adaption. The faster the adaption is, the lower the damage to businesses.
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If the valuation of oil is going down you better bought some gold. That isn't hard to understand, is it ?
.
Printing money and inviting barbarian rapists to enrich society, is a double suicide.
So Norway you punished Anders Breivik, but did you learned and listened..... ?
Am I the only one who read that as "Negroes Bank"?
You dyslexic Freudian bastard, you.
nogres bank
Just when they imported a bunch of new refugees to support and share the pain with. Lucky them.
It's all good. All that vibrant diversity will surely more than compensate for the implosion of both their oil industry and the assets in their SWF.
Here are some signs of a coming recession.
1. Investors in high-yield bonds are expecting to see their first negative return since the start of the credit crisis in 2008.
http://www.marketwatch.com/story/deteriorating-junk-bonds-flash-warning-signs-for-stocks-2015-12-07?dist=afterbell
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
6. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
What is the meaning of the term "Sovereign Wealth Fund" when all the currencies of the world, and all the assets of the international banking system lack physical collateral?
If each asset depends on every other asset for a portion of its value...and those assets rely on unpayable debts for their values via double entry bookkeeping... Then why do they not expect the SWF assets to disappear at the same rate as the rest?
Expansionary debt-based currency is corrosive to real production.
It is the pillars of real production that you see shaking.
Looking to finance as economic medicine is akin to seeking treatment at the undertaker's at best, and the worms at worst.
The incentives simply do not align.
5 to 10 million new wide-eyed & hungry muzzies should be able to eat thru that slush fund before long!
They'll need pleanty of nourishment in order to service all that available fresh fertile Norwegian womb!
The Sovereign Wealth Fund for Amerika is not represented in your chart? That means we don't have anything to lose in a downturn yay!..
When you subtract from Zero, it's still Zero.. so we're even... woot!
US currency is backed by enriched uranium. The debt will be paid in printed fiat, cancelled, and everyone involved will clap in thunderous applause. Every judge on earth will say it is fully legal and ethical as they too clap in thunderous applause.
The US doesnt neeed a sovereign fund. All funds are the US fund.
Anders Breivik is your prophet. While i disagree with killing chidren, he was
exactly right in choosing the politicians to kill.
Free the brave and wise Anders Breivik, make him your leader and you will be saved.
Anders Breivik is your prophet. While i disagree with killing chidren, he was
exactly right in choosing the politicians to kill.
Free the brave and wise Anders Breivik, make him your leader and you will be saved.
Top Gear guy Troll 'A' gas platform story. All to blow North Sea gas to Norway. In-fuckin-credible.
https://www.youtube.com/watch?v=Kx2EN3AAxKc
Eirik we don't give a shit what you think of us. We are not like our military. We are more dangerous and just as well armed. So welcome to the USA. Now get the fuck out!
Norway should also offer its Oil & gas
in Local currencies such as of BRICS
at higher rate than dollar rate
countries will buy it