Decision Season
With Parliamentary elections looming, more Norwegians than usual are asking themselves the tough questions. It is now apparent that the slump in oil is not a temporary one. What will the country do now? Time for the lottery winner, after receiving the last annuity, to get a job before burning out the savings. Many are looking towards the sea, fishing and exploiting underwater natural resources. Others are looking to blast open the mountains to do the same.
However, commodity based economies, third-world in nature, are subject to mother nature’s whims, innovation, and ruthless competition. Moreover, it creates complacency, catching the nation off guard when there is a shift in the supply curve (instead of hitting peak oil, the opposite happened). Hence, the decisions or lack thereof, made during the next four years will impact future generations. Two generations of Norwegians grew up on the delusion that their society, built on pre-socialist values and high oil prices, can endure any challenge.
The Fund’s withdraws could accelerate amid a global financial crisis: politicians burning cash to shore up the economy and secure votes.
Burn Rate
Taking the sovereign wealth fund (The Fund) for granted, many fail to realize that the underlying investments are all pinned to the prevailing low-interest rate climate. If inflation gets out of control and rates must be pushed up to cut it off, the effect on stock and bond values could be substantial.
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