Global Financial Meltdown? Not in Norway

One European nation has escaped the worldwide financial meltdown and recession.  It’s Norway, which saved its money – rather than spent – through the boom years. As a result of frugal financial management, Norwegian housing prices and consumption are on the upswing and interest rates are affordable.  Norway’s fiscal responsibility of its income from enormous oil and gas reserves has allowed the Scandinavian nation to build one of the globe’s largest investment funds.

After large deposits of gas and oil were discovered in the mid-1970s, Norway didn’t go on a spending spree, and channeled its revenues into a state investment fund.  The government – with very few exceptions – can spend only four percent of those revenues annually.  “By the end of this year, I guess we are approaching $400 billion U.S.,” according to Amund Utne, a director general of Norway’s Finance Ministry.  Do the math, and that adds up to $400 billion in a nation whose population is 4.5 million.

Beyond its oil and gas revenues, strict banking regulations – tightened after a banking crisis in the early 1990s – shielded Norway from the credit crisis.  Norwegian banks made loans wisely and stayed away from exotic investments and financial products over the past decade.  “They (the United States) got all the bright guys to make all kinds of fantastic products.  Very creative.  And it turned out it was maybe not the best solution in the end,” Utne said, with typical Norwegian understatement.  “I think Norwegian banks are not as creative.  In this situation, it may be good to be somewhat boring.”

Norway also was immune from the housing bubble.  According to Bjorn Erik Orskaug of DnB NOR, Norway’s largest bank, “Housing prices are back up.  Consumption is up.  Banks are lending normally to the household sector and interest rates are staying low.”