Tuesday 14 October 2008

Pic of the day: Sunset for the rich world? Probably not yet. But even one of the world's richest countries is seeing some serious worry now.

Fast forward

According to various Norwegian sources, the government made announcements Sunday evening to reduce the impact of the global financial crisis. The Norwegian state, which has huge currency reserves, is launching a new 3-year paper which will be swapped for banks' collateral for loans. This effectively takes care of the solidity question for the time being, as any fall in property value will have no effect on the banks. The Norwegian central bank has also recently made a currency swap with the Federal Reserve and will make dollars available for companies that need to pay back American debt that is no longer renewable. The central bank's interest rates are expected to fall slightly on its next meeting, but this is not under direct political control.

Economists still think the government is not taking the crisis seriously enough. As an oil-producing nation, Norway will suffer dramatic losses from a worldwide recession. However, the state has huge funds set aside for such an eventuality, and has diversified the economy rather than relying on oil and gas alone. Panic does not seem natural unless governments around the world react with acute protectionism. With a small and very open economy, Norway is completely dependent on international trade for the daily life of its citizens.