Tale I – Norway
The Norwegian Oil Fund now owns 1.7% of all European shares – this for a country of 4.7 million people. It’s also known as the Petroleum Fund (Oljefondet in Norwegian) or The Government Pension Fund – Global.
The Fund is effectively a country pension fund – save up now during the “earning years” while the oil still flows and use this savings pool to supplement government revenues when the oil dries up.
Norway is transforming its current oil-based wealth into a sovereign fund based on the economic progress of the world.
It’s a more traditional approach to saving than Dubai’s transformational gamble to turn itself into a lasting financial centre. A few years ago it would have looked like the dull, conservative, less effective approach. Now, although stock market declines have hurt the fund, the higher risk nature of Dubai’s approach looks like speculation on a national scale.
This is not to say the citizens of Norway are entirely happy about this plan. Many want increased current spending so that they can have better, cheaper services now. Concerns have also been raised around the suitability of stock markets as an appropriate asset and how the enormous fund manages ethical decisions.
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The South African Reserve Bank today lowered the REPO rate by a further 50 basis points, down to the level last seen in 2005 and the lowest the REPO and BA Rate have been in nearly 3 decades. Surveys leading up to the announcement and analysis of market interest rates suggests that the expectation was for rates to be held constant. Was this a purely populist decision, or does Tito Mboweni see more economic trouble ahead that other, more optimistic South Africans believe?
To date, the South African economy has been relatively less affected by the global financial crisis. Unemployment in Spain is up to 18% – within spitting distance of our own extravagant unemployment rates. Several large economies have been making eyes at 10% annual declines in GDP – often used as an informal definition of a depression (compared with a recession typically defined as two consecutive quarters of decline in real GDP). Property prices have been declining between 5% and 10% (depending on who you ask) and even after allowing for our higher inflation and thus greater real decreases, we compare very favourable to the drops of 20% to 50% in some parts of some countries. (more…)
The US Federal Deposit Insurance Corporation closed the 69th bank of 2009 recently. The rate of closures has increased recently, leading some analysts to believe that well over 100 banks could be closed this year.
The Savings and Loan crisis of the 1980s in the US started at about the same pace, with 100 closures per year. However, the number of closures increased to a peak of 534 in 1989 – fully 9 years after the start of the uptick in closures in 1980.
The South African banking environment is different – very much fewer banks and arguably tighter regulation give the lack of deposit insurance. However, the pain that US banks are feeling informs views that our banking sector still has pain to live through before turning around.
