7 ms·

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

by harryh 10y ago

hellogoodbyeeee 10y ago
The US would need 56 trillion to achieve the same level of per capita income
- gok 10y ago
  Trillion (10^12), not quadrillion.
- dogma1138 10y ago
  That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund https://en.wikipedia.org/wiki/Permanent_School_Fund) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities. A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.
  - mburns 10y ago
    >The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.
    - dogma1138 10y ago
      Different sovereign/public funds have different regulations, they are usually split between equity and fixed income, Norway splits it to 60% equity, 5% real estate, and 25% fixed income. As far as the fixed income goes most of it is invested in treasury bonds, while the equity is invested in primarily the international stock markets. Overall the Social Security Act does disallow prefunding of the fund with marketable investments but one of the reasons it hasn't been changed it's because it's actually a pretty solid policy, and the world for the most part also doesn't want the US to drop a 3 trillion dollars investment pinata on the global markets. Overall while there is a lot of clickbait that inflates the Norwegian one it is not a special case if you look at public fund rankings http://www.swfinstitute.org/fund-rankings/ http://www.swfinstitute.org/fund-rankings/ you'll see that the US Federal Pensions Fund and the California Reteirment Fund combined are about equal to the Norwegian National Fund, and those are just 2 funds. Overall pretty much every state in the US has multiple SWFs, public funds or similar investment ventures those are usually directed at a specific funding target e.g. retirement, public schools, universities, infrastructure etc. Each fund funds usually only a single thing and each fund has a different source of revenue and investment goals and regulations, for the most part based on how the US federal system works in general it's a better model. California isn't expected to fund education in Texas or pay for a new road in Wyoming and vise versa so each state runs their own funds to fund their own needs (there is some federal money involved) overall it's likely a slightly safer bet than putting all your eggs in a single basket. This is also why you simply can't blow up the Norway's fund to US levels and say you'll need 56 trillion dollars because the US doesn't pay for everything from a single fund. The Gross National Wealth of Norway including the fund is about 85% of the US one when adjusted per capita, Norway is rich, the fund is wonderful and very well performing but it's not some unheard of economic miracle that no one else is using ;)
      - harryh 10y ago
        This (and your other comments in this thread) was super interesting to read. Thanks!
      - ckinnan 10y ago
        Actually the state funds do hold real assets but the federal system does not, there's no $3 trillion dollars to invest, the Social Security Trust Fund is just a non-marketable claim on the U.S. Treasury. It is an accounting placeholder-- a promise if you will-- there are no assets of any kind backing it. When the IOUs come due the Treasury will have to cut spending, raise taxes, or borrow new funds.
dogma1138 10y ago
Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gdp http://www.tradingeconomics.com/norway/households-debt-to-gd... This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is a trend of creating a new generation or class of indentured citizens. Many EU countries need to look at germany and start reducing housing prices, one of the main contributors to Germany's low household debt is a 10 year cap on mortgages. Countries like Sweden and Norway just now starting to cap it, Sweden capped the mortgage term to 105 years (no this isn't a typo) this year and the current average mortgage term in Sweden is still over 140 years, and Norway isn't much better off (It was slightly higher than Sweden IIRC I just can't find a source atm). While the Nordic countries take pride in their model the current economics are pretty bad under the surface, you have a combination of inflated housing prices, extreme housing shortages, and mortgages that can span over 3 generations. To some extent the Nordic model isn't a choice it's an outcome of the economic policy to the point where a lot of people that appear to be wealthy are actually in dire debt and dependant on the state. http://www.telegraph.co.uk/personal-banking/mortgages/sweden-cuts-maximum-mortgage-term-to-105-years-the-average-is-14/ http://www.telegraph.co.uk/personal-banking/mortgages/sweden...
- ricardonunez 10y ago
  Will that be the reason why Germany has one of the lowest home ownership rates?
  - dogma1138 10y ago
    Not the only reason, and most likely not the primary one. When adjusted for age Germany has a pretty solid house ownership rate. Germany is big and has a pretty mobile workforce, in many other countries you are considerably less likely to be moving every 2-5 years across large distances like you are in Germany. Overall the affordability of housing even when accounting for mortgages and required seed money is considerably better in Germany than in Norway, Sweden or Denmark, and while Germany does have about half the house ownership rate on paper it is also because rent is both available and affordable and is favored by the younger workforce. One can argue about what is better having to rent until you settle down at the age of 30-35, or buying a house at the age of 19 with decades of mortgage and only having to sell it to move into your parent's house which is still under mortgage. The house pricing in Oslo rivals NYC these days. Also while Germany does have a considerable below average age for the EU28, the highest / above average EU28 countries are not those which you would expect, those are the Eastern European countries like Romania, Poland, Hungary, Slovakia etc. countries which were in the USSR/Warsaw Pact or were under socialism at one point or another. When you give everyone in the country a home at some point in time you'll end up having very high homeownership rates even 50 years later.
refurb 10y ago
Norway also has foreign debt of greater than $600B or 75% of the Global Fund.
- harryh 10y ago
  Interesting. Why do they choose to keep this money in a sovereign wealth fund instead of choosing to pay off their debt?
  - vertex-four 10y ago
    Likely because their debt comes on better terms than their income from their fund. Or their debt is structured in such a way that they can't pay it off until some time in the future.
  - Alupis 10y ago
    Because the debt doesn't necessarily harm their economy, and the fund can be put to better use than huge lump sum payments of a debt that doesn't impact Norway.
  - 0x0 10y ago
    From a random webpage http://www.nationaldebtclocks.org/debtclock/norway http://www.nationaldebtclocks.org/debtclock/norway - "NOTE The Norwegian central government is in a net asset position, i.e. the government’s total financial assets exceed the total debt. They borrow cheap to then re invest."
  - morgante 10y ago
    Because their return on investments in the fund should be higher than their debt interest.
  - bkanber 10y ago
    The Norwegian 10Y treasury bond has a coupon rate of 1.3% (lower than the US T-Note! suffice to say, very cheap). The wealth fund has been growing around 8% per year. Borrow money at a rate of 1.3%, reinvest it and make 8%. It's one of the golden rules of banking: if you can borrow money for cheap, do so.

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

by harryh 10y ago

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

hellogoodbyeeee 10y ago

The US would need 56 trillion to achieve the same level of per capita income

gok 10y ago
Trillion (10^12), not quadrillion.
dogma1138 10y ago
That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund https://en.wikipedia.org/wiki/Permanent_School_Fund) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities. A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.
- mburns 10y ago
  >The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.
  - dogma1138 10y ago
    Different sovereign/public funds have different regulations, they are usually split between equity and fixed income, Norway splits it to 60% equity, 5% real estate, and 25% fixed income. As far as the fixed income goes most of it is invested in treasury bonds, while the equity is invested in primarily the international stock markets. Overall the Social Security Act does disallow prefunding of the fund with marketable investments but one of the reasons it hasn't been changed it's because it's actually a pretty solid policy, and the world for the most part also doesn't want the US to drop a 3 trillion dollars investment pinata on the global markets. Overall while there is a lot of clickbait that inflates the Norwegian one it is not a special case if you look at public fund rankings http://www.swfinstitute.org/fund-rankings/ http://www.swfinstitute.org/fund-rankings/ you'll see that the US Federal Pensions Fund and the California Reteirment Fund combined are about equal to the Norwegian National Fund, and those are just 2 funds. Overall pretty much every state in the US has multiple SWFs, public funds or similar investment ventures those are usually directed at a specific funding target e.g. retirement, public schools, universities, infrastructure etc. Each fund funds usually only a single thing and each fund has a different source of revenue and investment goals and regulations, for the most part based on how the US federal system works in general it's a better model. California isn't expected to fund education in Texas or pay for a new road in Wyoming and vise versa so each state runs their own funds to fund their own needs (there is some federal money involved) overall it's likely a slightly safer bet than putting all your eggs in a single basket. This is also why you simply can't blow up the Norway's fund to US levels and say you'll need 56 trillion dollars because the US doesn't pay for everything from a single fund. The Gross National Wealth of Norway including the fund is about 85% of the US one when adjusted per capita, Norway is rich, the fund is wonderful and very well performing but it's not some unheard of economic miracle that no one else is using ;)
    - harryh 10y ago
      This (and your other comments in this thread) was super interesting to read. Thanks!
    - ckinnan 10y ago
      Actually the state funds do hold real assets but the federal system does not, there's no $3 trillion dollars to invest, the Social Security Trust Fund is just a non-marketable claim on the U.S. Treasury. It is an accounting placeholder-- a promise if you will-- there are no assets of any kind backing it. When the IOUs come due the Treasury will have to cut spending, raise taxes, or borrow new funds.

dogma1138 10y ago

Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gdp http://www.tradingeconomics.com/norway/households-debt-to-gd... This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is a trend of creating a new generation or class of indentured citizens. Many EU countries need to look at germany and start reducing housing prices, one of the main contributors to Germany's low household debt is a 10 year cap on mortgages. Countries like Sweden and Norway just now starting to cap it, Sweden capped the mortgage term to 105 years (no this isn't a typo) this year and the current average mortgage term in Sweden is still over 140 years, and Norway isn't much better off (It was slightly higher than Sweden IIRC I just can't find a source atm). While the Nordic countries take pride in their model the current economics are pretty bad under the surface, you have a combination of inflated housing prices, extreme housing shortages, and mortgages that can span over 3 generations. To some extent the Nordic model isn't a choice it's an outcome of the economic policy to the point where a lot of people that appear to be wealthy are actually in dire debt and dependant on the state. http://www.telegraph.co.uk/personal-banking/mortgages/sweden-cuts-maximum-mortgage-term-to-105-years-the-average-is-14/ http://www.telegraph.co.uk/personal-banking/mortgages/sweden...

ricardonunez 10y ago
Will that be the reason why Germany has one of the lowest home ownership rates?
- dogma1138 10y ago
  Not the only reason, and most likely not the primary one. When adjusted for age Germany has a pretty solid house ownership rate. Germany is big and has a pretty mobile workforce, in many other countries you are considerably less likely to be moving every 2-5 years across large distances like you are in Germany. Overall the affordability of housing even when accounting for mortgages and required seed money is considerably better in Germany than in Norway, Sweden or Denmark, and while Germany does have about half the house ownership rate on paper it is also because rent is both available and affordable and is favored by the younger workforce. One can argue about what is better having to rent until you settle down at the age of 30-35, or buying a house at the age of 19 with decades of mortgage and only having to sell it to move into your parent's house which is still under mortgage. The house pricing in Oslo rivals NYC these days. Also while Germany does have a considerable below average age for the EU28, the highest / above average EU28 countries are not those which you would expect, those are the Eastern European countries like Romania, Poland, Hungary, Slovakia etc. countries which were in the USSR/Warsaw Pact or were under socialism at one point or another. When you give everyone in the country a home at some point in time you'll end up having very high homeownership rates even 50 years later.

refurb 10y ago

Norway also has foreign debt of greater than $600B or 75% of the Global Fund.

harryh 10y ago
Interesting. Why do they choose to keep this money in a sovereign wealth fund instead of choosing to pay off their debt?
- vertex-four 10y ago
  Likely because their debt comes on better terms than their income from their fund. Or their debt is structured in such a way that they can't pay it off until some time in the future.
- Alupis 10y ago
  Because the debt doesn't necessarily harm their economy, and the fund can be put to better use than huge lump sum payments of a debt that doesn't impact Norway.
- 0x0 10y ago
  From a random webpage http://www.nationaldebtclocks.org/debtclock/norway http://www.nationaldebtclocks.org/debtclock/norway - "NOTE The Norwegian central government is in a net asset position, i.e. the government’s total financial assets exceed the total debt. They borrow cheap to then re invest."
- morgante 10y ago
  Because their return on investments in the fund should be higher than their debt interest.
- bkanber 10y ago
  The Norwegian 10Y treasury bond has a coupon rate of 1.3% (lower than the US T-Note! suffice to say, very cheap). The wealth fund has been growing around 8% per year. Borrow money at a rate of 1.3%, reinvest it and make 8%. It's one of the golden rules of banking: if you can borrow money for cheap, do so.