1 Norway wealth fund value at $1trn (San Francisco Chronicle) Norway’s sovereign wealth fund, the world’s largest of its kind, has hit a milestone value of $1 trillion, beating all expectations since its creation over 20 years ago.
The fund, which reached its record value early Tuesday, has been boosted lately by a rise in stock markets and a weaker US dollar, which increases the dollar value of its holdings in other currencies.
Norway first deposited oil and gas profits into the fund in May 1996 and CEO Yngve Slyngstad said nobody at the time had expected it to hit the trillion dollar mark, calling the growth “stunning.” The fund invests proceeds from the country’s oil and gas industry to secure pensions for future generations in Norway, a country of merely 5.3 million people.
Because of its sheer size, the fund does not reinvest all its money in Norway, or it would overheat the economy. So it places it worldwide, with some 42 percent in North America, 36 percent in Europe and 18 percent in Asia.
Of the total, 65 percent is in stocks — including a $7.4 billion stake in Apple and $5.5 billion in Alphabet. Norwegian lawmakers passed a law in 1990 to establish a government-owned oil and gas fund. In 1998, its management was transferred from the Norwegian finance ministry over to the Norges Bank Investment Management, a unit of the Norwegian central bank.
2 Britain’s debt time bomb (Larry Elliott in The Guardian) Britain’s debt time bomb is primed and ready to go off at any time. From never-never spending on credit cards to car loans, from overdrafts to payday loans, there is enough high explosive to devastate the economy for a second time in decade. All that is required is for the fuse to be lit.
The Bank of England is aware of the risks and has been issuing ever-more explicit warnings about debt. The warnings are fully justified, even if the Bank of England has itself been responsible for the build-up in debt.
After all, in the first 313 years of the Bank’s existence, official borrowing costs never once fell below 2%. In 2009 they were cut to 0.5% and left there until shortly after last year’s EU referendum when they were shaved further – this time to 0.25%.
Low interest rates were supposed to encourage people to borrow rather than to save – and that is precisely what has happened. Household debt levels as a share of national output are edging back to the record levels seen in the boom years in the build-up to the financial crisis.
For now, debt is a problem for some individuals but not for the economy as a whole. Debt servicing costs are much lower than they were before the crisis and the unemployment rate is at its lowest since 1975. Difficulties would only really arise if the Bank felt the need to raise interest rates aggressively or if unemployment were to increase sharply for any reason.
Imagining the circumstances in which the debt time bomb might go off is not all that difficult. There could be a severe run on the pound if the Brexit talks go badly, which would force the Bank of England to raise interest rates despite its concern about the impact on heavily indebted borrowers. A trade was between the US and China could derail what has been a fairly feeble global economic recovery. In truth, it would not take all that much to light what looks to be a fairly short fuse.
3 Unemployment seen as biggest risk to business (Straits Times) Unemployment is the biggest risk for businesses globally, according to a World Economic Forum survey of business leaders published on Wednesday.
The company executives put unemployment or underemployment as the top risk over the next 10 years, followed by fiscal crises and the failure of national governance, data from the WEF’s Executive Opinion Survey showed.
“Geopolitical risks and events have led to uncertainties which raise questions about how to manage resilience in uncertain times,” said John Scott, chief risk officer, commercial insurance, at Zurich. For businesses in the North America, East Asia and Pacific regions, the biggest risks were considered to be cyber attacks and asset bubbles.