How Norway has avoided the 'curse of oil'

Hugged by mountains and perched  on a stunning coastline of fjords, Bergen, Norway's second-largest city, has picture-postcard views.
As one of the centres of Norway's booming oil and gas industries, it is also a very wealthy place.

Yet there are few displays of ostentatious spending - there are no supercars with tinted windows, no designer handbag shops, and no queues of people outside exclusive nightclubs.

For while other countries have struck oil and then binged on the revenues, by contrast Norway is continuing to invest its oil and gas money in a giant sovereign wealth fund.

We trust the government, we believe our tax money will be spent wisely”

Prof Alexander Cappelen NHH Norwegian School of Economics

The fund, worth about $800bn (£483bn), owns 1% of the entire world's stocks, and is big enough to make every citizen a millionaire in the country's currency, the kroner. In effect, it is a giant savings account.

And most Norwegians are seemingly very content with this - according to a 2012 study by New York's Columbia University Norway is one of the world's happiest countries.

Trusting the government
So, no spending bonanza for Norway. In fact there is a closely followed guideline that only 4% of the surplus from the fund is spent or invested in public projects.

"Actually we are spending less than 4% currently - we are saving," says Prof Cappelen.

http://www.bbc.com/news/business-28882312
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A few observations -
1)It would seem, Norway is very much a rarity who are properly provisioning, for the future, as Demographic Aging, Energy Shortages & Climate Change, make the world a very different place!

2) Best not to get too carried away, trusting Politicians, even Norwegian Politicians, But they seem to have done a much better job than most other countries!

Petro-dollar era is officially over as Gazprom begins sales in Yuan and Rouble

Aug. 27 will officially go down as a red letter day in the history of reserve currencies and dollar hegemony in how oil and gas are purchased throughout the world. In a new announcement from the Russian business media source, Kommersant, Gazprom has conducted the first sale of oil in a currency other than the dollar, and will henceforth open their purchase window to accept both Roubles and Yuan for the exchange of oil and gas products.

Beginning today with an 80000 ton oil shipment from their Arctic fields, Gazprom Neft agreed to new terms on the sale and transfer of oil through the Eastern Siberian-Pacific Ocean pipeline (ESPO) to China, and facilitating the future sale of oil and gas to both Europe and China through a currency other than the dollar. And although this is not the first real transaction for oil done outside the petro-dollar, as this occurred covertly by Iran for gold during the days of economic sanctions, it is the first official global offering by a major oil producer and will likely bring an end to the solitary system of nations being forced to buy dollars first before buying oil from producers such as OPEC and Russia.

The Russian government and several of the country’s largest exporters have widely discussed the possibility of accepting payments in rubles for oil exports. Last week, Russia began to ship oil from the Novoportovskoye field to Europe by sea. Two oil tankers are expected to arrive in Europe in September.

According to Kommersant, the payment for these shipments will be received in rubles.

Gazprom Neft will not only accept payments in rubles; subsequent transfers via the ESPO may be paid for in yuan, the newspaper reported.

According to the newspaper, the change in currency was made because of the Western sanctions against Russia.

Russia and China had already long been in the works to supply one another with oil, energy, and other trade goods outside the dollar through a historic energy agreement made in late May of this year. However, the irony in all of this is that the move to enlarge this method of payment for oil to accommodate global transactions was only accelerated because of U.S. imposed sanctions, which were done in an attempt to isolate Russia, and tear down their economy.

The days of the dollar remaining the global reserve currency took a sharp hit today, and the ramifications of Russia's new move for selling oil in both Roubles and Yuan are just beginning. And since

there is over $17 trillion in U.S. dollars afloat and in nations outside the U.S. kept on reserve for the primary purpose of buying oil and natural gas, as more and more countries migrate to the East and find it far more inexpensive and efficient to no longer use the dollar and SWIFT systems to supply their energy needs, then these dollars will soon come crashing back to American shores, and the inflation America has exported offshore for decades will come rudely back and suddenly hit U.S. consumers and our financial system.

http://www.examiner.com/article/petro-dollar-era-is-officially-over-as-gazprom-b...
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Watch the Russians, Chinese & BRIC's, as they are the likely starting points, for the beginning of the end, for the US$ as the international safe haven currency & the commencement of the next big slide of the US & Global Economy!

Euro zone setback as economy stagnates

BRUSSELS: The euro zone economy stagnated in the second quarter, official figures showed yesterday, in line with the poor outlook which pushed the European Central Bank (ECB) into radical action on Thursday.

In a second estimate for growth in the 18-country currency zone, the Eurostat statistics body confirmed zero per cent growth from the previous quarter.

It also reported slight expansion of 0.2pc for the full 28-country European Union.

'The second quarter stagnation in euro zone GDP clearly added to the pressure on the ECB to take further stimulative action sooner rather than later to try and dilute the risk of extended low consumer price inflation morphing into deflation,'� said economist Howard Archer at IHS Global Insight.

Euro zone economic activity also suffered 'as heightened global geopolitical tensions, particularly the Ukraine/Russia crisis, weighed down on investment,'� he said.

The first estimate announced in mid-August sent shockwaves across financial markets and governments desperate for growth, and put even more pressure on the ECB to take action.

It did so in unexpected fashion on Thursday, when ECB president Mario Draghi produced the latest in a series of policy surprises, while also warning that the real solution was faster reforms by governments.

Concerns are growing that the European economy, after making it through the euro crisis and the prospect of the collapse of the single currency, may now be poised for years of stagnation or unduly low growth.

Stunted growth in the euro zone is forcing governments to cut back their estimates for growth of gross domestic product for the rest of the year, putting budget deficit targets into jeopardy, and also clouding the outlook for growth of the global economy.

The unexpectedly low growth figure was mainly the result of a surprise 0.2pc shrinkage in Germany, usually the reliable euro zone growth engine, and stagnation in an already fragile French economy.

Feeling the pressure, the Frankfurt-based ECB cut interest rates to a record low level on Thursday and pledged to buy hundreds of billions of euros of private sector bonds, thereby pumping much-needed cash into the economy.

However, Draghi also revealed that the ECB's policy council was split, since the decisions announced were not taken unanimously.

Despite the surprise moves, economist Holger Schmieding of Berenberg Bank said the ECB could now play only a 'support act'� in turning around the economy, unlike the instrumental role it played in ending the debt crisis.

'A lack of dynamism in France and Italy and Russia's aggression in Ukraine have interrupted the recovery. These factors are outside the ECB's control,'� Schmieding said.

The rate cut and bond-buying 'will help, but not solve all problems'�, he said.

The ECB also cut its forecasts for growth in the 18-country euro area this year and next, and lowered its outlook for area-wide inflation.

The ECB is now pencilling in gross domestic product growth of 0.9pc in 2014 with inflation expected to be 0.6pc this year '“ a lower rate than the 0.7 originally forecast.

http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=385311
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A few observations -
1) Politicians & Central bankers only say what they want to become reality and what they want people to believe, they do not disclose reality as it is.
IF they did, then they would confirm the real macro factors behind the "continuing Global GFC" AND they would confirm that it is not within their power, "to put things back to how they used to be"!

2) A look at what has happened to the "Canary in this Coal Mine, which is Japan", would confirm to any realistic person, that neither lower interest rates, nor massive stimulus's, will put the Economy back to where it once was!


Japan has been trying that for some twenty years & all that's happened is that they have accrued massive Debts, which are now approaching 250% of GDP, but it has done nothing to revive real Economic Growth & it won't!.


3) It should be clearly recognized that Economic Growth or lack of Economic Growth & inflation or Deflation are two very different issues!

Coming Economic Depression

Whilst there are possible (even likely) reasons, other than communicating current & upcoming Economic difficulties, on the mind of the author behind this video, it is also probable (even likely) that much of what is said, is also true.


Money velocity is certainly continuing to slow & that will prove to be a great difficulty, as Demand continues to Decline!


Certainly, US Debt & Unfunded Liabilities are well beyond "normal" and probably beyond control!


The US RedRes is certainly playing games & it is very likely that outcomes may well be beyond their control!


The US Share market is certainly well beyond realistic values & the DOW is likely to Decline & Decline sharply, by at least 50% or more, in the not too distant future!



Support for US Debt & the US$ is fraying & at some point that support will collapse. It is also likely that some of the current "support" has been "artificially arranged", by the FedRes!



As for the US$, it has certainly been "artificially propped up" recently & it will go back to its slide before much longer, probably with a little "aid", it will collapse & probably in the not too distant future!
http://webcache.googleusercontent.com/search?q=cache:KhBl4fAXkcgJ:moneymorning.c...

What the video didn't raise were the basic macro causes, which are -
1) Demographics
2) Energy - Supply shortages & Price Increases
3) Climate Change

Iron ore slide helps focus minds

The drop in the price of iron ore has helped focus minds on Australia's economic prospects this week, along with a raft of other data and indicators.

The price of iron ore, used to make steel, bounced around new five-year lows throughout the week before settling on Friday at $US84.30 ($90.21), its lowest point since September 25, 2009. The mineral, by far Australia's most important export, currently sits at just above half its all-time high – about $US190 – which it reached in 2011. The fall stemmed partly from growing supply and slower economic growth in China.

Australia's economic fortunes during the global financial crisis and the subsequent fallout have been largely tied to the mineral, which accounts for more than $1 in every $5 of Australia's export income.

Demand for coking coal that is used to fire the steel mills and the thermal coal burnt to make electricity also played to Australia's advantage as a large-scale exporter of the dark combustible.

Like all booms, however, the mining infrastructure bonanza had to end.

http://www.smh.com.au/business/iron-ore-slide-helps-focus-minds-20140905-10ct0l....
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Iron ore price at new five-year low

The price of iron ore has again failed to find support in overnight trade, slipping further away from the $US85 a tonne mark.

Benchmark iron ore for immediate delivery to the port of Tianjin in China is currently trading at $US83.20 a tonne, down half a per cent from its $US83.60 closing mark in the previous session.

Analysts have largely been revising their forecasts lower in recent months, though Westpac’s chief economist Bill Evans yesterday bucked the trend by issuing a forecast for prices to rebound above $US100 a tonne next year.

Mr Evans also tipped a “probable jump above $US120 a tonne in 2016, according to The Australian.

A more downbeat assessment has been offered by Alberto Calderon, however, with the former senior BHP executive suggesting the price has further to fall.

“On one side, we will see almost no growth in Chinese demand for iron ore, even if there is some growth in steel,’’ Mr ­Calderon said.

“On the other side, we are seeing a wall of iron ore supply being dropped in to the market by the large mining companies. It is not difficult to see why iron ore prices have collapsed and why they will go even lower.’’

Mr Calderon suggested prices in the $US70s could be seen for the next couple of years.

http://www.couriermail.com.au/business/breaking-news/iron-ore-price-at-new-five-...
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A few observations -
1) Never believe what Politicians or Economists say, they only say what THEY want you to believe, not what are likely realities!
2) Given the  main "known" Global factors that are currently influencing events & will be for quite some time (Demographics most of all), it is very unlikely that Demand for iron ore will do anything, other than go lower, which mean the Price of Iron ore will also continue to head lower!
3) Therefore, the suggestions of Politician (such of Colin Barnett - WA Premier) &  economist (Bill Evans -  Westpac’s chief economist), that iron ore Prices will rise again, ARE NOT BELIEVABLE!
4) Consider the likely outcomes, when CHINA (our major Economic supporter in recent times) ALREADY HAS ENTIRE CITIES WHICH HAVE BEEN BUILT, BUT ARE TOTALLY UNOCCUPIED!

I would suggest that most newer Australian mines will absolutely be in loss situations very soon, if not already & many will begin shedding their workforce first, then closing down completely and the older ones will also be substantially affected over the next few years!

Those who are shareholders may find this unpalatable, But it is the likely Reality!

Could be an "interesting" week ahead?

DOW Futures are currently trading some 140 points, lower than Fridays close
AND the All Ords is currently down some points, on trading today!

China cenbank injects $81 bln into major banks to support economy - reports

China's central bank is injecting a combined 500 billion yuan ($81.35 billion) of liquidity into the country's top banks, according to media reports, a sign that authorities are stepping up efforts to shore up a faltering economy.

Bloomberg, which quoted an unnamed government official, said the move follows deep concern over the economic slowdown.

The reports come after a series of soft data underlined the headwinds confronting the economy, which suffered its weakest growth rate in 18 months in the first quarter. A sharp slowdown in the housing market, which accounts for more than 15 percent of China's annual economic output, has also become an increasing drag on the broader economy.

Data out at the start of the week showed China factory output grew at the weakest pace in nearly six years in August, raising fears that the economy may be at risk of a sharp slowdown unless Beijing implements fresh stimulus measures.

http://in.reuters.com/article/2014/09/17/markets-china-repos-idINKBN0HC0AR201409...
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Perhaps the Chinese could build another dozen or so total Cities, totally unoccupied cities that is and that would boost their Economy?

The real question is, HOW LONG IS A PIECE OF STRING OR HOW LONG BEFORE THE LACKY BAND BREAKS?

If it was a question of ONLY Japan or ONLY the USA or ONLY Europe or ONLY China, then the others would already have taken action, but as it is, they are all inter-dependent on each other.

The problem being that, at some point the string will run out &/or the lacky band will break & then HUMPTY DUMPTY an all of his mates will take a great fall!

Global finance chiefs gathering in Cairns, Australia, face growing pressure to take steps to bolster growth as the global economic outlook dims.

The global economic recovery has faltered since a February G-20 meeting in Sydney, with Europe showing signs of slipping into deflation, Japan’s revival blunted by a sales tax increase in April and China’s 7.5 percent growth target for 2014 becoming harder to attain.

“Overall, the global economy continues to underperform. This is particularly true in the Euro area and Japan,” Lew said in prepared remarks in Cairns today. “More work is needed to achieve faster and more balanced growth, to boost demand especially in surplus countries, and to promote employment.”

Forecasts Cut
The Organization for Economic Cooperation and Development this week trimmed its growth forecasts for the biggest developed economies. Euro-area GDP is expected to expand 0.8 percent this year, down from 1.2 percent forecast in May, while the U.S. will expand 2.1 percent instead of 2.6 percent, the Paris-based organization said.

ECB Cuts
The debate could reflect growing concern that the world’s largest economies don’t have the appropriate policy mix to combat slowing growth, particularly in Europe, with too much focus on fiscal consolidation and an over reliance on loose monetary policy.

Inflation in the 18-nation euro area was 0.4 percent in August, holding at the weakest pace since 2009 and a fraction of the European Central Bank’s goal of just under 2 percent. ECB President Mario Draghi has warned of a deflationary spiral of falling prices and households postponing spending.

Draghi has cut interest rates twice since June, announced targeted long-term loans for banks and said the central bank will start buying assets.

PBOC Injection
The People’s Bank of China is injecting 500 billion yuan ($81 billion) into the nation’s largest banks to address weakening growth, according to a government official familiar with the matter. Bank of Japan Governor Haruhiko Kuroda said this month he’ll do what’s needed to achieve his inflation goal.

Infrastructure is one avenue Group of 20 countries are focusing on, said Richard Goyder, chief executive of Wesfarmers Ltd., who is also chairman of the B-20 group of executives advising the Australian government on its G-20 presidency.

“What we know is that there’s no shortage of money,” Goyder said in an interview in Cairns today.

http://www.bloomberg.com/news/2014-09-18/biggest-economies-plan-to-keep-g-20-gro...
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Well no? Not as long as the printing machines are still working at 100%, as they have been, BUT everything has limits!

A few things that should be considered -
1) US GDP has risen about 15% since the GFC, But the DOW has risen some 244%, mainly due to "fancy footwork", by the FedRes.
http://www.statista.com/statistics/188105/annual-gdp-of-the-united-states-since-...
2) Europe & Japan are still mired in Recession and unlikely to emerge for quite some time!

So, whilst the US as been/is  playing "games", there is nothing remotely resembling a real recovery, likely in the US for a long time & at some point the US house of Cards will come crashing back down, along with China, Japan, the Eurozone & Australia, this time, will crash also, irrespective of which Political Party is in power & no matter what Porkies all of our Pollies may tell!

Cheers, I think!