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Dr. Stephen Leeb is a recognized authority on the stock market, macroeconomic trends and commodities, especially oil and precious metals. Dr. Leeb is founder of the Leeb Group, which publishes a line of financial newsletters including The Complete Investor, Leeb's Income Performance Letter,... More
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  • Norway's Economics Lesson 0 comments
    May 14, 2009 5:57 PM

     

    If we were to live elsewhere in the world outside the U.S., we wouldn't choose Norway. Too cold and too expensive, among other drawbacks.
     
    But it turns out that the U.S. could learn a few things from that small country (just 4.6 million inhabitants). It's one of the few nations that's largely unaffected by the global financial crisis. An article in today's New York Times details some of the reasons.
     
    Undeniably, Norway has a big advantage: It's the world's third-largest oil exporter, creating great wealth for such a small country. But even though oil prices have declined sharply, Norway is well prepared because it avoided the spending binges of many energy-rich countries. Norway’s economy grew in 2008 by almost 3 percent. The government has an 11 percent budget surplus and is entirely debt free.
     
    Norway is known for its cradle-to-grave welfare state. Yet government spending actually has declined steadily in recent years. What's more, Norway's oil revenues go directly into its sovereign wealth fund, which invests around the world. Amazingly, Norway's sovereign wealth fund now is among the world's largest.
     
    Home prices soared in Norway, as they did elsewhere. But there has been no real estate crash because there were few mortgage-lending excesses. Norwegian banks represent just 2 percent of the economy and did not take big risks. Yet credit is widely available.
     
    All is not rosy in Norway. One economist there describes the situation as "an oil-for-leisure program,” adding that Norwegians work fewer hours than citizens of any other industrial democracy. "Some day the dream will end,” he says.
     
    For now, though, the lesson is clear: Over time, we need to rein in spending and borrowing, both individually and as a nation. It's worth noting that the U.S. is also energy-rich. Unfortunately, our energy consumption and imports have grown much faster than our production for several decades. We need to invest in productive resources instead of seeking growth through debt and asset bubbles.

     

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