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NES, a podcast from the news. A warm welcome to Elisabeth Holvik, Chief Economist at Sparebank 1. And Elisabeth, I am confused. Uh, the Strait of Hormuz is closed. Uh, inflation in Norway remains high. >> Uh, the wage settlement is now over 4%. Uh, everyone says, but that nevertheless, that there will be real wage growth in Norway. I think that with the uh price shock we are currently getting from abroad, I think that uh we can forget about that. And Norges Bank is talking about raising interest rates, not lowering interest rates. Yes. And uh at the same time, there is hope that the markets are holding up quite well despite a huge conflict. How do you navigate this landscape if you are trying to make sense of it for a confused podcaster? >> No, I still think that what is the tanker in understanding what is happening, it is the great power conflict between the USA and China, and China with all its allies. They have been very good at building alliances, primarily with Russia, but also with all these BRICS countries. And this includes both Venezuela and Iran, uh, and a long list of other countries. So China is completely dependent on importing oil and raw materials. And they have received very cheap oil from Venezuela and Iran. So when now, uh, the USA, uh, in a way, is strangling, uh, China's access to oil from both Venezuela and Iran, then at some point, that will start to hurt China. So I think it might be wise to keep the big picture of the global power shift in mind when you look at what is happening on an ongoing basis. >> So, as you read it, this is entirely deliberate from the USA and Trump. First Venezuela, then Iran. And then they get their hands on something that is very sensitive to China. >> Yes. And Russia. Because you must also remember that Russia's big problem is access to deep-sea ports, and they have now lost it in Syria, which was a close ally of Russia, and Crimea is also exposed, so, uh, and this deep-sea port is also very important for China, and that is one of the reasons why they are so concerned about Taiwan. So this is very much about this big game, and if you go back to thinking about your, uh, images of how to build up a great power, it is a long-term strategy where you must have the best educated people. You must be innovative, you must have large production capacity, you must have access to energy, minerals, metals, and new technology. And then eventually, you get what is perhaps the most important thing to be the great power that sets the rules of the game in the world, and that is to have reserve currencies. So when Iran now says that, or said before the USA blocked Hormuz, Iran said that yes, but ships going out must pay in Chinese currency or in cryptocurrency. So that is a financial attack on the USA's, uh, position as a superpower and as the one that has the reserve currency. And and there I have received many listeners who say to me, and rightly so, that Ness, you are too little educated about the Petrodollar. >> they say. And and I must admit that, >> immediately, I am so confused that Petrodollar, it is not, it is not a concept that makes immediate sense to me. Yes. Who is it? Yes. >> So, so take it, take the basics. >> Yes. No, uh, the USA provides security guarantees to a large number of countries, uh, in the Middle East. And then there is an agreement that these countries that sell oil, they sell it in dollars. And then when they receive export income in dollars, then a part of that surplus is reinvested back into the USA. So then, in a way, you recycle the dollars, uh, from the oil-producing country and back to the USA, and then the USA provides security guarantees for these countries in the Middle East. So this has been an agreement since the 70s, uh, where the USA built bases and, uh, and security for these Arab countries. Uh, and when it comes to the petrodollar, Norway is actually also a bit, we also have a bit of a petrodollar economy. Because in Norway, oil companies must pay taxes in Norwegian kroner, but they receive their income in dollars, right? So when oil companies make money, they must first exchange it into Norwegian kroner to pay taxes. And then those tax revenues go back to our oil fund, which then exchanges that money back into dollars and euros and then invests it abroad. So Norway also has a kind of recycling of currency in and out of dollars and into kroner. And is a large investor, especially in the USA. So China has, for many years, approached individual countries, bilateral central banks in Asia and other countries, saying that perhaps you should rather have your reserves in Chinese currency or gold, or drop the dollar. Uh, and then they have also gotten some countries to take out loans, not in dollars anymore, but in other currencies, and to sell goods in Chinese currency or currencies other than dollars. >> And and why would a country want a reserve currency? What, what is so good about it for the USA? And why would the Chinese want it to be the Yuan? Yes, well, China does not want it for now because they still tolerate a relatively stable exchange rate against the dollar. So, so China has, uh, since they particularly entered the global economy, they have had enormous export surpluses because they have produced, right? Many countries in the West have moved production to China, and then we have become dependent on importing goods from China. Then China gets a big problem because if they had only used those export revenues at home, then China's exchange rate would have strengthened significantly, and that was a bit of the, uh, criticism of the entire Bretton Woods currency system after World War II, where they agreed on what the rules of the game for currency in the world should be. And then Keynes and some others said that yes, but what happens if imbalances build up over time? Yes, they didn't really have a good answer for that. Then, in a way, the currencies of those who had very competitive products and large trade surpluses were supposed to become stronger. But when China, uh, deliberately keeps the exchange rate stable by using all export revenues in dollars and investing them back in the USA or other countries, they have maintained an artificially low exchange rate, right? And that has been beneficial for China. So if they are now to take over the role of reserve currency, they must be willing to let their currency float freely and accept all, uh, the export revenues they receive and then use them internally, or yes, they cannot just push them back to the USA, at least, and they are not ready for that yet. They do not have a mature enough economy to do that. So even though the Chinese currency has begun to strengthen since the war started, so it is something that I have pointed out as, ah, here is something happening, right? A change. Uh, if China allows its currency to strengthen to a greater extent, it will be another piece in this long-term, uh, power shift. Because anyone who is to become a superpower must also take on the role of, uh, having the reserve currency. The advantage of having the reserve currency is that you borrow in your own currency, so you have no currency risk. And then there is a tacit agreement that all countries that are linked to that currency system must have your currency as a reserve in their central bank. And in Norway, we saw it very clearly during COVID. Then the entire Norwegian financial market completely stopped because there was no, uh, there was no dollar. Uh, so what saved Norges Bank and the Norwegian kroner, you could think that any number for a kroner was worth, it was actually worth nothing. Uh, what saved it was that the American central bank supplied Norges Bank with dollars, and then Norges Bank could support buying Norwegian kroner and get liquidity back into the market. So there is a cost to having the reserve currency. It is a responsibility you take on behalf of the entire currency cooperation. And then the advantage is that you can borrow more cheaply. And everyone will be interested in your economy and, uh, yes, place money there and hold reserves in your currency. So, >> and and if we then now record this, uh, Wednesday, April 15th, midday. Mm. >> Uh, as we speak, Hormuz is, uh, closed. Uh, the USA is enforcing the blockade. Uh, and, uh, the world is then in an energy crisis. >> Mhm. >> Uh, at least the USA, at least Europe and Asia, one can say. >> Mhm. >> While the USA exports oil and gas. >> Yes. Always powers and earns, at least according to Trump, very good money from this. If we then try to focus on the current situation, >> Yes. >> now, >> Yes. >> Yes. So, of course, the USA has become self-sufficient in energy, and that is a big change from the 70s, so they are doing fine and have much lower energy costs than especially Europe. China has, of course, been prepared for this. They are an extremely long-term player, so they have probably filled up their stocks and arranged things in all sorts of ways to withstand such a shock as this will be. But in the long run, China still has a growth model where they live by exporting. Um, and they have too little purchasing power from Chinese citizens to take over the role that the USA has had as the spender of last resort for the rest of the world. So China is probably not ready to, uh, take over the role completely yet. And I think that is something that can be positive for finding a solution to the conflict. So if one is to think a little positively about what is happening, then I would say that the fact that they are already negotiating and having dialogue is a sign that everyone will lose from an escalation. Uh, and that it may therefore seem like there will be some form of agreement. And it could be that Iran accepts to give up, uh, but that they retain, uh, the Strait of Hormuz in some way. Because China is behind that, and, uh, the other thing that the USA is doing now is that they are entering all these friends and proxies of Iran and China. You have a peace agreement with Jordan and Israel at the moment. Uh, you see that the Houthi militia has not engaged yet. Saudi Arabia has established its own, in a way, internal alternative in Yemen, isn't that what it's called? Uh, I'm getting a bit lost in all these countries. But the Houthi militia has not been involved so far. They are, in a way, neutralized a bit. Uh, Hezbollah, Hamas, are beginning to be neutralized. So Iran does not have the same power to create problems for, uh, the USA and Israel as it had before. Uh, so for the regime, perhaps the best thing would be for them to survive, but give up uranium, and then they can start over and build themselves up. So from the financial market, it seems that this is what is priced in, that there will be some form of agreement. Um, because there is no alternative, right? What will China do with all the goods we have in stock if they cannot sell to the USA? Uh, more and more countries in Europe understand that they cannot accept all these goods, right? Uh, the Middle East has become a major trading partner for China, but if there is war there, they cannot sell goods there. And transport costs are a big issue for China, which is dependent on transporting its goods out and getting energy into the country. So there, but then you said something, and that was that a possible agreement could be that, uh, Iran, for example, gives up Iran, but retains control over Hormuz. Can the USA live with that, or must they live with it, so to speak? >> Yes. No, and I know too little about this, and it is impossible to know. When you start a war, anything can happen. Uh, but but if you try to think in terms of game theory, what are the solutions to all possible conceivable scenarios, then it is quite bad for everyone. And even though the regime is fanatical and completely awful, many of them will probably want to survive. Uh, so to reach some kind of agreement, I think that is what, as I said, is priced into the market. And I have no other, uh, analysis than to observe what is priced in and to think through various realistic scenarios. And and I think China is a bit behind because they are dependent on exporting. Uh, they are dependent on getting energy in and goods out. Uh, and they are too weak to take over the role of superpower for now. And then, uh, just to stay on track a bit, because I read a message that I found a bit amusing. Mm. Uh, and that was, yes, amusing. That's the wrong word to use for something like that. But >> uh, at least very interesting for a journalist, it was that Britain and France are working on an agreement to open Hormuz. >> But the French said that this agreement would take effect when the hostilities were over. >> Yes. When it is safe. >> When it is safe. And then I thought that >> here you see Europe's >> Yes. powerlessness, >> really, Yes. >> Yes. It is exposed. Yes. >> Yes. Totally. Except perhaps for some Europeans. >> Mm. >> Because we are still, ah, France and Britain are going to meet. I mean, we >> we are doing some kind of, uh, >> theater. >> Yes. And that is, that is what I have, in a way, warned about for many years, that we must, in a way, realize that the world is undergoing such great change and that the USA has such large budget deficits. They have so much national debt. Great internal tensions. We must take much greater responsibility for our own defense and deterrence. >> Go through these magnitudes for the USA, meaning with, explain what >> uh, current account is and budget deficit. Take it really like A B C. >> Yes. Yes. So, the USA is a federation of many states, but it is the federation, uh, where Trump is responsible. They are responsible for defense and what is, in a way, common to all states. And there, the federal budget deficit, the state budget, it has a deficit of, yes, around 7-8% of GDP now, with some war expenses. And GDP, that is everything that is produced, right? It is like 7-8% of >> absolutely everything that is made. That is how big the budget deficit is. >> Yes. And the demand for money that must be borrowed. >> Yes. And the requirement to be allowed to be in the euro was a maximum of 3% in really bad times, right? So here we are talking about a budget deficit that is off the charts. And periodically, everything stops in the USA because they cannot agree in Congress on what to do about this budget deficit. And it is a great concern for Europe, it should be much greater, that our security guarantee has economic problems, and they must borrow this money. So when the budget deficit increases, they must go into the market and borrow this money. And then it is we Norwegians, right? We have a surplus because we sell oil. Uh, so a part of that surplus, we lend it to the USA. So, to put it bluntly, we use our oil tax revenues to lend to the USA so that the USA will defend us. >> You don't need to be Trump to think that maybe this sounds a bit unsustainable. So the USA's budget, if you think that it is always producing, then they have a national debt that is over 100% of GDP. And again, if you think about what was the requirement to join the euro, and these requirements to join the euro were based on many hundreds of years of economic expertise about how a country should be managed properly, then they said that you can have a maximum of 60% debt relative to your economy. And the USA is already well over 100%. >> So the USA has bad state finances to join the euro. >> They would not have been allowed to join. They would have had to go through a, uh, austerity program. Um, so when the USA has to go out and borrow this money, the market will be a disciplining force, that if we then start to become concerned that this is going really badly with the USA and they will not be able to repay their debt or pay interest on their loans, then those who lend money to the USA will say, oh, this is starting to get uncertain here. We want a higher interest rate, a kind of insurance premium for lending money to the USA. So when the USA entered Iran, the interest rates for the USA immediately rose. Because then investors started thinking, oh, are they going into a new long-term war with this bad economy? Then we will demand insurance for lending money to you. So then all the interest rates for the US state immediately rose. So we see now, every time there is talk of negotiations, and today the interest rates are lower than they were a year ago for almost all maturities of US government debt. So the market, as I say, if you read, what do those who actually put money into what they believe in think, not just talk, they believe that this will go well and that there is something good about the American economy that will make them perhaps manage to grow out of their problems and then service their national debt in the long run. And and here, for those who have not studied finance, there is reason to respect the markets because what we usually say is that markets are >> uh, yes, all available information is priced into the market. So if you, uh, believe that the market is mispriced, then the probability is overwhelming that you, the market sees something you do not see yourself. So often the market is right more than you are. Yes, that is the first thing you learn when you start working in finance, that you can think what you want, but you have to convince all investors in the world who have all sorts of smart people and access to analysis and resources. So I remember when I moved to New York to work for Nordea, we had a fixed exchange rate and everything was going well in the Norwegian economy, and I was going to travel to get American investors to invest in Norway. While I was on the plane over, the kroner broke away from the fixed exchange rate policy. It is a country with much lower wages and a completely uncertain period for the Norwegian economy. So even though I had, in a way, the same analyses as before I got on the plane, all the world's investors had received such a shock, what is happening in Norway? Uninteresting, right? And they are right, because it is you who will not want to pay to buy something in Norway, and then the kroner falls, right? So with having respect for the fact that the financial market has enormous analytical capacity, and that we in Norway, right, have something called home bias in financial theory, that one thinks that the workplace one has is fantastic and would like to have a lot of shares in one's own workplace or the country one lives in, where one thinks it is going very well, but it does not matter if no other country's analysts think the same. Then we are, in a way, just fooling ourselves by talking only about all the positive things. So that was my first crash course with, you have to actually try to think like an, uh, objective analyst if you are to give good advice about what will happen in the future with interest rates, with the exchange rate, with the stock market. It does not help to sit and talk about your position, that we think things are going so terribly well in Norway. >> And this is amusing what you say, because here >> a little detour for me, then, is that I think we talk >> very much about the USA >> Mhm. >> and about how catastrophic Trump is and how >> not to say crazy or stupid he is. While the market says that yes, we have a little more faith in the USA >> now than we had a year ago. >> Yes. >> And even though this war is so stupid and wild according to us Norwegian commentators. >> Yes. >> Then the market thinks, no, there will be a solution. >> Mhm. >> And the USA has succeeded in Venezuela. They manage to push through something in relation to Iran. Result: the USA strengthens its position >> in the world. >> Yes, that is at least how you can >> read the market. >> read the market. And I am humble enough to believe that all those millions of analysts around the world collectively, uh, perhaps have a little more insight than I do, sitting here alone. >> Yes. And and then the oil market becomes interesting, because I think what we are seeing in the oil market now, and we have talked about >> a lot in my podcast, is that the physical prices >> are much higher than what you see in >> Yes. >> the financial markets, a bit ahead. That is, futures contracts, that is >> uh, that is, to translate that for everyday people, you can go to the store and buy milk >> at a spot price, or you can agree with the bank what you will be able to buy milk for in September. >> Yes. to insure yourself against rising milk prices or speculate that milk prices will rise sharply. >> Yes. And of course, if you look at the oil markets, they are quite optimistic that this will be resolved. So what I see >> and in the oil market, there are heaps of Saudi Arabian traders with good connections to the royal family, >> friends of Trump. >> Mhm. lots of Persians who know the oil industry after 10 years. >> Yes. >> Uh, and these are smart people from the best universities, uh, with enormous modeling tools, databases, 10 years of experience. >> But one can never rule out that something happens, right? And especially in war, uh, things can happen. Uh, and then it will be an enormous shock if it then becomes, uh, escalation, then this will go badly, and then oil prices will rise sharply. We cannot rule that out. >> Mhm. But for now, it seems that the market believes that there will be a change. But what is coming, I think will be a persistent problem, is that there has been a wake-up call about the need for energy. Uh, and if you look at the need for energy also in the technological change we are undergoing with artificial intelligence, it requires enormous amounts of energy. Um, and Europe went off Russian gas and then they thought they would be smart and go for liquefied gas, right? But then, oh shit, that had to go through that strait, right? So what we saw in the 70s, which was the last time oil was a weapon in such a great power conflict, the result after that oil crisis was a massive build-up of energy, especially in Europe. And then nuclear power was built out. So in 15 years, Sweden built 12 nuclear reactors. And that was, uh, it is carbon-free emissions and it is stable power. And that laid the foundation for an enormous growth period in Sweden and in Europe when you could increase energy production, you lowered costs, and there was enormous stability and security for industry in Europe. So it was a very favorable period, uh, for Europe, which was a response to them getting a wake-up call that energy could be used as a weapon, uh, in a conflict. So we could hope that the same happens now, that they get this wake-up call, especially in Europe, that they must actually build stable, uh, power. Because wind and solar, one knows, they actually only create more problems for the power system. Um, and, uh, yes, so I think that if one is to think about what will happen in the future, then it is >> and the EU Commission is pointing to nuclear power now as one of the solutions. Mm. Uh, and then I think Nikolai Tangen, the head of the Oil Fund, he said this, that the USA has >> artificial intelligence and no regulation, while, uh, Europe has a lot of regulation but no artificial intelligence. >> Uh, and, and, uh, recently in Norway, we got this nuclear power committee, >> Yes. >> which said that yes, nuclear power is good and stable, but >> it is terribly expensive and difficult and will take too long. in Norway. And that is a bit like that in all of Europe, that we, to quote Ola Borten Mo, so now I have been an advisor for Norwegian nuclear power, so that everything must be known, but >> so we have, in a way, stopped being able to build anything in Europe. >> Mhm. >> We are, uh, so, >> Yes. And think what Norway did after World War II. >> Norway built its own nuclear power reactors with Norwegian engineers and Norwegian heavy water. We, it is Norwegian, uh, IF that helps Ukraine if they have problems with their nuclear power plants, they call up Halden and ask, can you help us? Yes, okay. We have expertise, and we have had long experience with it, and if we have it, then Sweden also has it. And it is about the fact that it is so expensive. Um, I saw an interview some time ago with the person who was the, uh, energy minister for the Greens in Germany, whom they supported Merkel, uh, for government cooperation, so that the Greens would, in a way, get their main agenda, the green shift. And then he has since admitted that to achieve that, they added a lot of extra environmental and safety requirements to nuclear power in Germany to price it out of competition with these new, uh, green, uh, energy sources. So that, and then using prices, uh, to use it as, yes, but look how expensive it is, so it has been, uh, built with ever-new requirements and regulations that have made it take a very long time and become very expensive. And that is not the type of power plants we should build in the future. So I think we just have to bring in those who have expertise. Whether it is that we bring in a team from South Korea or Japan or Switzerland. Switzerland has, uh, they have a kind of perpetual motion machine with hydropower and nuclear power. So there are many countries that have good solutions for this that we could learn from. And I feel that we in Europe are obsessed with climate. >> Yes. >> It is like, uh, that such a proxy, as I usually say, for economic strength, is that China accounts for roughly a third of the world's greenhouse gas emissions. >> Mhm. The USA accounts for a fifth, and Europe accounts for about 6-7-8%, those are the figures I hear. But >> less than half of the USA, and then I think that this is also transferable to, like, production economic strength. >> Mhm. That is, China has the mines and >> uh, the metals and, and, and can weld things. The USA has some of that, and we in Europe, we have nothing, and it will become less because we should just erect wind turbines and then we will have conferences on how the Strait of Hormuz should be opened after the war is over. That is, in the old days, one would have sent the Royal Navy. >> Yes. from Britain, uh, and some ships from France. >> Mhm. >> And said that now we are opening this place. If not, then you are, uh, at war with Iran. While now we are like, >> yes, >> uh, international law, please. And everyone hates Trump. >> Yes. But the hatred of Trump is also, not least, a consequence of us being disappointed with the USA he gives us, that like, the USA will not necessarily be there anymore to pick up the bill and defend us. >> M. Yes. And then I think it is just to, uh, Trump cannot get through everything he wants, so the institutions in the USA are quite strong. Uh, and, and again, one can just look at the facts. For example, industrial production in Europe versus, uh, the USA. So in Germany, industrial production has fallen dramatically over the last 10 years. While in the USA, at least the arrow is going upwards, even though it is of course slow. Uh, in Norway, industrial production is also increasing, but still, we are at approximately the same level as we were in 2010. So the production capacity in Europe to build, uh, ships, to build tanks, to build, uh, everything else, it is very small. And if we do not get more, uh, cheap energy, then it is impossible to build up that industrial production. Uh, so German industrial companies are moving today, closing down in Germany and moving to other countries. For a country to not have production capacity, that is a complete crisis if you think about total defense. What makes Ukraine able to fight back against Russia is that they had industrial production, they had mechanics, they had people who could screw and fix things. And then you are much better equipped in a conflict. So that Iran, no, what Ukraine is doing now, the way they innovate closely to where the war is. You can make new drones, new technology quickly and have people who sit and screw and fix. That is what makes them able to hold out. While Russia is, in a way, a top-down command economy, very bureaucratic. And that must be the biggest wake-up call for Europe. How can we become more agile like Ukraine? Uh, our ability to educate skilled workers, engineers, have our own production, our own access to energy, uh, minerals, metals, technology, uh, and to build things if something were to happen, right? That is, we are >> How would we achieve that? No, it is a change of attitude and a realization that if, uh, that people understand that if we do not do something about the governance system, we will quickly end up in the 70s situation. Because many people think that the inflation problems of the 70s were just bad luck with the oil price, right? It was >> yes, because that is finished. If we are to go back, for some of the younger listeners, the 70s is an eternity ago. I was born in 74, one year after that oil crisis. And then, when I started studying economics, we learned then, like, the ugliest and strangest word that existed. It was stagflation. >> Mhm. where we then got inflation, i.e., price increases simultaneously with rising unemployment, and growth could not be achieved. >> Uh, and that should not really happen, like stagflation. >> Keynes, then, one had believed that with Keynes, he who said that in bad times, the state should spend money, >> Mhm. >> that he had not thought of stagflation, but then it came. >> Yes. And that, um, because Keynes is, in a way, a demand economist. That is, how can you increase or decrease demand in the economy? And you can do that by spending more money from the state budget, less money, or increasing interest rates up and down. But what happened in the 70s was that after the fantastic period from World War II until the end of the 60s, you had a tremendous productivity improvement. You could roll out technology that was developed during the war to country after country. Uh, and you elevated the way and organized things in a completely new way. So it was a period where you had productivity improvements from year to year. Strong increase in that. And we can remember in Norway, it was just get started, build, make things happen. >> And productivity is like doing more, getting more value out of each hour of work, really. Yes. >> Yes. And it is not about running fast, as everyone might immediately think, that now the poor nurses should be whipped to have more patients per day. It is about organizing things in a different way. Um, that is, finding new ways to do things, adopting new technology, uh, division of labor, uh, moving production, that is, many things that result in getting more out of your resources. So what happened in the 70s was that you first had the oil price shock, and then the response from everyone, including in Norway, was that we must stimulate here because growth is faltering. So then they started with all sorts of stimulus measures, and then yes, growth picked up a little, but inflation went completely out of control. And in retrospect, it turned out that so many things in the economy had, uh, slowed down productivity growth in the 70s that you got a real blow to productivity growth. And it is very interesting to read the person who was the central bank governor at the end of the 60s in the USA, Arthur Burns. He wrote several articles and explained what actually happened in the 60s in the USA. Uh, and he was manipulated or pressured by Nixon, uh, to keep interest rates low, right? Uh, so that he would win elections, and, uh, low interest rates are, like, that is good, right? You help the poor. So what he explained was that it was not that the central bank necessarily thought that, oh, now we are being pressured politically to keep interest rates low. It was more that they felt
There are indeed many who sit on the board and in management. That was part of society and the spirit of society. Out in the 60s, the idea was that you should help and do a lot of good, right? You should have women out in the workforce. You should have Black people be allowed to buy homes, the poor should get more loans so they could enter the housing market and the job market. Um, lots of regulations, and then there was also environmental protection, and then there was a period where you got lots of regulations, lots of demands. You started to think that with good intentions, we do these things even if it slows down efficiency. So he describes this more as a kind of societal spirit, that with good intentions, we do these things because it's so important, right? And it reminds me a bit of this green initiative we're working on now, right? That it's so important to think about oneself disappearing and the ice melting and so on. We have to do something. And the spirit of the times was out in the 60s and into the 70s, and then you didn't understand, because it's very difficult to know today what productivity growth actually is today. It's impossible to know. You can only really know when you look back. So the way we calculate productivity in the Norwegian economy will show itself in a few years. Was it right? Has something happened today that we thought was worse than we think? Right? So the problem in the 70s, in retrospect, yes, you had a cost shock with oil, but you also had a fall in the trend of productivity improvements from year to year, and that's what you call the great stagnation. Yes, that's what you call it in retrospect. And as you learned about it, it was called stagflation, that growth slows down. It doesn't help to stimulate growth more by spending more money from the state budget or lowering interest rates, because then inflation just rises. So the point of drawing that parallel is that we must be careful not to have a rather sharp focus on productivity improvements today. Because otherwise, it will be the case that good wage settlements, more stimulation from the state budget, slightly lower interest rates than perhaps is right, then inflation will start to run. I think that if we talk about the great stagnation in the global economy from the 1970s onwards in the USA, then I think we can talk about Norwegian stagnation in Norway today, because real wages are pretty flat. We're pouring out more and more public money without me being able to see that the schools are getting better, or recently they opened, I thought it was ironic, just now the government quarter opened, and everyone cheered for office spaces at 10 million kroner per person. And when you talk to department employees, they are already complaining because now they have to sit in open-plan offices, whereas before they had private offices. And I think that if there is one professional group that should be allowed to sit in peace and quiet in a private office and think deep thoughts and work thoroughly, it is bureaucrats. But now they have to sit in an open-plan office and become dumber in the spirit of group feeling. In 2004, we established the Directorate for Education and Training in response to the PISA shock. And since then, Norwegian school results have fallen down the rankings. So, am I the one who is a grumpy, middle-aged old man, or is it Norwegian stagnation? The OECD had a very good country report, I think it was in 2024, where they highlighted precisely the school results as very worrying for Norway. So the OECD agrees with you that there are quite a few things in the Norwegian economy that could be put under a sharper spotlight. And this applies particularly to the fact that we have weakened productivity growth, school results are too poor, and the tax on family-owned businesses is so high that it destroys innovation and productivity in the business sector as well. So the OECD had a very good report, and then they delivered it to Vedum, who was the Minister of Finance, and he stated that yes, it looks good, growth is increasing, so of course these are difficult things to do something about and they are politically unpopular. So what I'm trying to raise a conversation about is that something has changed in the balance of the Norwegian economy over time without us really talking about it. And it's about the fact that when we got the economic policy in 2001, the private sector was a larger share of the economy. Whereas today, the public sector is the largest part of the economy. And for the public sector, it doesn't really matter if interest rates increase, right? Because the public sector, the state as a whole, has money in the bank. They don't have loans. And interest primarily affects those who have loans. So even though the municipalities have loans and of course say that they have to tighten their belts and interest rates increase, it is the case that they can then get money in their budgets eventually to compensate for the increased expenses. So as long as, yes, to rephrase it a bit, we have a central bank whose task, it was probably Alan Greenspan who said that the central bank's task is to remove the punch bowl before the party gets completely out of hand. Yes. The punch bowl in this case that is being removed is to increase interest rates to cool everything down. The disadvantage is that if the public sector is having the party, then the central bank has no control over that punch bowl. The Minister of Finance has it. And so Norges Bank tries anyway. They increase interest rates. The result is that the private business sector has to turn down the heat even more. They get it even less pleasant. While then, the party people in the public sector quickly think that now the private sector looks very dysfunctional here. Now let's push on a bit more to raise the temperature in the room and increase the volume. Yes. And let's start with some gender consultants, government buildings, and so on. Yes. And again, because it always gets misunderstood, it's not about the teachers and nurses having it so great and that they now have to start tightening their belts. That's not what it's about. It's about all the other things that state budget money is spent on that don't go to teachers who can lift PISA or nurses, or it's about spending money on all sorts of other things, right? That there is enormous imagination for what to spend and stimulate and come up with from the state budget. And it's much, much more than other countries have, right? But then there is hope here, and I think that is artificial intelligence. I am incredibly enthusiastic about this technology. I think it might finally bring productivity growth back to old levels. Or perhaps even higher than old levels. Unlikely in Norway anytime soon, given that the public sector will probably not be the first to achieve productivity gains, but the power of example will be there. Yes. And what do we see with artificial intelligence in the country that is furthest ahead, namely the USA? Yes, what we see is that they manage to lift economic growth without increasing employment. So they manage, and then it's only productivity increases that lift growth. And what they do is, of course, it's unpleasant for those who lose their jobs or don't get jobs. But then there is a big effort in the USA to retrain people. I just saw in Texas, they are spending enormous amounts of money to lift vocational training and further education for skilled workers, so that they can take jobs in data centers and production halls within technology. So there is a major restructuring in the economy, and where artificial intelligence can be used the most is in sort of paper-pushing jobs, right? You can create faster PowerPoints and summaries and analyses so that you can reduce the number of people working on that and free them up to work on production and service delivery. That would be positive, I think, for the economy. It will become more dynamic, and there will be more jobs in the private sector that deliver to a market where you get price impulses. Because that's where it becomes difficult in the public sector, as it has no measure of production. You have no market that stops buying, so to speak, school services, because there are only public schools, right, when private ones are forbidden. Whereas one could think that because we are in the transition we are in, perhaps one should have thought differently about schools, pushed it more down to the local level and had some competition between different regions based on the industries they have. Vestlandet is much better at involving the business sector. Because they are so dependent on getting labor that they perhaps allow it to a greater extent to bring forward alternatives, local things that can be better for the local business sector and that means young people don't have to move to the city to. If we are going to land and you are going to try to put the pieces together a bit now. Norway, it's an enormous puzzle, but a bit of what the market tells you and the trends that are emerging. If we then take four pieces, China, Europe, USA, Norway. The global power struggle is between the USA and China. And they are running as fast as they can. They allow innovation, they help their companies, they cheer on those who succeed, because then the country succeeds. In Europe, we perhaps haven't quite understood, we are in the process of realizing that we have to change. Perhaps it requires a generational shift in politics and also in the bureaucracy, because we have been in a deep peace and have actually been most concerned with regulations and details and making sure nothing goes wrong. But if you want to run faster, you have to accept that some people make mistakes. But you have to have progress, and you have to make decisions, and you have to dare to let those who succeed win and that it pays off for you who are going to take that risk. And if you don't make taking risks attractive, who will bother, right? Who will, why should one take that risk? Why should SK just sit back and wait, right? So I think China also has to change its growth model. They can't just export their way to growth. So perhaps this crisis will also be a signal back that China has to make it a bit better for those who live in China, that they get a larger welfare provision and can have it a bit better internally. And then, at best, you get an agreement with Iran where they give up their ambition for nuclear weapons and recognize that Israel has the right to live. Israel has had to fight with neighbor after neighbor for them to accept that they have the right to live. And Iran is the one left with its ambitions. So perhaps this is Israel's last fight for survival. And that would entail a more peaceful period in the Middle East and stabilization of oil prices. But that in Norway we must to a greater extent begin to discuss how we are going to achieve, how we are going to equip, rebuild, and focus more on that. I think we are in a hurry with that. Then we'll end on a somewhat optimistic note. Thank you very much for coming, Elisabeth. Thank you. 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