Problem with Krone: – Weakest currency in the whole West

He believes that the government is the reason why you and I are now poor.

In the series “What’s happening in the world to the Norwegian krone”, investor Østein Spetalen now gives his input:

Foreign countries have lost confidence in the government’s financial management.

And who pays the bill? Going to the beach in France this summer is you, with 13 people to walk with.

– Norway now has the weakest currencies in the entire West. This is a scenario that some people think is possible. Economists have pointed to several reasons. I believe the main reason is political risk and Cron’s vision. Not least the uncertainty surrounding the new tax changes. When I speak to the international investor market, they keep asking questions about the sudden and sharp tax increase for business.

– And the flow of outgoing Norwegians helps reinforce Norway’s image as a big political risk, he says, referring to wealthy Norwegians who have moved to Switzerland because of increased taxes such as property taxes.

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– It rots when it weakens against other currencies. Against the Moldovan liu, the krone has fallen 25 percent in a year — think about that. Towards Moldova. The poorest country in Europe.

– In the past year, all Norwegians have become 20 percent poorer than the average European. If we compare in currency, since August last year we have become almost 30 percent poorer than the Poles.

– Many economists think Can’t say exactly why Krone is weak – But does it indicate that interest rates in other countries are higher and oil prices are lower?

– Currency market is always difficult to predict. But I believe that economists do not pay enough attention to political risk. A currency is always linked to the future of a country’s income and stable structural conditions for business.

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What happens when the krona weakens is that most of the goods we buy are imported, making goods more expensive. This is because the shops charge higher prices for foreign products.

– Cars, shoes, clothes, televisions, washing machines, iPhones, coffee and wine will be 30 percent more expensive in the coming months than at the beginning of this year.

Spetalen therefore believes that price increases will be very strong next month due to a very weak krona.

– If you are going to travel, the weak krona and rising prices in European countries contribute to the fact that a holiday abroad is now 30-40 percent more expensive than a year ago.

Spetalen believes the choice now is to change tax policy and rhetoric or drastically raise interest rates. The latter will greatly affect everyone, including the common people.

– What would you have done if you were the finance minister?

– We need to rebuild confidence in the Norwegian krone. Norway has always been associated with little political risk. Remember that all countries with low inflation over time have predictable structural conditions and stable tax policy for business.

Ola Kritten, professor of economics at the Norwegian School of Economics (NHH), believes Spetalen has a point.

– If I were a foreigner and managed a fund or worked as a broker or investment bank, I would react when I see Norwegians with strong capital moving money abroad to avoid taxes. Then I wouldn’t invest in Norway.

– What does it mean if the krone has weakened against Moldova, Europe’s poorest country?

– This is not a health measure for the Norwegian economy, it is not. There are signs of some confidence in the Norwegian krone.

He also points out what he believes to be a government swing:

– We have a government party that has indicated that there will be no land rent tax for agriculture, and suddenly it will be a big tax. This has taken investors a bit by surprise.

– The government tried to tighten last fall, and this spring they are stepping up again. Measurements don’t allow for a tight budget. And elections are coming soon.

But Creighton, who was a special adviser to Norges Bank, points to several reasons:

– So I think general pessimism is the cause of Crohn’s weakening. I think there is an expectation in the market that the krona will fall. I believe it is time to show a signal that you believe Krone should be strengthened.

He insists that Norges Bank has not exactly received help from the government:

– You can’t beat inflation if the government has to compensate for all inflation. If nothing happens, they will raise interest rates.

– Neither Norges Bank nor the government have indicated that they are now prioritizing a strengthening of the krone to a certain degree. With an easing of budget policy and compensation for inflation, the government has done the opposite and has not helped Norges Bank to propel the krone.