882 B / 5.2 Million ~= $170k for every citizen of Norway.
At 4% a year that's $6,800 each in annual income. Not bad!
At 4% a year that's $6,800 each in annual income. Not bad!
This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is a trend of creating a new generation or class of indentured citizens.
Many EU countries need to look at germany and start reducing housing prices, one of the main contributors to Germany's low household debt is a 10 year cap on mortgages.
Countries like Sweden and Norway just now starting to cap it, Sweden capped the mortgage term to 105 years (no this isn't a typo) this year and the current average mortgage term in Sweden is still over 140 years, and Norway isn't much better off (It was slightly higher than Sweden IIRC I just can't find a source atm).
While the Nordic countries take pride in their model the current economics are pretty bad under the surface, you have a combination of inflated housing prices, extreme housing shortages, and mortgages that can span over 3 generations.
To some extent the Nordic model isn't a choice it's an outcome of the economic policy to the point where a lot of people that appear to be wealthy are actually in dire debt and dependant on the state.
http://www.telegraph.co.uk/personal-banking/mortgages/sweden...
Germany is big and has a pretty mobile workforce, in many other countries you are considerably less likely to be moving every 2-5 years across large distances like you are in Germany.
Overall the affordability of housing even when accounting for mortgages and required seed money is considerably better in Germany than in Norway, Sweden or Denmark, and while Germany does have about half the house ownership rate on paper it is also because rent is both available and affordable and is favored by the younger workforce.
One can argue about what is better having to rent until you settle down at the age of 30-35, or buying a house at the age of 19 with decades of mortgage and only having to sell it to move into your parent's house which is still under mortgage. The house pricing in Oslo rivals NYC these days.
Also while Germany does have a considerable below average age for the EU28, the highest / above average EU28 countries are not those which you would expect, those are the Eastern European countries like Romania, Poland, Hungary, Slovakia etc. countries which were in the USSR/Warsaw Pact or were under socialism at one point or another. When you give everyone in the country a home at some point in time you'll end up having very high homeownership rates even 50 years later.
(b) sweden has a lot of interest-only mortgages. If you look at the rate they are being repaid, it represents a repayment period of 148 years.[1]
[1] http://www.fi.se/upload/43_Utredningar/20_Rapporter/2013/bol...
Source: am planning to buy a new house, had a meeting with my bank man two weeks ago.
Where did you get the idea of that cap?
10-year mortgages were the common case, but there's no actual cap. (See here for current mortgage interest rates up to 30 years: https://www.baufi24.de/tagesaktuelle-hypothekenzinsen/)
Do you have any other citations for this? I have never heard about this in the Swedish news and I'm quite curious where The Telegraph got that information from.
http://www.fi.se/upload/43_Utredningar/20_Rapporter/2013/bol...
There are also reports from various global banks and financial organizations, google is your friend.
Housing is expensive where I'm at: It is much cheaper outside of the city. There is debt tied to the house, if you own a house.
The average mortgage is 20-30 years - what you are stating isn't the average. This isn't actually all that much outside of the rates in the US, and part of the reason is to keep housing affordable for people. What is different is that people tend to stay at a job for a much longer time frame.
In addition, housing comes with a required down payment, depending on your age. I think for folks under 23, they have to have 10% down payment: Everyone else should have 20% (or possibly 25%), capped at something like 3.5 times income.
As far as debt goes, you can't really inherit debt here. You can inherit a bit of debt through inheritance - ie, tax on a house that had value. The other way to have that is for parents to co-sign on a loan, but that isn't the same sort of thing. There are some laws to prevent children inheriting debt from what I understand.
Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities.
A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.
Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.
Overall the Social Security Act does disallow prefunding of the fund with marketable investments but one of the reasons it hasn't been changed it's because it's actually a pretty solid policy, and the world for the most part also doesn't want the US to drop a 3 trillion dollars investment pinata on the global markets.
Overall while there is a lot of clickbait that inflates the Norwegian one it is not a special case if you look at public fund rankings http://www.swfinstitute.org/fund-rankings/ you'll see that the US Federal Pensions Fund and the California Reteirment Fund combined are about equal to the Norwegian National Fund, and those are just 2 funds.
Overall pretty much every state in the US has multiple SWFs, public funds or similar investment ventures those are usually directed at a specific funding target e.g. retirement, public schools, universities, infrastructure etc. Each fund funds usually only a single thing and each fund has a different source of revenue and investment goals and regulations, for the most part based on how the US federal system works in general it's a better model. California isn't expected to fund education in Texas or pay for a new road in Wyoming and vise versa so each state runs their own funds to fund their own needs (there is some federal money involved) overall it's likely a slightly safer bet than putting all your eggs in a single basket.
This is also why you simply can't blow up the Norway's fund to US levels and say you'll need 56 trillion dollars because the US doesn't pay for everything from a single fund.
The Gross National Wealth of Norway including the fund is about 85% of the US one when adjusted per capita, Norway is rich, the fund is wonderful and very well performing but it's not some unheard of economic miracle that no one else is using ;)
Yes you can say that the fund is an "accounting placeholder" just like many other economic tools, when you take a loan from a bank it doesn't give you money, it effectively gives you a tradeable IOU against yours even tho you treat it as currency.
To put in in a simpler terms the year to year budgetary deficit of the SSA against the payout claims should be treated as a separate thing to the actual Social Security Fund, if the US government or any other institution with sufficient means and credit would make a commitment to pour 3bln dollars into a bucket, said bucket is now worth 3bln dollars even if it is empty.
The wealth fund has been growing around 8% per year.
Borrow money at a rate of 1.3%, reinvest it and make 8%.
It's one of the golden rules of banking: if you can borrow money for cheap, do so.
Remember that a country doesn't have to retire, so its debt is quite different than a household's.
This is untrue, while a country might not have a single large SWF most of them have similar investments they are just distributed and managed differently. What you would be correct to say is that not many countries have a single large SWF which is primarily funded through the "nationalization" of the revenue from mineral rights.
Also please note that the "882B" are for both funds or if you like the Government Pension Fund of Norway Fund manages 2 discrete SWF's the petroleum revenue fund and the national insurance/tax revenue fund.