Saudi Arabia isn’t the only nation struggling following the oil-price slide, says ZeroHedge.com. For the first time since Norway set up its sovereign wealth fund in 1996, the state has tapped it to cover some public spending.
It took out $5.4bn in the first half of the year, and is set to withdraw another $20bn in the second, a sum worth around 18% of overall government spending, which in turn accounts for 60% of the $375bn economy.
This is still under the 4% annual withdrawal limit ($36bn), which may be cut, given the difficulty of earning a decent yield these days.
“The problem with being too data dependent [is that] volatile economic indicators rarely strengthen synchronously to present the perfect opportunity [to raise interest-rates]. Imagine if the Fed waited for payrolls above 150,000, manufacturing ISM higher than 52 [50 signifies expansion], core inflation above 1.5% and real consumption expenditure, bank lending and construction spending to be growing faster than their long-term averages before pulling the trigger. The 2004-2006 cycle would have seen half the number of rate hikes. Meanwhile, only four rate increases would have materialised throughout the roaring 1990s.”