Different money

By Arno Mong Daastøl,
PhD Candidate at Finanzwissenschaft, Universität Erfurt
and co-ordinator at the
Institute for Creditary Economics

The 29 Oct DN printed Full speed downhill, a commentary by Idar Kreutzer, chairman of the board of
The Financial Industry Association and group managing director of Storebrand.

Kreutzer argues against the governments assumed expansionary financial policy, which he claims will lead to inflation and weakened competitive ability. Kreutzer’s main point is his long standing and usual support to the  ”Rule of Action”[1], where he  criticises ” exorbitant” use of oil revenue. As most Norwegian economists Kreutzer bases this on a hidden presumption that (foreign) oil money is similar to other money, here meaning Norwegian crowns.

The foundation in this question is that money is a claim, an acknowledgment of debt (‘IOU’). IOUs are claims on resources. Norwegian oil revenue consists of foreign money, as payment for Norwegian production and export. The oil revenue therefore constitute claims on foreign resources – not on Norwegian resources. The oil revenue can therefore only be used for import – or given away to the abroad.

Since the use of oil revenue in principle therefore cannot lead to higher demand for Norwegian production, it can also not lead to higher Norwegian inflation. In the contrary, strategic import of competence and real capital from the abroad, and a corresponding higher wealth creation on Norway will lead to lower Norwegian inflation and an improved Norwegian competitive ability.

Reality is therefore the opposite of what Kreutzer imagines.

Kreutzer should rather spend his time in suggesting wealth promoting prioritisation of the financial expenses, and work out a list of priorities for wealth promoting imports, for example to infrastructure, hospitals and research. 


[1] I.e.: Limiting government spending of oil revenue to 4% of expected yearly yield.