oil revenues became substantial, money could be set aside in a fund abroad. steinar strøm ( 1985 ) : “ oljemilliardene – pengegalopp til sorg eller glede? ” [ norway ’ s oil billions – curse or blessing? ], sosialøkonomen, 1, p. 246. report no. 29 to the storting ( 2000 – 2001 ) : “ guidelines for economic policy ”, ministry of finance. bis central bankers ’ speeches as long as the north sea generates revenues, the value of the fund will rise, laying the basis for a sustainable rise in petroleum revenue spending. 7 institutional challenges oil converted into money entails institutional challenges. a crucial question that arose when we discovered oil was whether we had the discipline to refrain from spending all the money at once. in 1983, the committee on the future of petroleum activity was chaired by former central bank governor hermod skanland. he was of the view that it would not be possible to set aside a share of the oil revenues in a fund : “ in the light of the prevailing attitudes among both politicians and the wider population, it is difficult to imagine that hundreds of billions will be invested in foreign assets while there are domestic needs that have not been met (... ). ” 8 for skanland the solution was simple. if the political system did not manage to set aside the revenues, the oil taps had to be opened very slowly. wealth management could be carried out by portioning exploration sites in the north sea. oil that had not been discovered would burn a hole in the pockets of politicians to a lesser extent than money flowing into the state coffers. skanland ’ s scepticism was well founded. future oil revenues were used as an argument for allowing the central government to run a budget deficit. moreover, it would transpire that the actual pace of oil extraction – and oil - revenue spending – increased much faster than the committee had recommended. in the first 25 years, skanland ’ s prediction was right on the mark. all the oil revenues were spent. but in the past 15 years, petroleum revenues have risen at such a fast pace that a portion has been set aside. if we look at the period of oil revenues in its entirety, close to half of the oil - based revenues have been spent. 9 in 1994, the economists bye, cappelen, eika, gjelsvik

and continued high oil prices. different developments in global growth and in oil prices would result in a different path for the norwegian economy. interest rate setting must also be assessed in the light of developments in property prices and credit. wide fluctuations in these variables may constitute a source of instability in demand and output in the somewhat longer run. safeguarding financial stability implies that the interest rate should be brought up towards a more normal level. if developments in the economy are in line with the baseline scenario, it is likely that financial developments in banks and enterprises will be favourable. as mentioned above, however, developments ahead are uncertain and the norwegian economy may be exposed to shocks. uncertainty with regard to financial stability in the longer term is mainly related to the historically high household debt burden and to changes in asset prices. long periods of a sharp rise in debt, asset prices and investments may give rise to instability and problems in the financial system at a later stage. we have observed this phenomenon both in norway and in other countries. the trend we have seen in household borrowing in recent years is not sustainable over time. the current interest rate level is very low compared with the level that over time must be considered more normal. borrowers and lenders would probably be wise to bear this in mind. thank you for your attention.