return on the foreign currency reserve, one must realise that the riksbank currently has fairly limited opportunities to earn money. let us look at a simple calculation, based on how things looked ten years ago, and compare this with the current situation. see, for instance, the speech by lars nyberg on 17 may 2011 : “ is it dangerous to borrow dollars? ” bis central bankers ’ speeches net interest income has declined at the end of 2004, the riksbank had assets worth sek 183 billion. the interest rate then was around four per cent ( measured as an average over the currencies included in the reserve ). a rough estimate of the riksbank ’ s net interest income is then sek 7. 3 billion ( 183 x 4 % ). as the assets were financed almost completely by the banknote and coin stock and the bank ’ s equity, interest rate expenditure was low. the cost of the small imf liability was just under sek 300 million, so net interest income was around sek 7 billion. this should be set against the riksbank ’ s costs for conducting its operations, which amounted to around sek 750 million a year. net interest income was thus almost ten times higher than expenditure. if we make the same calculation for 2014, the picture is rather different. based on the interest rates that applied at the turn of the year, net interest income is around sek 3. 5 billion. now the bank also has sizeable interest expenditure amounting to sek 2. 4 billion ( and this despite the repo rate being zero, so the bank does not pay interest on liabilities in swedish krona ). net interest income is thus sek 1. 1 billion, which still covers the costs of conducting the bank ’ s operations – but now with a much smaller margin than before. as you can all see, this is a very rough and simplified calculation. the return on a bond portfolio is not just determined by the interest rate at a particular point in time, but also by the yield curve and how it moves over time. we have calculated this, too, and when we estimated the expected return on the foreign currency reserve, we have used data from interest rate forecasts by the national institute of economic research. 6 from 1988 onwards, the riksbank ’ s results have on average exceeded sek 8 billion a year. i have chosen 1988 as starting year as this was when we began to apply the principles for how to calculate

interest rate to be primarily governed by expectations of potential growth, the propensity to save and technological advances. i will therefore first describe how the various factors can influence the real interest rate. i will then discuss possible explanations as to how growth, propensity to save and technology may change. lower potential global growth gives lower global real interest rate according to economic theory, expected growth should play an important role for the development of the real interest rate ; the lower the growth, the lower the real interest rate. international organisations such as the imf and the oecd have made downward adjustments to their assessments of the global growth trend in recent years. this could lead to a lower real interest rate. at the same time, one can note that global growth was both stable and relatively high during the 15 – 20 years prior to the financial crisis. it is thus not possible to explain the long - term fall in interest rates prior to the financial crisis as due to lower global growth. one possible explanation could instead be that the global population increase has fallen over a long period of time, and is expected to continue falling in the coming period. this could contribute to lower potential growth in that the labour force will increase at a slower pace. at the same time, this effect will be counteracted if labour productivity rises. slower population growth and the fact that the working age population is shrinking indicate that growth will remain lower than in the pre - crisis decades. the prospects for labour productivity are much more difficult to assess. the rate of increase in labour productivity declined in connection with the economic downturn following the financial crisis and it is uncertain how lasting the effects will be. demography affects propensity to save and thus the real interest rate demographic developments also affect the propensity to save. life expectancy has increased and the birth - rate has fallen in recent decades. this has meant that the population has aged in most parts of the world. it applies especially in developed countries but also in countries such as china and several other emerging markets. merely the fact that people are on average living longer means that they need to save more money for their old age, unless the retirement age is raised at the same pace as the increase in life expectancy. developments have also entailed a percentage increase in the older working age population ( 40 – 65 years old ) – which normally has a high level of saving – in recent decades. there is thus good reason to assume that demographical developments have contributed to an increased