ten separate days. norges bank wrote in its press release that “ the third quarter of 2008 was an unusually demanding quarter for the management of the government pension fund – global. ” and it was to get worse. the gpfg posted a return for 2008 of minus 23 percent, measured in terms of the fund ’ s currency basket. chart 4 : post - crisis paths have differed chart 4 shows developments in the us equity market from 2008 onwards. the rapid reversal in equity markets, shown in the chart, also affected the gpfg ’ s results. in 2009, the fund posted a positive return of 26 percent, largely thanks to a 34 percent return on the equity portfolio. the return continued to rise in 2010. while the fall in the fund ’ s value as a result of the financial crisis in 2008 was historically large, the fund ’ s recovery in 2009 was stronger and faster than had generally been expected. owing to a weakened krone, the gpfg ’ s return was less negative in terms of nok than in terms of the fund ’ s currency basket. even though changes in the krone exchange rate do not influence the gpfg ’ s international purchasing power, the fall in the fund ’ s value may have been perceived as less dramatic as a result. equity markets have not always rebounded after a steep decline as rapidly as after the 2008 financial crisis. the chart shows developments in a global equity index in the period after the dotcom crash in 2000. from the peak in winter 2000 to the trough in winter 2003, equity prices plunged at the fastest pace since the early 1930s. fluctuations in the krone exchange rate amplified the fall in the gpfg ’ s value measured in nok. the value of the gpfg at the beginning of 2003 was 30 percent lower than assumed in the national budget for 2002. investors buying equities in japan ’ s equity market at the end of 1989 experienced even more dramatic developments. the market fell and stayed there. the value of the shares traded on the tokyo stock exchange is still no higher than the 1989 levels. from being the largest in the world in 1990, accounting for almost 40 percent of global market capitalisation, japan ’ s equity market now accounts for less than ten percent. however, it is important to remember that these developments apply to only one country. global equity markets in general have shown completely different developments since 1989. 2 / 6 bis central bankers'speeches what can we learn from these crises? the

loan - to - income or loan - to - value limits. the flexibility of the framework enable banks to take individual borrower circumstances into account. there is an ongoing public debate as to the impact the mortgage measures might have on the demand for owner - occupied housing. but prices have risen substantially, and are now back to 2005 levels in nominal terms, or 2003 in real terms. so the demand is there. what is needed is a sustainable level of supply. supply has started to respond, but it ’ s still below estimates of what is needed. 33 the fact is, a higher level of credit by itself will not build more homes. however it risks the re - emergence of a credit price spiral. if supply is not responding to prices, then any move to increase the level of credit is likely to lead to higher housing costs and higher indebtedness. even if supply were to respond more strongly than we expect, new homes take time to build. we could see a rapid spike in prices, followed by an equally rapid decline. higher indebtedness also brings with it more risk. as i ’ ve discussed today, a lot of demand for housing in ireland comes from people who have moved to find work. ireland ’ s position as a small, open economy means that we are more vulnerable to structural shocks emanating from abroad. 34 it is important that households and borrowers are resilient to shocks that can have quite large, sudden effects on irish employment and wages. we need to ensure that if such a shock does occur, it does not trigger a repeat of 2008. the five years up to 2008 saw the same kind of growth rates we are seeing now. over that time, house prices grew by over 40 per cent for example. 35 the difference is that with that growth came an unsustainable increase in credit. the subsequent crisis dramatically reduced the demand for housing, and over - indebted irish households were left ‘ holding the bag ’, as it were. many of these households had taken on very large debts in order to be competitive in the home purchase market. this was the credit price spiral that mortgage measures today are trying to prevent a re - emergence of. many of these households were financially devastated, indeed continue to struggle, even today. households in mortgage arrears was one effect of the credit price spiral. recall, that in september 2013, one in eight private home dwelling loans were more than three months in arrears on their repayments