Economist warns against Norwegian housing bubble


KrugmanNobel Prize winner Paul Krugman, warns against a Norwegian housing bubble. The Prime Minister dismisses his concerns, but Krugman fears her statements may end in humiliation.

The Nobel Economy Prize winner Paul Krugman points out that there has been a steep and lasting price increase over a long period of time, and that Norwegian households' debt is over 200 percent more than their disposable income. 

 

The Prime Minister responded to and dismissed Krugman's concerns of a housing bubble at the NHO-conference this week. 

"Very often I experience that foreign economists, for example with an American point of view, have a different frame of reference when they analyze the Norwegian economy," Solberg tells DN. 

She explains that Norwegians borrow money and save for one thing only - a house. 

"Our basis is that as long as employment, job creation and competition can be maintained, the housing market and the individual debt that families have are not in danger."

Krugman, however, thinks that Solberg statement is in itself a sign of a bubble-situation. 

"I had not expected political reactions to this. Can you imagine a president or state leader going out in the public to declare that there aren't any bubbles in the market? That can quickly end in humiliation," Krugman states and adds "When politicians say that everything is ok, that is a sign of a bubble-situation."

(DN)

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