Prices rose by around 3 per cent annually for a long period, but since 1995 they have been falling by about 6 per cent annually. This kink point coincides with the dismantling of the restrictions on textile trade and with a period of rationalisation in retail trade in Norway. The rapid growth of production in China, India and other newly integrated economies has led to a substantial rise in demand for oil and other raw materials. At the same time, increased trade has engendered higher demand for shipping services and favourable freight rates for a period. BIS Review 39/2006  1  These changes have provided Norway with increased revenues thanks to a remarkable strengthening of our terms of trade. Prices for imported goods are falling in relation to prices for goods we export. The impact of the rise in oil and gas prices is particularly strong, but the terms-of-trade gains on goods in the mainland economy have also been high. The situation in Norway differs from that of its Nordic neighbouring countries. Sales of Swedish and Finnish high-tech products are growing strongly in terms of volume, but prices are falling. Denmark has a diversified business sector, which is moving on a steady path overall. The high energy prices have contributed to increased cross-border capital flows as income is transferred from oil importers to oil exporters. Consequently, a savings surplus has been building up in oil exporting countries such as Norway.
Indeed, some sort of an intellectual vogue is flourishing, which contends that, in light of past experiences, any banking crisis is bound to have severe adverse economic consequences. You have those, the optimists, who predict a Swedishtype of crisis. And you have those, the pessimists, who allude to Japan's "lost decade". If referring to the past is of any use, it is precisely to learn from past errors. As a result, any comparison is bound to be misleading. Not only is today’s economic situation critically different. It is also addressed very differently. Let me insist on one key difference, which has to do with policy reactions to the crisis. They have been extraordinarily rapid, massive and vigorous. We have learnt from past crises, especially from the long adjustment Japan has been through after the burst of the asset price bubble in the late 80s. Let me also mention that macroeconomic policy instruments are available and could be used should output decline dramatically. The outlook for financial regulation A major consequence of the crisis already apparent is the growing consensus around the need for a fundamental review of the foundations of financial regulation. The crisis has also rekindled concerns about the structure of supervision. As you know, at the French President’s instigation, huge efforts are made to think about what is termed now a “new Bretton Woods”. Beyond these ambitious words, I do believe it to be useful to take a fresh look at the existing financial regulation.