When last we visited Norway, the country’s sovereign wealth fund - the largest in the world - had just turned in its worst quarter in four years after losing nearly 17% on EM equity bets (and 21% on Chinese stocks).

Here’s what we said late last month:

Because ZIRP and NIRP are depressing yields on government bonds, Norway is shifting into EM. But the fund's EM bets lost nearly 17% in Q3. Meanwhile, slumping crude prices mean cash injections are about to flatline and indeed, 2016 will actually see the government withdraw some $450 million. Additionally, with US stocks near all-time highs, it wouldn't be entirely unreasonable to say that giant holdings like Apple and Google (pardon: "Alphabet") could suffer heavy losses in the event some exogenous shock (like say a Fed-induced EM meltdown) feeds back into US markets.

As noted, cash injections into the $835 billion SWF have flatlined thanks to the sharp decline in crude prices and although “lower for longer” oil has served to put pressure on the krone, the fact that i) everyone else is easing, and ii) global demand and trade are in the doldrums, serves as a kind of counterweight, leading directly to a situation wherein the currency, in Bloomberg’s words, “just can’t get weak enough.”

This has led many to speculate that Norway will soon be forced to either get to ZIRP in a relative hurry, or else face recession. Of course cutting rates by another 75 bps to zero could very well mean exacerbating the housing bubble. What housing bubble, you ask? This one:

That rather disconcerting chart goes some ways towards explaining why the Norges Bank kept rates on hold earlier this month.

Still, if crude prices remain in the doldrums, Oeystein Olsen may be left with little choice - especially if the ECB eases further in December, prompting a "response" from Norway's neighbors in Sweden and Denmark.

Of course there are always other policy "options" if you want to ease without cutting rates - like QE. The problem for Norway however, is that it's not at all clear that there's enough debt to monetize. Consider the following:

Here's Bloomberg:

Norway is just too rich for quantitative easing. “If the interest rate weapon is used up, maybe they would try aiming directly for the krone,” said Kari Due-Andresen, chief economist at Svenska Handelsbanken AB. “I don’t know how much traction they would get from buying bonds in Norway, it’s hard to say if it would be a credible strategy due to the small size of the market.” Norway “could and they would use QE if the situation called for such measures to be taken,” said Kjersti Haugland, an analyst at DNB ASA. “But it would take a significant strengthening of the krone to levels uncomfortable for Norwegian businesses for this to happen.” Norway has 336 billion kroner ($38.6 billion) in outstanding nominal government bonds, compared with 592 billion kronor ($68.2 billion) in neighboring Sweden. Sweden’s Riksbank last month expanded its bond-purchase plan for a fourth time since February as it tries to keep pace with stimulus measures in the euro zone. Denmark has 376 billion kroner ($54 billion) in total nominal bonds issued.

So essentially, were Norway to go the QE route, they would swiftly find themselves in a situation akin to what happened to Sweden back in the summer. That is, the effect on liquidity would be so great as to essentially "break" the QE virtuous loop and send yields moving in the "wrong" direction as the liquidity risk outweighs the advantages of frontrunning potential Norges Bank purchases in the minds of investors.

If QE isn't feasible that means that in order to stay competitive in the global currency wars, Norway will may need to intervene directly in the FX market.

And if that doesn't work, you know what comes next:

“My guess is that we will have negative rates in Norway before there will be any talk of QE,” Handelsbanken’s Due-Andresen said.

It's NIRP's world, we just live in it.