[Gunnair]

$1:

Andrew Coyne: McGuinty’s oil-sands comments aren’t wrong, just irrelevant
Andrew Coyne Mar 2, 2012 – 6:36 PM ET

Like millions of Canadians, the Premier of Ontario works in real time. Maybe some other politicians prefer to work in imaginary time or waltz time or the nick of time or Miller time. Dalton McGuinty’s keeping it real.

That at any rate was his explanation for comments earlier this week to the effect that Alberta’s oil sands might just as soon go up in a puff of smoke as far as he is concerned. Actually what he said was that soaring oil exports had driven the Canadian dollar to levels that have “knocked the wind out of Ontario exporters and manufacturing in particular.” So given a choice between “a rapidly growing oil and gas sector in the West” or a lower dollar, “I’ll tell you where I stand. With the lower dollar.”

Perhaps predictably, the comments ignited a firestorm, not only in the West but in Ontario itself. Hence the premier’s sheepish explanation, that he works in “real time” and thus does not always have the opportunity to “self-edit.” But really, what’s a premier of Ontario supposed to say? True, it’s not exactly the sort of statesmanlike, country-first rhetoric one might have hoped to see. But viewing the issue purely from the standpoint of Ontario’s interests, as a premier might, it’s not clear he had anything to apologize for.

Have rising oil exports had a hand in driving up the dollar? Yes, indisputably: we’re a net oil exporter, of course they would. The rise in the dollar’s value from 64 cents in 2002 to near parity by 2008, tracks very nicely with the surge in world oil prices in that time, from $20 a barrel to more than $100.

Has the rising value of the dollar hurt Ontario manufacturers? Again, the correlation is pretty exact. The real value of Ontario manufacturing shipments peaked in 2000, and has been flat or falling ever since, notwithstanding its recent recovery from the depths of the recession. To be sure, other factors also come into play, from the soaring price of Ontario electricity to the province’s labour laws to the decline of the American economy, but other things being equal, yes, the dollar would be part of the story.

It’s certainly true that Ontario also benefits from the oil sands in many ways. In the most direct sense, Ontario manufacturers supply the oil patch with parts and machinery, while some part of the wealth Albertans enjoy generally from oil from is dispersed in Ontario’s direction, whether to purchase Ontario goods and services or invest in Ontario’s economy. Likewise, the high dollar has positive as well as negative effects, for example making it cheaper for Canadians to buy goods from south of the border— including the imported parts and machinery many Ontario manufacturers purchase for themselves.

But on balance, does the combination of high oil prices and a high dollar hurt Ontario manufacturers more than it helps? Almost certainly yes. But so what? The real knock against McGuinty’s comments isn’t that they were wrong, or rude, but that they were irrelevant. Unless it is proposed to roll back oil prices, or peg the value of the dollar, he might as well complain about the weather. Neither of those is about to happen, nor should they.

A high dollar may disadvantage a particular firm, or industry or region, but what counts for policy makers, or should, is the national interest. Whatever the dollar’s level, it will be to somebody’s advantage and somebody else’s disadvantage. As far as the country is concerned, however, the “right” value of the dollar is wherever it happens to be at the time.

The dollar’s value in foreign exchange represents the sum of all of the reasons people might want to buy Canadian dollars weighed against all of the reasons people might like to sell them. At any given value, some firms and industries will find they can compete with foreign competition, and some will not: the exchange rate is the knife edge separating the two.

That sounds arbitrary, and as such inspires a lot of wishful thinking. The exchange rate is one of those economic variables, like foreign subsidies, that people are inclined to wave away, as if somehow they didn’t count. We’d be perfectly able to compete, they will insist, if it weren’t for these things, which after all are wholly beyond our control. But they do count. They exist. Just because we can’t do anything about them doesn’t make them any less real.

Either the high dollar is a purely temporary phenomenon, in which case Ontario manufacturers ought to be able to ride it out. Or, as seems likely, it is more or less permanent — in which case it is entirely appropriate to be shutting high-cost Ontario factories and moving capital and labour into other sectors. Like, say, oil. Certainly there is no gain to be had in attempting to reverse that process, propping up uncompetitive manufacturers at the expense of the oil patch, any more than we should be taxing manufacturing to subsidize oil.

Having offended Albertans so mightily at the start of the week, McGuinty ended it by signing onto Alberta’s proposed “national energy strategy,” apparently in the belief that it means subsidies for clean energy sources. Which only shows how meaningless a concept it is. Still, it’s progress. If there is one thing we learned from the last such exercise, it is that if the world wants to pay top dollar to buy our oil, we should sell it to them.

[andyt]

For those who throw up their hands and say there's nothing to be done.

$1:

Frugal Norway saves for life after the boom

Across Norway, the oil boom is being paralleled by record growth in the non-petroleum, export-driven economy. In November, Norway's non-oil private-sector economy reported quarterly growth of 1.9 per cent, the equivalent of a 7.6-per-cent annual growth – an astonishing economic performance, beating even the growth of oil and gas exports.

And that is the real surprise here. While it isn't hard for nations and provinces to get rich from oil, it is exceptionally hard – almost impossible, by conventional economic reasoning – for them to make money off anything else while the oil boom is taking place.

Everywhere else in the world – including Canada – a boom in oil has led to a decline, if not a complete devastation, of conventional businesses. It's a phenomenon known to economists as “Dutch disease,” after the tragic experience of the Netherlands, which discovered oil in the 1970s. As oil exports boomed, the flood of money into the domestic economy inflated the currency, provoked price increases and destroyed exports, leading to a decade of joblessness and rising inequality.

The same thing happened, on an even larger scale, in Britain in the 1980s. After North Sea oil was discovered, the British industrial economy was virtually obliterated, leaving four million people jobless. Poor countries, from Nigeria to Venezuela, have also discovered the economy-smothering nature of oil windfalls.

Among oil economies, Norway – the world's third-largest exporter and 10th-largest producer in 2006 – is almost alone in having avoided this fate. As oil has boomed, so has everything else, and it has boomed in areas that will continue to generate economic growth when the oil revenues are gone. This is no accident: For Norwegians, this is a story of planning, self-discipline and a long learning process.

While other countries have become apathetic and uncompetitive during petroleum booms, Norway appears near the top of every international index of competitiveness and entrepreneurship.

The “Norwegian model” has become a topic widely studied, but rarely imitated, among other oil nations. The hotels of Oslo these days are populated with Kuwaitis, Saudis, Kazakhs and Brazilians who have come here to examine the Nordic way....


This is Norway's long-term savings account, and in the 17 years since it was launched it has become one of the four largest investment funds in the world. It currently holds $368.2-billion, or $78,351 for each Norwegian citizen. By the end of next year, even with an oil-price decline, it is projected to hold almost $500-billion, or $117,000 for each citizen....

The Management Rule is the heart of Norway's economic miracle. It is a profound act of self-discipline: All but 4 per cent of Norway's oil earnings must be placed in the fund for savings; nothing can be withdrawn from the fund until the oil is gone, decades from now; and – most crucially – absolutely none of the money can be invested inside Norway. Mr. Slyngstad and his traders spend their days funnelling the oil wealth into foreign stocks and bonds, so none of it will touch the Norwegian economy.

Mr. Slyngstad explained that by investing all this money in non-Norwegian companies, the fund acts as a shock absorber for the entire Norwegian economy. Even as oil has soared, Norway has avoided high inflation and its non-oil companies have grown more competitive....

(Norway's oil is drilled from beneath the North Sea by dozens of companies, including Norway's state-owned Statoil and Canadian firms such as Talisman and Petro-Canada. In exchange for the right to drill, they must hand 78 per cent of their profit over to Mr. Slyngstad's fund. By comparison, Alberta's Heritage Fund currently receives about one-eighth of the province's oil money; the rest goes into provincial coffers or is paid directly to Alberta citizens. In its 31-year history, it has accumulated $16.1-billion, or $4,588 per Albertan. Two-thirds of it is invested inside Canada.) On the face of it, Norwegians seem to be paying a price for their frugality: Only about 10 per cent of Norway's $70-billion government budget comes from oil money. In order to finance their generous state services and social benefits, Norwegians' income taxes are among the highest in the world, and their gas stations charge $2.30 for a litre of unleaded – the highest price in the world, in a country that is the world's third-largest exporter of the stuff.

But it's hard to find Norwegians who consider this a burden. They have among the highest disposable incomes in the world (and the fairest distribution of income: Even the poor are comparatively rich). In every quality-of-life index, Norway ranks at or near the very top, above Canada. Their unemployment rate is currently 2 per cent. And in the 2005 election, Norwegians re-elected the social democratic coalition government that has shunted their earnings overseas. (Take note, tightie righties)

http://www.theglobeandmail.com/archives ... 155/page1/

[bootlegga]

That's hardly news Andy, the Heritage Trust Fund was created to fight that effect AND help diversify Alberta's economy (one reason why so much is invested in Canada). Additionally, lots of ALbertans have been critical of how the government has managed the HTF. Here's how the fund could have looked under a variety of scenarios;

0:

heritage fund.jpg [ 84.32 KiB | Viewed 523 times ]

[andyt]

The story was written in 2008, so no, it's not news. Just a very good idea that Albertan's aren't smart enough to follow. Here's your engery minister at the time: “But our Constitution in Canada dictates that the province of Alberta has the mandate to deal with our own natural resources. We feel that wealth generation in the province of Alberta is worth something, and that to put that money back in the hands of Albertans, and let those people do what they do best with their money, is a better opportunity for us.” So people blowing it on whiz bang and bling is a better opportunity? How do the Norwegians manage to be frugal and still have a very good standard of living, but we can't? I bet some of it is what PA like to rave about, that Norwegians don't spend nearly as much on consumer crap as we do, don't live in McMansions and drive their F150's to the office and have 6 TVs etc.

[eureka]

When Coyne is a bit older he might become a bit wiser. I doubt it, though. He is too full of himself and too certain in his opinions. The destruction of an economy and the destruction of hundreds of thousands of lives is a little too big a question to find a crack through which to enter his head.

Permanent petrodollar it may be: as far as it can be permanent. When it collapses with the end of oil or, as will happen, when the world weans itsel off oil long before Canada's share runs out, then the Canadian economy will have nothing to sustain it.

[RUEZ]

eureka eureka:

When Coyne is a bit older he might become a bit wiser. I doubt it, though. He is too full of himself and too certain in his opinions. The destruction of an economy and the destruction of hundreds of thousands of lives is a little too big a question to find a crack through which to enter his head.

Permanent petrodollar it may be: as far as it can be permanent. When it collapses with the end of oil or, as will happen, when the world weans itsel off oil long before Canada's share runs out, then the Canadian economy will have nothing to sustain it.

you sure don't have a lot of faith in your country do you?

[Gunnair]

eureka eureka:

When Coyne is a bit older he might become a bit wiser. I doubt it, though. He is too full of himself and too certain in his opinions.

The fact you would criticize anyone on this planet for this reveals the unfathomable depths of your hypocrisy and the inexplicable self denial you exist in.

[FieryVulpine]

Gunnair Gunnair:

eureka eureka:

When Coyne is a bit older he might become a bit wiser. I doubt it, though. He is too full of himself and too certain in his opinions.

The fact you would criticize anyone on this planet for this reveals the unfathomable depths of your hypocrisy and the inexplicable self denial you exist in.

That is why I tried to avoid locking horns with Nameless over the past few days without much success.

[eureka]

Gunnair Gunnair:

eureka eureka:

When Coyne is a bit older he might become a bit wiser. I doubt it, though. He is too full of himself and too certain in his opinions.

The fact you would criticize anyone on this planet for this reveals the unfathomable depths of your hypocrisy and the inexplicable self denial you exist in.

A bit of a silly response, n'est ce pas? And the others.

Faith in country. Of course I do not have faith in country if having faith in country means letting it go to Hell in a handbasket.


Hundreds of thousand of the unemployed in Canada are unemployed because of the petrodollar. That is no exaggeration.

Lives ruined a far greater number as their families also suffer.

And Coyne wearing his tin foil editorial hat thinks that is no mischief

I happen to care about people and I have met many who are devastated by this.

[FieryVulpine]

Hark! What's that I hear?

[eureka]

You father calling you, perhaps?

[PluggyRug]

eureka eureka:

You father calling you, perhaps?

Are you sure you're her father, maybe someone had it in for you.

[Gunnair]

eureka eureka:

Gunnair Gunnair:

eureka eureka:

When Coyne is a bit older he might become a bit wiser. I doubt it, though. He is too full of himself and too certain in his opinions.

The fact you would criticize anyone on this planet for this reveals the unfathomable depths of your hypocrisy and the inexplicable self denial you exist in.

A bit of a silly response, n'est ce pas? And the others.

Nope, spot on.

[Unsound]

eureka eureka:

I happen to care about people and I have met many who are devastated by this.

I'm guessing you don't care too much about the Albertans, Saskatchawanians, Newfoundlanders, etc. who would be hurt by the shutting down of the oilsands.

[Caelon]

eureka eureka:

Hundreds of thousand of the unemployed in Canada are unemployed because of the petrodollar. That is no exaggeration.

Absolute BS. Ontario's problems have nothing to do with the ficticious petro dollar and everything to do with banking on a single country to export to. When the US economy fell apart so did Ontario's exports.

Our dollar has not moved appreciably against many world currencies. You keep harping on 'artificially inflated' dollar duet to petroleum. No matter how many times it has been pointed out to you it is the FALL OF THE US DOLLAR not the rise of the Canadian dollar. Your biggest customer has had a currency devaluation. So you can blame the following on Ontario's current woes
1. Failure to improve efficencies when they were subsidized with a weakened doallar under Chretien.
2. Failure to modernize
3. Forgetting that nothing is static and failure to prepare to adapt to change.
4. Being foolish enough to re-elect a tax and spend government.
5. Failure to diversify the economy.
6. Failure to accept the blame for their own stupidity.

eureka eureka:

Lives ruined a far greater number as their families also suffer.

I happen to care about people and I have met many who are devastated by this.

Good for you. Maybe you can move beyond 'caring' to 'helping' by focusing your attention to curing the problems in Ontario instead of looking for a boogey man to blame for your own failures.