Canada's wealthiest province utterly rejects the left

[shoop]

The fund managers are responsible for the return on the fund. IMT was talking about the return, not how much the Province tops up the fund by. So yes, the $1.1 billion dollar return this year is the correct figure to use.

The *frigging thing* sits at almost 13 billion dollars and is still growing. Regardless of money they divert to general revenues. Once again, how is this *not* passing on a portion of our oil riches to future generations?

Um...my math isn't so shit hot, but isn't $300 million roughly 3 per cent of $1 billion? If so, then IMT is correct: the fund is "growing" just above the pace of inflation because the bulk of its return is being funnelled into general revenues.

Do explain how a fund that will be close to 13 billion dollars by the end of fiscal 2005-06 isn't passing a portion of our oil riches to future generations.

Because they keep pilfering the frigging thing to top up the general revenues?

[Black Dog]

The fund managers are responsible for the return on the fund. IMT was talking about the return, not how much the Province tops up the fund by. So yes, the $1.1 billion dollar return this year is the correct figure to use.

If you're talking about the return. Sure. But implying the Heritage Fund is growing at 8 per cnet is also false, because teh fund itself only sees a portion of that return...just above inflation.

The *frigging thing* sits at almost 13 billion dollars and is still growing. Regardless of money they divert to general revenues. Once again, how is this *not* passing on a portion of our oil riches to future generations?

If it's growing only at the pace of inflation, it's not really "growing" at all. Adjusted for inflation, the fund is still smaller now than it was 20 years ago. Whoop-dee-doo. Put another way: as it stands right now, that mighty legacy is about half of what the government spends in one fiscal year. As far as legacy's go, that's kind of a waste. (Sure, it's better than nothing, but how much money has this government blown on "prosperity bonus"? Deregulation?)

[I Miss Trudeau]

Typical of the laziness of the Liberals. (The laziness that cause you to lose this election )

Are you absolutely incapable of staying on topic? It seems so.

All of your facts and assumptions are disproven yet you are too arrogant to read the link attached.

How so? Looking back, what I said was:

Tops it up to keep pace with inflation? Who the hell is managing the fund? That fund should be growing on its own, even when adjusted for inflation. If Klein is topping it up to keep pace with inflation, he needs to find a new fund manager.

More likely, Klein is pulling out all of the interest then putting just enough back in so that it doesn't shrink when adjusted for inflation. The price of our non-renewable resource is currently very high, and to celebrate and plan for the future, we're ensuring that the trust doesn't shrink?

So basically, the statement that I said was the more likely scenario is the one that you explicitly agree with when you say:

Of the $1.1 Billion that 8 1/2% represents about $800 Million will go into general revenues and $300 Million will go into *topping up* the fund.

Next....

For 2005-06 the fund is going to return about 8 1/2%. Guess that beats your 2 to 3 % hey? So the fund managers are allowe dot keep their jobs?

Did you read a single post in this thread before banging out this reply? No where did I claim that it was only growing by 2-3%. What I said was that either:

A. the fund was growing at less than the rate of inflation and thus needed to be topped up

or "more likely",

B. Klein is pulling out all of the interest then putting just enough back in so that it doesn't shrink when adjusted for inflation.

Which, again, means that the scenario that I outlined as most likely is precisely the one that you are claiming "disproves" my facts and assumptions. Ironically, you didn't even realize that you were posting information that supported my claim all the while gloating about how wrong I was.

Do explain how a fund that will be close to 13 billion dollars by the end of fiscal 2005-06 isn't passing a portion of our oil riches to future generations.

Oil prices are extremely high when compared to historical averages, and the best we can do for a legacy is making sure that the trust fund doesn't shrink? Notice, we're not growing it, just making sure that it doesn't get smaller. Think about it....our Heritage Trust fund is merely treading water while we sell record amounts of oil at near record prices. Any claim that we're doing something meaningful for future generations with this fund is absurd.

Gee those pesky facts....

Indeed.

[shoop]

Once again, what is with the arrogance? I understand how being a disciple of P.E.T. could lead to that, but honestly grown adults can disagree with you. That doesn't make the stupid, deluded or lacking in intelligence. But if you want to continue the personal attacks, so be it. Why so arrogant?

On August 30, 1976 the Heritage Trust Fund was created with $1.5 billion dollars. In a little less than 30 years the value of the fun has gone up *8 times*. Far, far better than merely treading water. The trust fund is growing by leaps and bounds.

PS, if you want to chastise me about *staying on topic* remember not to use it as a simple tool hoping I will overlook your ignorance. You could actually justify your points I have refuted before. Or you can ramble on without support in the face of the growing mound of evidence against...

Are you absolutely incapable of staying on topic? It seems so.

Oil prices are extremely high when compared to historical averages, and the best we can do for a legacy is making sure that the trust fund doesn't shrink? Notice, we're not growing it, just making sure that it doesn't get smaller. Think about it....our Heritage Trust fund is merely treading water while we sell record amounts of oil at near record prices. Any claim that we're doing something meaningful for future generations with this fund is absurd.

Gee those pesky facts....

Indeed.

[shoop]

Once again, what is with the arrogance? I understand how being a disciple of P.E.T. could lead to that, but honestly grown adults can disagree with you. That doesn't make the stupid, deluded or lacking in intelligence. But if you want to continue the personal attacks, so be it. Why so arrogant?

On August 30, 1976 the Heritage Trust Fund was created with $1.5 billion dollars. In a little less than 30 years the value of the fun has gone up *8 times*. Far, far better than merely treading water. The trust fund is growing by leaps and bounds.

PS, if you want to chastise me about *staying on topic* remember not to use it as a simple tool hoping I will overlook your ignorance. You could actually justify your points I have refuted before. Or you can ramble on without support in the face of the growing mound of evidence against...

Are you absolutely incapable of staying on topic? It seems so.

Oil prices are extremely high when compared to historical averages, and the best we can do for a legacy is making sure that the trust fund doesn't shrink? Notice, we're not growing it, just making sure that it doesn't get smaller. Think about it....our Heritage Trust fund is merely treading water while we sell record amounts of oil at near record prices. Any claim that we're doing something meaningful for future generations with this fund is absurd.

Gee those pesky facts....

Indeed.

[Black Dog]

On August 30, 1976 the Heritage Trust Fund was created with $1.5 billion dollars. In a little less than 30 years the value of the fun has gone up *8 times*. Far, far better than merely treading water. The trust fund is growing by leaps and bounds.

I notice you ignored my point that the vaunted fund was worth more in real dollars in the mid '80s than it is today. That is not "leaps and bounds" by any stretch of the imagination, especially given the incredible growth in revenues the province has seen over the past few years. If the porivnce was serious about building the fund a s alegacy, they'd rededicate a set percentage of royalty revenue to the fund instead of using it as the government's piggy bank.

[shoop]

I didn't ignore it. I just don't believe it.

Point to one link that shows the value of the fund at any point in the mid-80s and I can do the calculations to adjust the figure for inflation.

But I am not simply going to *take your word* for it if you are too lazy to actually provide a link.

Would you believe what I remember from 20-some years ago and take it at face value?

I notice you ignored my point that the vaunted fund was worth more in real dollars in the mid '80s than it is today. That is not "leaps and bounds" by any stretch of the imagination, especially given the incredible growth in revenues the province has seen over the past few years. If the porivnce was serious about building the fund a s alegacy, they'd rededicate a set percentage of royalty revenue to the fund instead of using it as the government's piggy bank.

[Black Dog]

I didn't ignore it. I just don't believe it.

Point to one link that shows the value of the fund at any point in the mid-80s and I can do the calculations to adjust the figure for inflation.

But I am not simply going to *take your word* for it if you are too lazy to actually provide a link.

Would you believe what I remember from 20-some years ago and take it at face value?

Are you calling me a liar? Are you calling me a liar?

Alright: there's this comparison between the AHTF and the Alaska Pemanent Fund. See the charts on page 15 and take note of this:

For each of the first ten years a portion of revenues from natural resource royalties was allocated to theAlberta Heritage Savings Trust Fund. Beyond the initial allocation of $1.5 billion, from 1976 to 1983 30% of the province's non-renewable revenues (mostly oil and natural gas) went into the Heritage Fund. Between 1984 and 1987, such revenue going into the Fund was halved to 15%. Pursuant to the collapseof world oil prices in 1986, the provincial government ceased transfers the Fund. Total transfers into the fund from 1976 to 1987 were just over $12 billion. 10 Until 1982, the fund kept all its investment income, which helped it grow to a peak of $12.7 billion in 1987. Since then, all income, including income from capital gains, has been transferred to General Revenues to help pay for ongoing government programs and services. No inflation proofing took place, so the purchasing power of the Fund began to erode. Moreover, the absolute value of the Heritage Fund declined because of continued spending on Capital Projects such as irrigation works, parks, hospitals, and research funding. This spending stopped in 1995, and the Fund has been valued at approximately $12 billion ever since.

And then there's this older analysis by the same authors which states:

With contributions and investment income, the book value of financial assets of the fund grew to exceed $12 billion by 1985 and have since stabilized at that level....in real terms, the AHSTF is now only 75 percent of its value in 1986, the last year a contribution was made to it.

That last bit is from 1993, but I sincerly doubt that any contributions to the fund made since will have made up that lost ground.

[shoop]

Fair enough.

But reading the first study makes a valid point. The Province quit contributing to the fund when the price of oil collapsed in 1986.

Yes, it has lost pace with inflation. But Alberta couldn't afford to top it up to do so throughout the 90s. Klein balanced the budget with big cuts to the civil service, and smaller cuts to education and health care in the mid 90s. Funding for education and health had to be restored before saving for a *rainy day*.

Go back and read the first study you linked to. On page 10 Warrack says something about the Alberta government not trusting the people to make their own decisions. In context it reads like an argument for reasons *not* to grow the fund.

In the early 90s there was debate in Alberta about eliminating the fund to pay down the debt.

Thankfully that one wasn't followed...

Here is a link to oil prices in constant dollars using 2004 as a baseline.

Using $30 a barrel as a rough gauge for an *oil boom* Alberta has only had three years to start rebuilding the fund. I know they *only* put in 1/4 billion this past year. But if they keep it up the fund will start growing again.

Alright: there's this comparison between the AHTF and the Alaska Pemanent Fund. See the charts on page 15 and take note of this:

That last bit is from 1993, but I sincerly doubt that any contributions to the fund made since will have made up that lost ground.

[Black Dog]

But reading the first study makes a valid point. The Province quit contributing to the fund when the price of oil collapsed in 1986.

Indeed. But nothing is keeping them from putting back into it now. As the first analysis states:

After 1987,the Heritage Fund no longer functioned as a savings account. It can be argued that it simply became a financial asset from which the government gleaned yearly earnings.

If that is the case, then its hard to make the argument that the HTF is a true legacy built on solid fiscal know-how. It is, as I said, a piggy bank by another name.

Using $30 a barrel as a rough gauge for an *oil boom* Alberta has only had three years to start rebuilding the fund. I know they *only* put in 1/4 billion this past year. But if they keep it up the fund will start growing again.

But at the current rate, they are only investing enough in the fund tio inflation proof it. Frankly, the whole purpose of the fund today seems to be primarily political: when confronted with criticism, it's nice to have $12 billion to point to, even if that money isn't actually doing anything (such as growing or contributing to the province). I'd like to see the government adopt a plan for that money and stick with it.

[shoop]

See that is the problem with what you are saying.

The fund is bad because it isn't growing because the funds are going into general revenues. But the funds going into general revenues do *contribute to* the province....

More than $28 billion has gone into general revenues from the fund since its inception... (From the Fund link I provided a ways back...)

But at the current rate, they are only investing enough in the fund tio inflation proof it. Frankly, the whole purpose of the fund today seems to be primarily political: when confronted with criticism, it's nice to have $12 billion to point to, even if that money isn't actually doing anything (such as growing or contributing to the province). I'd like to see the government adopt a plan for that money and stick with it.

[Black Dog]

See that is the problem with what you are saying.

The fund is bad because it isn't growing because the funds are going into general revenues. But the funds going into general revenues do *contribute to* the province....

More than $28 billion has gone into general revenues from the fund since its inception... (From the Fund link I provided a ways back...)

But that's NOT what I'm saying. I like the idea of a "rainy day" fund that can be drawn on to meet future needs, be they projects or what have you. What I don't like is how the role of the ATHF has shifted and changed according to the whims of the politicians. One day it's a savings account, the next a toll for diversifying the economy and the next a piggy bank for government projects. Flexibility is one thing, but its hard to escape the impression that the Heritage Fund is a political tool first and foremost. Either that, or the people managing it are niot the fiscal genisuses some say they are.

I'd like to see the fund's purse strings managed by someone other than the people who can use its goodies to finance their own electoral prospects.

[shoop]

The idea of a trusteeship like the one that manages the Alaska Permanent Fund is an appealing idea.

I have seen the idea floated that the Tories could grow the Heritage Fund to a large enough size that it could fund the provincs revenue needs of just the interest. I wonder how big *that* would have to be...

I'd like to see the fund's purse strings managed by someone other than the people who can use its goodies to finance their own electoral prospects.

[Spike22]

I wonder if Ralphie boy could lend some of that cash at a fair interst rate?

[Black Dog]

I have seen the idea floated that the Tories could grow the Heritage Fund to a large enough size that it could fund the provincs revenue needs of just the interest. I wonder how big *that* would have to be...

A good way to start would be by plowing the full return on the fund (all $1 billion of it) back into the fund itself. And, given the fact that the oil patch is not going to slow down, maybe start earmarking some royalty money into it (based on a sliding scale so that the percentage changes with fluctuations in revenue). Still, the day the fund gets to the size where we were living off its interest is the day we're all sitting on solid gold toilets.

I would also support a plan that dedicated a portion of the interest from the fund to specific projects, rather than redistributing the same money through the general revenues (where everyone gets a nibble).

[Montgomery Burns]

Alberta is the wealthiest province because of a stroke of geographical luck and thats it.. don't try to credit the conservatives for that... boy.. you're really reaching now.

Get real. I;ve seen that map of the oil and gas exploration in Alberta and Saskatchewan.

Are you trying to say that it is the purest of coincidence that the oil and gas exploration virtually stops at the man-made Alberta/Saskatchewan border?

[Montgomery Burns]

Mar:

A number of economists see recent U.S. developments as an ultimately destructive path; that is, that giving primacy to corporate interests and particularly the multi-national expression of them is gradually impoverishing the domestic population and creating a security burden so immense that the economy will eventually collapse under it. Simply put, there are signs the U.S. economy has become so dependent on activity outside its borders that it can only avoid collapse by an ever increasing imperial policy which will eventually place a burden on the economy that it can't sustain.

Check out today's business news. The US jobless rate dropped from 4.9% to 4.7%.

Low jobless rate = less people on welfare rolls and more tax, unemployment insurance, and pension plan revenues, etc for the govt.

[Montgomery Burns]

While the corporate/private sector is just one institution within society it is the only institution that generates wealth in our economy. It is in fact, the economy. The corporate/private sector doesn't need a society as much as society needs a corporate/private sector. We are a trading nation. Primarily an exporting nation. Our prosperity also has a great deal with what goes on outside our borders, primarily south of our immediate border.

The corporate sector does not generate wealth; it exploits resources and may control the distribution of wealth. C'mon, guys! This is economics 101.

The wealth of petro resources in Alberta were not created by the corporate sector. If we had the furthest left government you can imagine, those resources would still be there and would still be being exploited. The difference would be the mechanism for sharing the wealth generated from these resources among the population.

As to our being a "trading nation":

a) there is a huge amount of analysis of Canada's economic origins as a mercantile economy dues to its colonial history.

this is 2006. Every country is engaged in international trade ("nations" tend not to be).

P.S. rbacon, maybe you should start your own blog if you want to post this stuff as it just adds useless clutter in a thread.

If we had the furthest left government you can imagine, those resources would still be there and would still be being exploited.

Obviously you know nothing about Saskatchewan and its filthy rich resources that the socialist NDP ignore.

And of course the private sector generates wealth. Economics 101, indeed!

[Montgomery Burns]

Stignasty:

And just to reply to the thread, yeah Albertans have rejected the left. However, you can't really place the federal Liberal party on the left. Just because they don't adhere to modern neoconservative beliefs doesn't make them "leftist."

When a federal party (Liberals) implement social liberalism, they are on the left.

[I Miss Trudeau]

PS, if you want to chastise me about *staying on topic* remember not to use it as a simple tool hoping I will overlook your ignorance. You could actually justify your points I have refuted before. Or you can ramble on without support in the face of the growing mound of evidence against...

Excuse me? You've taken every oppurtunity to level attacks at former prime ministers and "Liberals" that you could in this thread, neither of which is relevant to this topic. And when I ask you to try to stay on topic and avoid inflammatory material that contributes nothing, you accuse me of arrogance?

Furthermore, I've already pointed out that what you think "refuted me" was almost exactly what I claimed. You then proceeded to gloat (arrogantly, I might add) about my ignorance, never having figured out that your data supported what I had said from the start. Commenting on the irony of you arrogantly berating me for being correct doesn't seem unreasonable.

On August 30, 1976 the Heritage Trust Fund was created with $1.5 billion dollars. In a little less than 30 years the value of the fun has gone up *8 times*. Far, far better than merely treading water. The trust fund is growing by leaps and bounds.

Again, you didn't read what I said. Here it is again:

Oil prices are extremely high when compared to historical averages, and the best we can do for a legacy is making sure that the trust fund doesn't shrink? Notice, we're not growing it, just making sure that it doesn't get smaller. Think about it....our Heritage Trust fund is merely treading water while we sell record amounts of oil at near record prices. Any claim that we're doing something meaningful for future generations with this fund is absurd.

Right now, at this point in time, during a period or record sales and near record prices, the fund IS barely treading water, and thats a generous assessment. Sure, it has grown by about 8x in that time. But consider that the original $1.5B would be worth roughly $26B today had it been left alone to grow at a 10% interest rate with no more additions to the fund. Contrast that with the $13billion its currently worth.

[I Miss Trudeau]

I have seen the idea floated that the Tories could grow the Heritage Fund to a large enough size that it could fund the provincs revenue needs of just the interest. I wonder how big *that* would have to be...

Currently, Alberta's annual operating budget is roughly $26 billion. So, at an interest rate of 10% (not unreasonable with a well managed fund) that would require roughly $260 billion in the fund. If we could have put $16B into the fund 30 years ago, we'd be there now. If we had $8B in the fund 30 years ago, we'd be there in about 6-7 years. If we had $4B in the fund 30 years ago, we'd be there within 15 years. Though we'll likely require a budget larger than $26B in 15 years.

If, over the last few years, we had invested large sums of money in oil patch companies instead of paying down our debt, we would have seen absolutely massive returns (some individual companies on the order of 3000%) and may be at that point now. All with minimal risk.

[shoop]

You are an all star IMT. The mistakes I made in the thread were admitted to. I apologize for you being too lazy and arrogant to actually have read the entire thread.

However, you do miss one *huge* point. True there would be $26B left in the fund. However since its inception the fund has paid out over $28B into various government spending.

Hmmm, the early 90s were definitely a rainy day given that prices fell in the crapper at that point in time....

Right now, at this point in time, during a period or record sales and near record prices, the fund IS barely treading water, and thats a generous assessment. Sure, it has grown by about 8x in that time. But consider that the original $1.5B would be worth roughly $26B today had it been left alone to grow at a 10% interest rate with no more additions to the fund. Contrast that with the $13billion its currently worth.

This quote just shows how you lack the basic fundamentals in economics of your namesake.

If, over the last few years, we had invested large sums of money in oil patch companies instead of paying down our debt, we would have seen absolutely massive returns (some individual companies on the order of 3000%) and may be at that point now. All with minimal risk.

Energy stocks have always been among the riskiest and most speculative out there. Companies that are returning *in the order of 3,000%* are definitely trading on the Venture Exchange. There is no way Heritage Fund money should be trading on something that speculative. How about Bre-X? Why didn't all the Fund's money go there? Or Nortel? Am I making my point....

I am guessing you believe in the Kyoto Protocol. How much off a negative effect on the value of *all* stocks in the energy industry would there be if Federal (and Provinicial) Governments took the necessary steps to meet our Kyoto targets? Hmmm, shoud the Government really be in a position to choice against a policy you favour for economic reasons?

BTW, do show how you would have turned $16B into $260B in just 30 years?

[I Miss Trudeau]

Energy stocks have always been among the riskiest and most speculative out there.

Yes and no. Investment in companies with legal rights to proven oil deposits are pretty safe investments. Invest in companies that claim to have massive but unproven deposits are extremely risky (and usually fraudulent, to boot).

There is no way Heritage Fund money should be trading on something that speculative. How about Bre-X? Why didn't all the Fund's money go there? Or Nortel? Am I making my point....

No, not really. See above for why I think you're wrong.

I am guessing you believe in the Kyoto Protocol. How much off a negative effect on the value of *all* stocks in the energy industry would there be if Federal (and Provinicial) Governments took the necessary steps to meet our Kyoto targets? Hmmm, shoud the Government really be in a position to choice against a policy you favour for economic reasons?

Far less than you think.

BTW, do show how you would have turned $16B into $260B in just 30 years?

Calculate the compound interest on $16 billion at 10% interest over 30 years. Its actually $279,190,436,302.18 over 30 years.

[geoffrey]

Energy stocks have always been among the riskiest and most speculative out there.

Yes and no. Investment in companies with legal rights to proven oil deposits are pretty safe investments. Invest in companies that claim to have massive but unproven deposits are extremely risky (and usually fraudulent, to boot).

There is no way Heritage Fund money should be trading on something that speculative. How about Bre-X? Why didn't all the Fund's money go there? Or Nortel? Am I making my point....

No, not really. See above for why I think you're wrong.

I am guessing you believe in the Kyoto Protocol. How much off a negative effect on the value of *all* stocks in the energy industry would there be if Federal (and Provinicial) Governments took the necessary steps to meet our Kyoto targets? Hmmm, shoud the Government really be in a position to choice against a policy you favour for economic reasons?

Far less than you think.

BTW, do show how you would have turned $16B into $260B in just 30 years?

Calculate the compound interest on $16 billion at 10% interest over 30 years. Its actually $279,190,436,302.18 over 30 years.

IMT is right, about $280 billion. Though you should really compound that more frequently (you compounded annually) because any earnings would be instantly reinvested. Using a monthly compound @10% we are looking at about $318 billion dollars. Chances are it would be higher.

Also right on investment in companies with proven reserves, this is a very reliable investment and my portfolio is heavily invested in this. Though its rare that you'll find any company valued strictly on that, and you can get into some trouble if the company becomes overvalued through some belief in unproven supply. Any decent investment firm could make a few bucks off that anyways. Plus it has direct benifet in Alberta.

Kind of like Quebec's Pension investments in companies like Alcan.

[shoop]

Please do tell where you would get that 10% return (compounded monthly) over the last 30 years.

IMT also talked about companies returning 3000%. Hmmm, I sure bet those weren't companies with proven reserves. Gotta pick one side of this game if you insist on playing. Is it companies returning 3000% (or even 10% compounded monthly) or is it companies iwth proven reserves? You know the whole risk/return tradeoff. Tends to drive the returns down with the whole *proven reserves* thing.

IMT is right, about $280 billion. Though you should really compound that more frequently (you compounded annually) because any earnings would be instantly reinvested. Using a monthly compound @10% we are looking at about $318 billion dollars. Chances are it would be higher.

Also right on investment in companies with proven reserves, this is a very reliable investment and my portfolio is heavily invested in this. Though its rare that you'll find any company valued strictly on that, and you can get into some trouble if the company becomes overvalued through some belief in unproven supply. Any decent investment firm could make a few bucks off that anyways. Plus it has direct benifet in Alberta.