Dutch Disease: Alberta Canada vs. Norway

The term ‘Dutch Disease‘ refers to an increase in natural resource based economy crowding out manufacturing and other sectors. It’s also a stand in descriptor for taking all your winnings in a booming market and re-investing them in the same market.

When Oil prices were high, both the province of Alberta and the country of Norway benefited from a petroleum based economy, but they approached the future in different ways.

Brian Ripley over at CHPC summarizes Bruce Campbells take-away of the differences between these two economies approach to oil wealth:

Alberta’s so called “progressive” conservative governments; 7 consecutive iterations since 1971, have squandered their provincial energy resources leaving their treasury with a CAD 12 billion dollar debt and a 500 million dollar deficit.

Norway, a county of 5.2 million people (Alberta’s population is similar at 4.2 million), began their first successful North Sea oil drilling in 1971 and by maintaining sovereign control and creating partnerships with the private sector “… now sits on top of a CAD ONE TRILLION DOLLAR pension fund established in 1990 to invest the returns of oil and gas. The capital has been invested in over 9,000 companies worldwide including over 200 in Canada. IT IS NOW THE LARGEST SOVEREIGN WEALTH FUND IN THE WORLD”

Read the full article over at CHPC.

113 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
home
home
5 years ago

Wow, outstanding blog site format! The time have you been writing a blog regarding? you’ve made blogs peek effortless. Your entire glimpse of your respective web site is excellent, as snugly for the reason that content material!

Rinck
Rinck
5 years ago

Useful information. Fortunate me I discovered your website unintentionally, and I’m shocked why this coincidence didn’t came about in advance! I bookmarked it.|

vangrl
vangrl
5 years ago

The comments on that article on this site are not biased at all.. http://www.mortgagebrokernews.ca/news/analyst-canadas-housing-market-is-loonie-tunes-189678.aspx I especially like these ones.. “As long as there is low interest rates there is affordability despite of high prices. The collapse happens when most people can not buy the properties in these very high prices.” “f we keep the paste of immigrants(investor & skilled workers) inflow at the rate 250,000/year, we’re safe, if not, then we may have to face the consequence of losing on demand and investment side and …!” “The U.S. housing market grew out of greed and lack of government regulations which cause its bubble and finally succumbed to these 2 factors and burst. This is totally not the case in Canada” ——————————————- So you’ve got this guy- “a lecturer in the Program on Ethics, Politics & Economics at Yale University and… Read more »

trackback

[…] -Did you short Genworth at the right time? -There will be fewer hungry realtors this month -All about those rates? -Vancouver is the next… Calgary?!? -Economy shrinks -Over 55? Stop paying property tax sucker! -Who ya gonna blame for this crazy market? -What is the Difference between bulls and bears? -An orderly correction please. – […]

Bo Xilai
Bo Xilai
5 years ago

#106, Shut if Down Already:

You’re probably the type of person who thinks Ariana Grande is an amazing singer compared to Ella Fitzgerald.

Les goûts ne se discuttent pas…. Malheureusement.

Oracle
Oracle
5 years ago

And Patriotz:

You live in Ottawa and bought a house there.

Why so interested in Vancouver? Are you smarter than the people who live there?

Oracle
Oracle
5 years ago

I second that Canada is getting very corrupt.

http://www.theglobeandmail.com/news/politics/john-baird-lands-yet-another-job-as-adviser-to-hong-kong-billionaire/article23786325/

Baird nows works for Li Ka Shing….owns lots of land in vancouver…

Shut It Down Already
Shut It Down Already
5 years ago

Most of the old-timer houses I see have no architectural value. And those so-called monster homes generally look 1000 times better than the moldy pieces of crap they replaced.

Bo Xilai
Bo Xilai
5 years ago

#30 Patriotz, Montreal and New Orleans might be more corrupt, but usually there is a proportional increase in those cities being lively and fun… Vancouver scores highly for corruption, but very low on the the “lively” and “fun” scale…

Just goes to show regression analysis doesn’t always work.

joe
joe
5 years ago

Japan’s internet café refugees: The workers forced to move into tiny, dark cubicles because they can’t afford to rent a flat

http://www.dailymail.co.uk/news/peoplesdaily/article-3021375/Japan-s-internet-caf-refugees-workers-forced-dark-tiny-cubicles-t-afford-pay-rent.html

Bo Xilai
Bo Xilai
5 years ago

#87 Shut It Down Already Says:

The reason why people get upset when “Tear Downs” get Torn Down isn’t necessarily nostalgia for what was, but an abhorrence for the architectural stucco monstrosities which replace them.

Shut It Down Already
Shut It Down Already
5 years ago

Vangrl, how else would expect a land-value-only property to be marketed? The decaying structures on these lots are often worthless, unless you count sentimental value.

They’re being marketed to local builders who, like you, have been fooled into thinking there’s an endless stream of foreign buyers.

renters rule
renters rule
5 years ago

@#84

come out of your closet

Softy
Softy
5 years ago

This is interesting, Vikram Mansharamani claims that there is a shadow mortgage market in Canada where homeowners borrow against their home equity at 3% and lend to subprime borrowers at 8-12% for one year:

Here’s the situation, as told to me by Seth Daniels of JKD Capital, one of the most astute Canada-watchers I know. Daniels told me that there is now a booming private mortgage market in which ordinary citizens are borrowing from their home equity lines to lend money to desperate borrowers. Specifically, he noted “a homeowner acts as a subprime lender by drawing his home equity line at ~3%, and lends it to a subprime borrower at 8-12% for one year.”

He posts links about it here:
http://www.pbs.org/newshour/making-sense/why-canadas-economy-may-be-headed-off-the-cliff/

Softy
Softy
5 years ago

According to

According to Vikram Mansharamani, a lecturer in the Program on Ethics, Politics & Economics at Yale University and a senior fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School:

“Vancouver is now deemed the second least affordable city in the world – thanks to Chinese buyers”

http://www.pbs.org/newshour/making-sense/why-canadas-economy-may-be-headed-off-the-cliff/

But hey, he must be wrong because its a grave sin to refer to country of origin.

paulb
5 years ago

New Listings 285
Price Changes 54
Sold Listings 189
TI:13178

http://www.paulboenisch.com

Mom Of Ponzi
Mom Of Ponzi
5 years ago
StupidityCheck
StupidityCheck
5 years ago

RE: Victoria condos appreciating more than SFH.

That’s what happens in a debt-driven market. The low end sees more activity than the high end.

Corrupt in Canada
Corrupt in Canada
5 years ago

Locals who do buy those houses gut it to the bone anyways whats the diff?

Actually have a friend who bought on the west side and is gutting it to the core and redoing everything. By the end of it they will probably figure out they should have just bought a new build.

They have already gone through asbestos removal, structural problems etc. Just to save the “cute” exterior..

patriotz
5 years ago

@91: “Are CMHC premiums factored into mortgage calculations when getting approved for max amount by the banks? ”

Yes, because they are added to the mortgage balance.

patriotz
5 years ago

@85: “Wouldn’t the past performance on the Island be more related to the lure of cheap US property + above par loonie a few years ago?”

The first problem with that argument is that US property is not an alternative purchase (i.e. a substitute) for Canadian property because Canadian retirees can only live in the US for 1/2 the time. If Canadian buys a US property they still have to live somewhere in Canada for the other 1/2.

The other problem is that the rise in the USD and US RE lately have been of no help at all to the market in retirement areas in coastal BC, as you can see from the sidebar right on this page.

vangrl
vangrl
5 years ago

Almost every house for sale over 15 years old has one of these attached to the listing description

– Great Lot!
– Attention builders & developers
– Hold now build your dream house later!
– prime level building lot
-This property must be sold in conjunction with…

These aren’t being marketed to locals, most locals wouldn’t dream of tearing down 90% of these houses, nor could they afford it.

The West side will soon be called West Mainland

DaMann
DaMann
5 years ago

Are CMHC premiums factored into mortgage calculations when getting approved for max amount by the banks? I presume they are but wasn’t sure. I guess that will make the qualifying amount a tad less now that CMHC rates have gone up. Means nothing of course in the land of $ millions not hundreds of thousands…

space889
space889
5 years ago

@Slagathor – Some people don’t like the moldy smell which I guess a lot of locals love? Not sure about the health implications but I can’t imagine long term mold being good for you.