Sep 20 2007
“Fair Share” Confiscation & Wealth Protection
Those looking to protect themselves from massive currency inflations that are required to keep asset and credit bubbles afloat (a method that itself has limits before it theoretically collapses under the weight of its own fiction) were hit with a surprise announcement today: Alberta Panel Recommends Higher Oil, Gas Royalties
Notes Bloomberg’s Ian McKinnon:
Royalties on oil-sands projects that are profitable should be raised to 33 percent of net revenue from 25 percent, said the six-person panel, appointed in February by Premier Ed Stelmach. “Albertans do not receive their fair share of energy development and they have not been receiving their fair share for some time,” Bill Hunter, panel chairman, said at a news conference.
That’s a wake up call to all about the push and pull dynamics taking place in the Western World. Huge social benefit programs have their costs, and given their inherent collectivist inefficiencies, those costs are dynamically more inefficient than economic gravity can support. But don’t let economic reality get in the way of populist whim and political whoring to it. As currencies continue to have governmentally caused problems relative to real, hard assets, such as oil, expect the parasitic elements who attach themselves to the productive economy to seek a fresh supply of blood. Cuts are out of the question, so Alberta’s energy reserves are good enough.
As an aside, there’s no doubt that resources in the ground ought to have a valid social value attached to their development. But the market probably ought to be assigning that value on a competitive level, and by no means does that justify it should be used to subsidize a parasitic Leviathan.
More than anything else, it makes us wonder about the safety of any asset, below ground or above ground, when the whims of populist self-interest, or worse yet, populist desperation are at play. Capital controls can be enacted quickly on citizens’ wealth, preventing them from moving assets to more favorable jurisdictions in order to protect themselves from government confiscation through various taxes, fees, and fines. Its happens all the time across the globe (look at Chavez’s Venezuela right now!) and the U.S. is hardly exempt, lest we forget the “patriotic” confiscation of gold by no less than national hero Franklin D. Roosevelt — of course, to save American citizens ostensibly from their own imperfect “animal spirits” — a blame the victim (of lousy economic policy) diagnosis if ever there was! Even today Gold is punitively taxed not as ordinary capital gains, but at a much higher “collectible” rate.
Trust the government when the xyz’s hit the fan? Be my guest, but no thanks. Were Capital Controls to be rolled out they can affect you negatively. Vigilant folks would be wise to remember that they can happen quickly; consider the potential as part of your overall planning.
[...] unknown wrote an interesting post today onHere’s a quick excerptThose looking to protect themselves from massive currency inflations that are required to keep asset and credit bubbles afloat (a method that itself has limits before it theoretically collapses under the weight of its own fiction) were … [...]