What if the Norwegian citizens had had the chance to manage their own individual oil funds or share of oil revenues?

Sir, I refer to David Sheppard’s “Norway fund to sell off oil shares” November 17

At first sight we are of course all impressed with that the Norwegian Oil Fund has been able to accumulate US$200.000 per Norwegian. 

The question is though, had the Norwegian oil revenues been paid out to and invested directly by the Norwegians, would they in average have more or less than US$200.000, and would the Norwegians, in average, have been stronger citizens as a result of having to take on that responsibility on their own?

And when we read that what we always thought as the Norwegian Oil Fund or the Norwegian Government Petroleum Fund, is now known officially as the Government Pension Fund Global, the natural question we have is if all that money is now only to go to pensioners? If I was a young Norwegian with ideas of my own and in need of capital, I am not sure I would look too favorably at that possibility.

And let’s be honest about the results. Much of it, or perhaps even most of the financial returns obtained, which are perhaps more than the oil proceeds injected, have been direct consequences of US and Europe having kicked the 2007-08 crisis can down the road, injecting huge amount of liquidity with QEs which, together with the ultralow interests maintained, have inflated all financial assets.

Sir, I was appointed the first diversification manager of the Venezuelan Investment Fund created in 1974, basically a fund very similar to the Norwegian Oil Fund. It took me only two weeks to become convinced it would not work, and so I left.

All this sort of centralized accumulations of wealth sooner or later loose contact with the final beneficiaries and with their original purpose and fast (Venezuela) or little by little (Norway) begin functioning more in terms of the wants and needs of those managing it.

When we now start reading about how that Norwegian fund begins to assign more and more value to issues like sustainability and ethics, which of course is good, we do wonder though how much of that is more based on managerial show-off than on a real mandate from its final beneficiaries.

Again, if I was that young Norwegian in need of capital, or just wanted to construct my own retirement nest, I can easily hear me saying… Great, you do all that but, before you start, give me my share. 

And let’s face it. One reason Norway’s government have been able and willing to set aside oil revenues in the fund is that they receive other type of compensations, like gas/petrol consumption taxes. Norway has the highest gas prices in the world, about $2.40 per liter (Venezuela less than $1 cent per liter)

I hear you Sir. “Here is just a Venezuelan being envious of the $200.000”.

Of course I am envious but, believe me when I say, that as a defender of oil revenue sharing, I would much have preferred my fellow citizens to have only a tenth of that amount, but in the process have learned more of how to stand on their own, and freeing themselves from having to depend on redistribution profiteering governments or fund managers.

PS. What about the Norwegian Fund selling off oil shares? Sounds reasonable but their current 6 per cent invested in the oil and gas sector is not that exaggerated either. Can you imagine what the Norwegians would say if Norway runs out of oil and the Fund stands there with no investments in oil?

@PerKurowski

Much more than the Paris Climate (photo-op) Agreement, our pied-à-terre needs revenue neutral carbon taxes

Sir, Martin Wolf writes: “In no area are global spillovers more significant and co-operation more vital than climate… The main obstacles to such action are three. First, specific economic interests, notably in the fossil fuel industry… Second, free-marketeers, who despise both governments and environmentalists, reject the science, because of its (to them) detestable policy implications. Third, few wish to…threaten their standard of living, for the sake of the future or people in poorer countries” “Climate change puts poorest nations at risk”

Not so fast! There are those of us who believe that the threat of climate change is so real that there is no need to convince us with the “people in poorer countries” argument. The best interests of our grandchildren suffice. And there are those of us that despise the idea that so much of the important sacrifices required could be dilapidated enriching governments and environmentalists. To mostly attribute “specific economic interests” to the fossil fuel industry is to be too biased.

Of course the poorer countries should be helped, but the brunch of the climate change war effort, needs to be carried out as much as possible by sending out strong market signals, letting the markets operate freely assigning resources; and aligning the incentives as best as possible.

For that I strongly believe that a huge carbon a tax, shared out entirely to the citizens, is what first should be happening. Let us for instance suppose that petrol (gas) was sold all over the world at Norway’s current price of about US$2.10 per liter (Venezuela would have to increase its prices US$2.09 per liter) and that 100% of what that tax produces, goes directly back to the citizens.

Then we would fight climate change and inequality at the same time; which would be great since as Martin Wolf rightly holds: “The linked challenges of climate and development will shape humanity’s future.”

Sir, nothing in the Paris Climate (photo-op) Agreement seems to me remotely as powerful and effective as revenue neutral carbon taxes.

Similar to what I proposed for Mexico City

http://ourpiedaterre.blogspot.com

@PerKurowski

To make saving our pied-a-terre affordable, we need to keep the climate-change-fight profiteers at bay

Sir, I refer to Martin Wolf’s “Inconvenient truths and the risks of denial”, November 2.

I do not read scientific projections on global warming, it suffices me to see what harm is done to our delicate pied-a-terre to know its wrong and that it should stop. But I also know that could be a much costlier than needed process, if we are not able to keep the climate-change-fight profiteers at bay. And I also know that we would be much more effective in our efforts if we could engage other social causes in the quest, like that of decreasing inequality.

That is why I am all in favor of for instance very high carbon taxes, with all its revenues paid out to citizens by means of a Universal Basic Income. That would decrease carbon emissions, allow supplier of cleaner energy sources to compete more and, to top it up, help our economies by reviving demand.

Sir, all those incredible over 500 percent gas/petrol ad valorem taxes in Europe, would do much better placed in the pockets of European citizens, than managed by European bureaucrats, capturable by their own and other special interests.

@PerKurowski ©

Mexico needs carbon and petrol tax, which revenues are all redistributed by a Universal Basic Income mechanism.

Mexico needs to align incentives on pollution

Sir, Jude Webber writes about the horrible pollution caused by the excessive number of cars in Mexico City (“Corruption and car fumes clog up the capital”, Notebook, May 26) and proposes that eliminating corruption in emission testing could be an important part of solving this. Fat chance! As a Venezuelan, I know that this is not a viable route.

Ms Webber writes: “Mexicans are snapping up cars as fast as the world’s seventh largest producer can churn them out . . . Domestic consumption is the engine of economic growth so there is no official incentive to dissuade people from buying Mexican-built cars and associated products such as petrol.”

That’s really not the case. You must build up the right political and economic incentives to correct for it. If Mexico imposed carbon tax, petrol tax and a strong traffic toll system, and made sure all the revenues from it were immediately returned to the economy by means of a universal basic income, you would face a different reality. Then you would have aligned the incentives for pollution control and the fight against climate change with the fight against inequality, and that makes for a very powerful alliance.

Standing in the way, besides initial protests from car owners, would be the redistribution profiteers who would miss a chance to make political and economic capital. Just as in Venezuela.

Published in FT

The current low interest rates on public debt are completely artificial.

Sir, again, for the umpteenth time, Martin Wolf finds it “hard to understand the obsession with limiting public debt when it is quite as cheap as it is today” “Negative rates are a symptom of our ills” April 13.

But again he refuses to delve into why public debt is “as cheap as it is today”. Where would interest rates on public debt be without central banks buying public debt; or without regulators allowing banks to hold much less capital against the debt of the monarch, than against all other debts?

Wolf also brings up a frequent ritornello of his, namely that “The world economy is suffering from a glut of savings relative to investment opportunities.” But he does not ask himself where that saving glut could be had it not been for QEs.

Wolf informs us that higher interest rates, “would force borrowers into bankruptcy”. Yes but is that not a natural and necessary element of how savings glut are reduced? In a letter titled “Long-term benefits of a hard landing” that FT published in 2006, I wrote: “the hard truth… gradualism could create the most accumulated pain… [do not] ignore the value of pruning or even, when urgently needed, of a timely amputation.”

Wolf’s standard suggestion for how to eliminate the savings glut is having government investing in infrastructure. Nothing’s wrong with that, good infrastructure is always useful, though any waste building it, is just that, waste.

But building bridges does not mean these will be used. And how are we to make sure we get the new investments that will use the infrastructure built, with risk weighted capital requirements that make banks stay away from what perceived as risky? What we now have is a banking system fully dedicated to solely financing what is perceived, decreed or concocted as safe.

For a government to take on public debt should be a delicate matter, knowing that it is our children and grandchildren who will have to service that debt. To do so based on some artificial current low rates is not something I can support.

PS. With a $2 per gallon gas tax the US could pay each American citizen about $900 per year. Good for the fight against climate change and inequality, and fairly decent for the economy. That would be a good start for a Universal Basic Income scheme, which I much prefer over Helicopter money, first because it is duly funded, and second since I do not fully trust the helicopter pilots  J     

@PerKurowski ©