Hicks on Biz: Red October hasn’t happened…yet BY GRAHAM HICKS FIRST POSTED EDMONTON SUN: THURSDAY, OCTOBER 19, 2017
Happily, I’m on the hook to pay for a fancy dinner with my former boss John Caputo, now the Sun/Postmedia’s head of advertising for Western Canada.
In June, Hicks on Biz predicted a serious financial downturn in Edmonton by the end of October, i.e. this month.
Financial blood would be running on the street, I said, caused by the slowdown in the oilsands, the slowdown in all Northern Alberta construction and manufacturing, higher income and corporate taxes, minimum wage increases and the enormous debt being run up by this free-spending provincial government.
It would all hit home, I said, with a sudden, thudding recession starting in October.
Caputo, ever the optimist, took issue with the forecast.
So we made a bet: A fine dinner, to be paid for by whoever was wrong.
That was me. Hooray!
Today, most credible economic forecasters – the Conference Board of Canada, Edmonton Chief Economist John Rose and others – are predicting a higher-than-average 4% growth this year in Edmonton’s GDP (gross domestic product – an indicator of economic growth) compared to 2016, when Alberta’s GDP shrunk by 3.6% and the equally horrible 2015, when the Alberta’s GDP also shrunk by 3.6%.
So why do I still have a sinking feeling in my stomach when it comes to Alberta’s future?
Why am I so worried for the financial well-being of my adult children, my nieces and nephews who have chosen to make their careers in Edmonton?
Why am I worried that in 10 years’ time, the value of my Edmonton home will have dramatically slipped? Why do I feel like I’m walking around with a dark cloud over my head?
Because while Red October hasn’t happened yet, I still think it’s coming.
It’s all too obvious.
Fact 1: We are losing the global propaganda war against fossil fuels. City after city, country after country are announcing future bans on internal combustion engines. “Ethical investing” considers oil companies to be the black plague.
Big Oil is backing off the research needed for further emission reduction from oil, coal and gas. What’s the point? The world won’t accept fossil fuels, no matter how clean.
This may be illogical, verging on insanity. The global low-cost solution to climate warming depends on fossil fuels being cleaned up, not banned!
But in this new climate-change religion, fossil fuels are evil and must be stopped. Our own provincial and federal governments drink deep from this fashionable Kool-Aid: Sustainable energy good, fossil fuel energy bad.
Fact 2: Fossil fuels are the number one driver of our provincial (and national) economy. Every week a billion dollars’ worth of oil – the product of Alberta’s global expertise in all aspects of heavy oil – is pumped out of Alberta, bound for the USA because we won’t build pipelines to supply other markets.
Nothing will replace the economic activity in Alberta coming from the extraction and processing of fossil fuels. A billion dollars a week … the Canadian Wind Energy Association suggests its industry will spend $3.7 billion in Alberta, between now … and 2030.
Industries do not move around by whim. No wind/solar manufacturing outfit will set up shop in high-cost Alberta, far away from major markets. Our civic leaders optimistically talk of an artificial intelligence (AI) cluster … based on one company moving a dozen researchers here to take advantage of expertise at the U of A. Our IT sector is no bigger, no smaller than 50 other North American cities. IT research is centred in Silicon Valley, Boston, Waterloo. Why would it move to Edmonton?
What we’re really good at, where we are world leaders, is in the research and development of heavy oil and gas – including emission reduction. The expertise is here to lead the charge to produce low-emission clean coal … but no money is going into coal research.
Fact 3: No matter how you cut it, the current provincial government is heading over a financial cliff. It can’t keep spending $10 billion a year more than it is bringing in. Sooner or later, the books will have to be balanced, huge interest payments will have to be made. Spend now, pay later. Live for today, why worry about tomorrow.
Even if re-elected in 2019, this government will face a financial hurricane. Spending will be severely restrained. Taxes will be further increased.
When the provincial fiscal house-of-cards collapses, Edmonton will endure the same economic shock as happened in the early ’80s and the mid ’90s. Remember, 27% of our employment comes from the public sector – in health care, education and administration.
All in all – dear God, please may I be wrong again – we’re not going to get out of this without a whole pile of financial hardship.
It ain’t gonna be pretty, in fact, soon or later, it’s going to be downright ugly.
But not this month.
Waiter, the bill please.