Grantcoulson's Blog

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

Direct Energy cuts 500 jobs as it moves headquarters from Toronto

The Canadian Press By Craig Wong

Direct Energy is cutting 500 jobs in Canada as the company shifts its headquarters from Toronto to Houston in order to concentrate on key growth markets in the northeastern United States and Texas.

Direct Energy spokeswoman Hillary Marshall said Friday the regulatory environment in Ontario was too restrictive and the company’s opportunity to grow in the province too limited.

"We are a business that needs further deregulation in the energy markets — more competition if you will — in order to keep growing and we’re just not seeing it here," Marshall said.

"We are however seeing it in the United States."

A subsidiary of British company Centrica, Direct Energy has been growing its retail business in the U.S., especially Texas and the U.S.

"We have been focusing our growth on those markets and that’s where we are going to continue to focus it," Marshall said.

The company’s Canadian headquarters will be closed over the next 12 to 18 months while the company completes the move to Texas, where Direct Energy plans to add about 300 people.

In total, Direct Energy, one of North America’s largest energy and energy-related services providers, will still have about 2,000 employees in Ontario and roughly 6,000 across North America.

The company, which has operations across Canada, also operates approximately 4,600 producing gas wells in Alberta as well as three natural gas fired power plants in Texas.

"Direct Energy has a growth strategy that is largely built on expansion of our residential business, our commodity sales business and also in our upstream business where we produce natural gas and generate electricity," Marshall said.

"We’ve done just over a $1 billion in acquisitions over the last 18 months and there is a stated strategy to invest billions more in North America, but we want to do it in markets where there is healthy competition, where it is open to competition, and not utility dominated and we just don’t see that in Ontario."

Earlier this month, the company announced the acquisition of Indiana-based natural gas retailer Vectren Source, a wholly owned subsidiary of Vectren Corp. (NYSE:VVC), for US$39 million.

Vectren Source supplies natural gas to about 280,000 residential and small business customers in Ohio, Indiana and New York.

Last year, Direct Energy entered 22 new residential markets in the northeastern United States.

The company also recently acquired First Choice Power in Texas and Gateway Energy Services in the U.S. Northeast.

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   There are many different ways to kill real enterprise and Ontario uses all of them. Generate electricity via official agencies which pay incredibly high salaries and benefits and increase the cost of electricity. This drives away industries because of a), high taxes, and b), high cost of electricity, and c), in this case, drives away companies which want to generate electricity cheaper–the trifecta of public utilities.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

       Do not think about, write about or deal with  human behavior without determining the effects of incentives.

      An ant and an elephant meet, fall in love and share an incredible  night of lovemaking. Well satisfied, they fall asleep to sleep the deep slumber only known to those in love.. In the morning, the ant wakes to find the elephant dead. “Great,”, says the ant, “One night of passion and I have to spend a lifetime digging a grave.”

    To torture this metaphor beyond all reasonable limits, this is where politicians now find themselves, except the one night is decades and they’ll sentence others to the lifetime of filling the hole. More specifically, the political structure in the Western world has done two unsustainable things. The first is that they have set up a system of wealth transfer which has produced an increasing number of folks dependent upon the government. This group has, in turn, two main divisions, government workers and those dependent on the government dole. The second unsustainable thing is the level of debt. Naturally, the size of the dependent group has a significant impact on the amount of government expenditure and debt.

   Governments around the world are either getting the message or completely missing it. The Canadian government is cutting expenditures and, horror of horrors, government worker pensions. The mayor of Toronto got the message, sold it to the electors and is now cutting costs. The governments of California and Ontario completely missed the message and are continuing as if dawn had not yet come. The credit ratings of Ontario and California have either been threatened or downgraded, industry is fleeing and expenditures are not decreasing. Both are pouring money into education, green energy and the number and size of government agencies is increasing. I’m waiting for the realization of dawn for California, Ontario and the government of the United States, another jurisdiction still dreaming of love.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

   The conceit of the supporters of government is that the economy needs managing and that officials are good at managing other people’s money. Neither is true and the failure of each is becoming clearer.

Obama and the Keynesians Total Fail

    Jeff Carter

Caught this article in BI today. The lack of analysis and depth of thought is frightening. In March of 2009, we embarked on our latest Keynesian experiment. Previous to this one, we had tried Keynesian schemes before. They almost never work. The author also fails to look past the comparison of the Austrian School and Keynesian school of economics. There is another more rigid school, the Chicago School.

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    The article to which he refers is about how the first Keynesian stimulus didn’t work and how another should be tried.

Without delving into the petty differences of each, the Austrian and Chicago school are similar, but the Chicago school has a lot more math to it. It’s more data and scientific method driven. The Keynesian school relies on the fundamental principles of the IS-LM curve. It’s more of an art form with than the Chicago school, which relies on a classical mathematical model for prediction.

The first time we tinkered with Keynes was the Great Depression. Instead of rescuing the American people, Keynesian economics made us poorer and prolonged the downturn. Keynesian advocates like to say that it was World War Two that brought us out of the Depression. Even today, Krugman was advocating for space invaders to get us to ramp up spending and bring us out of this prolonged recession.

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    World War Two didn’t bring anyone out of the Depression, but it provided lots of temporary employment for millions of people.

        Nobel Laureate Robert Lucas and Leonard Rapping calculated on the basis of just expansionary Federal Reserve policy that the economy should have been back to normal by 1935. So what stopped a blockbuster recovery from ever starting? The New Deal.

Please try and disabuse yourself of some horrible logic and psychological constructs. World War Two did not bring the US out of the Great Depression. Saying that ignores the opportunity costs of war, and turns a blind eye to the decimation of human capital that took place from 1939-1945. The New Deal was a raw deal for the American people since it ignored all precepts of classical economic thought. Demand curves always slope down and many of the New Deal programs threw that precept to the wind. Believing the pablum that war or government spending gets you out of economic downturns is simplistic, and flimsy logic at best. At it’s worst it becomes psychologically damaging and turns government into a over arching and domineering beast. Thinking this way also shows that you haven’t thought through all the issues. Intellectually bankrupt.

The whole crux of the advocacy of the Keynesian system is the multiplier. They always hypothesize a multiplier effect of more than 1.0, but below 2.0. This means that for every government dollar spent, it will multiply through the economy in a factor greater than 1.

That’s where the Keynesian argument falls on its face. The multiplier effect of government spending a dollar is always less than 1. It is actually much closer to zero, and in some cases negative. Where do those government dollars come from? They don’t majestically come out of thin air. There is no money tree planted in the nation’s capital that we simply can pick dollars from and send out to people to spend.

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    The multiplier, or seeing-eye dollar effect of the government-spent dollar has always baffled me. The theory is that a dollar spent by the government multiplies economic activity whereas one spent privately does not. Academics and government officials pushed this theory for years. It shows the strange effects of theory on action when one deals with other people’s money.

The dollars that fund our government come from the American taxpayer. Period. The End. The government creates debt that must be paid by the productivity of the American taxpayer.

There is an opportunity cost to taking that dollar away from the American taxpayer. Individuals can be more productive using their own dollars for their own means than the government can using centrally planned systems and spending it for us.

In March of 2009, we spent more than any government spent before. Yet, today, we are still in the doldrums. Instead of spending, suppose we had cut taxes and cut spending by the same amount. Because it’s a mathematical fact that cutting taxes does stimulate in a multiple greater than 1, we would have been out of the deep economic ditch we are in, and would have had less debt to show for it.

Critics will point to exceptions. Defense, big infrastructure projects etc. And because of transaction costs, it is better to aggregate together, pay taxes and off load that sort of thing to the government. However, when it comes to private investing, insurance, individual care, education, and retirement the government is a horrible manager of funds. There is always waste, what economics professors would categorize as dead weight loss when the government does things that are better left to the efforts of private individuals.

That is really the crux of the election debate in 2012. Do you want a nanny state that takes care of everything, decides for you, and directs you-and will cause the country to continue going down the path of a death spiral of debt? Or do you want to dismantle the albatross and return sovereignty to private individuals that are all trying to maximize their gains. The act of millions of us trying to make life better for ourselves individually will translate into more production and raise the standard of living for us all.

Monolith versus The Millions. The millions are always more efficient and work faster.

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   What happens when money and theory run out? Stay tuned for the fun.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

      Perhaps people should expect less from governments. I have never expected anything from them and have never been disappointed. It is a fact that a government solution enters any debate with an “unearned aura of virtue” whereas, in my opinion, every government solution enters the debate with a well-earned aura of incompetence and costliness. Now, governments have been found to have borrowed too much money based on a declining economy caused, for the most part, by government intervention and increased government size.

      The debt crises could have been predicted, and were, by sighting along a trend line. What the trend lines unusually don’t tell you, without additional information, is when the critical mass occurs and the crisis seems to appear overnight. Something that was foreseen decades ago is hardly unforeseen.

The Slide Into Poverty

Ten Years to Greece
John Stossel
    

Dec 07, 2011

America moves steadily toward the cliff.

When Greece blew up, its government debt was 126 percent of gross domestic product. Ours is on track to exceed that in about 10 years.

If we haven’t learned from Greece, might we learn when other countries blow up? That may be about to happen, says Daniel Hannan, author of “The New Road to Serfdom: A Letter of Warning to America.”

Hannan, a British member of the European Parliament, says, “The consequences of the better part of 40 years of reckless borrowing have caught up with us.”

I told him that most Americans don’t notice Europe struggling. I hear people say: “I went to Paris. I went to Rome. Things are OK.”

“Things are OK in the same sense that a house that is massively overmortgaged can still be a nice-looking house. … But there comes a point when the bills are due, and we’ve reached that point.”

On the surface, things do look good on the other side of the Atlantic. Europeans have shorter workdays and longer vacations than Americans. Many of us would say, “Sounds good.”

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    You always get what you pay for. Ask anyone operating his life via the assumptions of thrift, hard work and responsibility.

“In the short term, it’s lovely. What’s not to like? … The trouble is you can’t carry on doing that indefinitely. … In the mid-1970s, Western Europe accounted for more than a third of the world’s economy. Today, it’s about a quarter. And in 2020, it will be 15 percent. That’s the reality of burdening yourself with more taxes, more regulations … deeply uncompetitive practices.”

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    Europe adds another layer of government and is  surprised that prosperity did not increase. Surely more people on the government payroll is the short route to wealth.

Adding to the fiscal burden is the fact that people live longer.

“It’s a good problem to have. … But, of course, the longer people live, the worse the (worker-to-retiree) ratio grows. … We introduced the old-age pension in the U.K. almost exactly 100 years ago. … And in those days, you typically drew your pension for about 18 months. That was the gap between retirement and death. Fortunately, we can all now look forward to much longer periods of life. But, of course, you’ve got to pay for that. … We are going to have to ask people to make a greater contribution or to retire later, or both.“

People don’t want to hear that. Hannan notes that his fellow Europeans are remarkably selfish when it comes to things they think they’re entitled to. Some understand that cuts must be made, but don’t touch their handouts.

“In France, they call it the ‘droits acquis,’ the acquired rights. … As the governments try belatedly to … restore some order, some sanity to their public finances … people who now feel entitled by right, and who have stopped thinking about where the money comes from … quite understandably turn around and say: ‘This wasn’t what I expected when I started doing this job. Go and find the money somewhere else.”

But there really isn’t anywhere else.

We Americans feel entitled, too. We work longer and harder than Europeans, but American students say they are entitled to government loans; industries and their friends in politics insist that housing, agriculture, energy and all sorts of other businesses deserve subsidies; and most everyone expects health care to be free, or nearly free. Many politicians tell people that’s all possible, and some promise more.

But that just moves us closer to the cliff.

Why don’t we learn? Because there are problems that must be solved, and politicians act so interested in our welfare that we believe them when they say, “Yes, we can.” But the educated response to “Yes, we can” is “No, they can’t.” Not when “they” means government.

Our government should be a fraction of the size it is now. Its girth is the result of electioneering politicians who promise the moon to gullible voters while using debt to push the costs onto our children and grandchildren.

Politicians can dream of guaranteed incomes and free medical care, but as economist Friedrich Hayek wrote in “The Fatal Conceit”: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

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       The “fatal conceit” of everyone, not just politicians, is that they believe what they INTEND is the same as what they DO and the side effects, just like the “side effects” of psychoactive drugs are not important because they are, after all, just on the “side”.

But saying that government can’t solve our problems is not to say that humanity cannot solve them. When people and markets are left free, we manage to prosper.

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      Government job or respect–Which’ll it be?

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

   Do not think about, write about or deal with  human behavior without determining the effects of incentives.

     California’s unemployment rate is 11.7% compared to the national average of 9%.

    Excess regulation, high taxes, higher electricity costs–not lights on the path to prosperity.

Pro-Business States Target Anti-Business California

    Tony Katz

In the Nevada Development Authority’s latest ad on Fox News, entertainer Clint Holmes, broadcasting from McCarran Airport in Las Vegas, extols the airport’s frequent-flier-friendliness and the virtues of living and working in Nevada:

    There’s more to Las Vegas than the strip. We’re business-friendly, family-oriented and very cost-effective. It’s time to relocate your business to the real Las Vegas.

This is one in a series of NDA promotional spots. In another, a fake news correspondent from KTAX (yes…kTAX) reports that Sacramento lawmakers don’t want you to move your business to Las Vegas, with, "…no corporate income taxes, no personal income taxes and low worker comp fees."

Many states are trying to attract California businesses. In the latest issue of City Journal, Steve Malanga has an article entitled, "Cali to Business: Get Out!" He begins with the story of an Irvine, California medical-technology company that relocated to Salt Lake City, Utah. The CEO, Michael Beeuwsaert, explains how regulations spurred his move:

    The tipping point was when someone from the Orange County tax [assessor] wanted to see our facility to tax every piece of equipment I had,” Beeuwsaert said. “In Salt Lake City at my first networking event I met the mayor and the president of the Utah Senate, and they asked what they could do to help me. No [elected official] ever asked me that in California.

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    Civil servant arrogance and interference, just the thing for a business-friendly environment.

Malagna goes on to explain that California is losing not only businesses, but also investment. A California Manufacturers and Technology Association study reveals that between 2007 and 2010, 10,763 industrial facilities were built across the United States. The number of those in California? 176.

    That amounted to 4.8 facilities per 1 million people, the lowest rate of any state; the national average was more than 40. The same study found that of the nation’s $350 billion in investments in manufacturing facilities, just $8.7 billion was spent in California, a per-capita rate of investment less than one-fifth the national average.

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     Pay attention to the future.

A FOX Business article highlights companies that have left California in recent years. Intel recently moved a plant, along with thousands of construction and high-tech jobs, to Oregon. Business coach Joseph Vranich reflects on the California’s loss and Intel’s astonishing gain:

    The Intel investment in Oregon, when you add it to Arizona, is $8 billion, with a “B,” so the exodus of capital from California is running at an alarming rate… Right now, Intel will probably save about 60% on their electric bill, but when the new environmental regulations and rates increase next year, their electric bill in Oregon could well be an astonishing 80% to 90% less than in California.

Yet liberals are still arguing that the problem with California is not that taxes are too high; it’s that they’re too low. In a conversation I had on FOX and Friends in January, Sally Kohn of Movement Vision Lab recited the liberal meme:

    So, ok , look, California is not in a debt crisis because they mismanaged things. The reason Califonia is….in a fiscal crisis is because A, we are in a recession so tax receipts are lower and B, at a federal level…we have cut taxes at the very very top to an unprecedented level, and thats why they have less money to pay for it….So, we’ve literally sucked all these resources out of the states, including California.

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    We’ll balance the budget by raising taxes–and the death spiral gets faster.

When I responded that lower taxes bring higher revenues, and that perhaps Northrop Grumman would have stayed in California rather than move to Virginia had taxes been lower, Kohn continued:

    California got here by cutting taxes

California hasn’t cut taxes, nor has it cut the environmental regulations that make doing business there prohibitive. Virginia, Nevada, Oregon and Utah all have profited from California’s failures. And if California listens to Kohn and her fellow travelers, even more states will benefit royally.

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     If the statists didn’t believe that governments are entitled to all wealth, they wouldn’t be in their increasingly desperate situation.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

ECONOMIC FREEDOM SURGES IN CANADA

KATHRYN BLAZE CARLSON

National Post, November 22, 2011

Alberta scores top spot in Fraser report

Alberta is the most economically free jurisdiction in North America, beating out its provincial counterparts and all 50 U.S. states as Canada narrows the gap with its southern neighbour on economic freedom, according to a report released Tuesday.

The Fraser Institute’s Economic Freedom of North America 2011 report found Canadian provinces, on average, moved up in the ranks as compared to U.S. states when judged on the size of government, taxation, and labour-market freedom.

“The chicken is coming home to roost: Canada is staying on the course of economic freedom, while the United States has accelerated its spending and regulation,” said Fred Mcmahon, a Fraser Institute vice-president and coauthor of the report. “It’s been a long-term trend that’s really beginning to bite now.”

The think-tank’s report uses 2009 data, so given the U.S. government’s continued stimulus spending since the 2008 recession, Canada will only continue to close the freedom divide, Mr. Mcmahon said. The rankings take into account all levels of government, including federal, provincial/state and municipal/local.

Canada’s climb and America’s descent is ever-more significant because economic freedom is directly correlated with prosperity, according to the report: The 12 North American jurisdictions with the highest levels of economic freedom had an average per capita GDP of $54,435, compared to the 12 lowest-ranked jurisdictions where the average per capita GDP was $40,229.

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     Increased prosperity because of less government spending and regulation.

Alberta’s Minister of Finance, Ron Liepert, said he is “not surprised” Canada — and Alberta specifically — is viewed as economically freer in terms of smaller government, less taxation and freer markets. As energy minister until recently, he met often with U.S. state legislators in oil- and gas-producing states.

“In almost every case, they had what I call ‘ Alberta envy,’” Mr. Liepert said, referring to the resource-rich province that has a 10% flat tax on personal income and zero sales tax. “I remember a conversation with a fellow from Wyoming. He had nothing but good things to say about the kind of climate we have here … In a general sense, they felt it was much easier to do business in Canada these days than it is in the U.S.”

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   If only they would listen. The facts are obvious.

Saskatchewan soared in the Fraser Institute’s rankings, moving to 32nd overall from 53rd and trailing only behind Alberta among the provinces.

There, earners can make more money before they start paying taxes than in any other province, and resource royalties bolster government coffers so lawmakers rely less on taxation for revenue.

While its boost in the rankings is impressive, the province’s overall rating on the three key indicators — size of government, taxation and labour market freedom — remained largely unchanged.

“The biggest thing is that the United States’ jurisdictions have been trending down,” Mr. Mcmahon said, explaining Saskatchewan’s bump in the rankings.

“Everybody else must be moving down,” echoed David Mcgrane, a University of Saskatchewan political science professor. “It’s not as though a lot has changed in a single year in Saskatchewan.”

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     Yes, we can–reduce the standard of living.

The drop in American rankings is because t he Obama government has continued a spendthrift approach first adopted by the Bush administration, while Canada’s spending increase has been far less dramatic, Mr. Mcmahon said.

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   Republicans–Democrats both financially irresponsible–both say they’re not.

In the report, he and University of Texas researcher Avilia Bueno also argue the United States has seen a significant spurt in regulatory growth, in part due to stock-market scandals such as the one spurred by the Enron fraud and because of the housing bubble blamed on a failure of policy.

Ontario and Quebec, Canada’s two largest provinces, ranked 49th and 58th overall, climbing barely in the rankings from 51st and 59th respectively. “Quebec is the highest tax jurisdiction in all of North America and it has long had a very large government,” Mr. Mcmahon said, adding that Ontario has been growing its government and increasing taxes, too.

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    As noted here many times, Ontario is on the death spiral of increased spending and regulation.

“It’s almost like Ontario has Quebec envy — a perverse envy. It’s as if the kid in the class that’s getting a B+ is copying the kid that’s getting a C-.”

Newfoundland and Labrador ranked third among the provinces and 37 th overall, while British Columbia ranked fourth in Canada and 43rd overall.

The bottom five spots overall are filled by Canadian provinces — Manitoba in 56th, New Brunswick in 57th, Quebec in 58th, Nova Scotia in 59th, and Prince Edward Island in 60th — but their declines are less dramatic than the gains of other provinces so Canada gained in economic freedom on balance.

U.S. states Delaware and Texas placed 2nd and 3rd overall, respectively.

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Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies