Thursday, November 09, 2017

Background On The Saudi WW-III Caldera

capitalistexploits |  Saudi Arabia is a tribal society where order has been, up until last week, maintained by a consensus amongst the various branches of the Royal family. Up until now it’s been unthinkable to publicly shame, humiliate, and imprison other members of the ruling family, and so fracturing this established order is a big deal. A really big deal!

This is not like admitting at a family gathering to having snuck into auntie’s beach house for a quickie with the cute waitress at the corner coffee shop.

Rather, it’s like telling them you’ve already burnt down their homes after becoming a transvestite. It’d be a huge shock, and that’s exactly what the families are experiencing right now.

You see, the way it’s worked is that the families all have a stake in the system, and this in turn helps secure their loyalty. What MBS has just done is to completely shatter the way things have always worked and in so doing destroyed any loyalty and trust.

So what the hell is happening?

To understand what’s likely taking place let’s follow the money.

Here’s what we do know.

Oil makes up 90% of Saudi government revenue, and the entire place is a giant welfare state. So the price drop has been very painful and they’re bleeding through their reserves.

In fact, according to the IMF, Saudi Arabia is set to burn through all of its cash within five years.
This is why the market is putting more pressure on their currency peg than at any time in its history. I wrote about this back in May when I said the Saudi sheikhs only have two options.

This is also why they need to list Aramco — in order to shore up their finances.

Not only have weak oil prices hurt them. They’ve been engaging in futile silly wars… and these things cost billions. Yemen, Syria — both of which they figured would be easily won and over in months. Oops!

So their expense column looks horrible due to their losing billions in wars and welfare, while their revenue column has been under severe pressure due to the price of oil.