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.
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