Is Saudia Arabia going to collapse?

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Brian Howell

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Oct 29, 2015, 1:21:59 PM10/29/15
to Ipse Dixit
The Saudis are running huge deficits. According to articles I've read, Saudi Arabia needs oil priced somewhere between $106 and $115 for economic equilibrium. With oil around $45 per barrel, compounded by increased military spending (Yemen, ISIS), they've burned through more than $62B in foreign currency reserves and have issued $27B in government bonds—the country's first-ever issuance. 

In the wake of Arab Spring, the king has greatly increased social spending to quell a restless population that has 29% unemployment for those in the 16-29 YO cohort. 3/5 of the country's population is under 30.

The kingdom should be able to survive for three to five years at current oil price levels—though some prognosticators are now predicting oil at $20/Bbl. Of course deficits will continue to grow and eventually rebuilding reserves will be all the more difficult. But if the kingdom does collapse, what does it mean for the Middle East? And for OPEC? And for the world-at-large?

The irony in all this is that the Saudis are significant contributors to their own economic problems: they've lead OPEC in upping production in an effort to drive prices lower and economically undermine—successfully—Canadian Athabasca tar sands and U.S. shale oil production (notably from N.D.'s Bakken Shale field).

Macro economics is exciting!


Craig Good

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Oct 29, 2015, 3:22:38 PM10/29/15
to Brian Howell, Ipse Dixit

> On Oct 29, 2015, at 10:21 AM, Brian Howell <bdho...@gmail.com> wrote:
>
> The Saudis are running huge deficits.


There is no vial so small that it would not still be left near empty by the tears I would shed if the house of Saud were to march into the dustbin of history.

I can only hope this would help defund the Wahhabi.

Still, whatever happens in that part of the world is likely to be messy.



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--Craig WWWAYD?
clg...@me.com http://www.craig-good.com
Craig Good: Infidel

jack saunders

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Oct 29, 2015, 3:35:33 PM10/29/15
to Brian Howell, Ipse Dixit
There's more to it.  All the semi-functioning gulf states have hugely bloated civil service payrolls, people who accomplish little but are on the payroll merely to sop up civil discontent.  This has been the story for decades, and also requires oil prices above $100 per barrel.  So these days it's a continual game of moving money around to keep all these many accounts afloat, but it can't go on forever....or even for much longer.  No more unaffected sectors to borrow from. 

This shows you how much the Saudis fear the fracturing boom in the U.S.  They will push the whole gulf state edifice to the brink to strangle it -- a long shot at best. 

Watching in the wings for signs of breakdown:  ISIS, with a proven capability to move quickly into power vacuums created by chaos.
 


From: Brian Howell <bdho...@gmail.com>
To: Ipse Dixit <Ipse-...@googlegroups.com>
Sent: Thursday, October 29, 2015 10:21 AM
Subject: [Ipse Dixit] Is Saudia Arabia going to collapse?

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jack saunders

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Oct 29, 2015, 3:45:18 PM10/29/15
to Craig Good, Brian Howell, Ipse Dixit
Craig:  Messy, indeed.
 
Speaking of Indeed.....had anyone ever heard of Indeed.com, a new job search site getting saturation advertising during the World Series? 

The essence of the spots, a no-brainer, is a series of quick video snippets of what appear to be the coolest jobs on earth....the  obvious advertising angle.  But this creative team is excellent.  One really does get excited by the promise in the pictures. 

 I would have thought the job search space was jammed and dominated by big legacy players, but upon reflection, I guess it's rather about due for disruption.

From: Craig Good <clg...@me.com>
To: Brian Howell <bdho...@gmail.com>
Cc: Ipse Dixit <Ipse-...@googlegroups.com>
Sent: Thursday, October 29, 2015 12:22 PM
Subject: Re: [Ipse Dixit] Is Saudia Arabia going to collapse?
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