Connect with us

Economy

Corruption, ascension, and oil: Why Saudi Arabia’s moves should worry the world

Published

on

Mohammed bin Salman

Saudi Arabia has dominated the world’s oil exports for decades. They’ve used this status to wield great influence over every industrialized nation. Sometimes this influence is indirect as nations like Russia and China must take cues on prices even when they aren’t trading with the Saudis. Others, including the United States, have been forced to change policies and relationships based upon the will of Saudi Arabia’s leaders.

Things have been changing in recent years. There are more players in the game. OPEC, which is essentially controlled by Saudi Arabia, is still the biggest player in oil town, but their power has been fading. The Saudis are no longer able to control every facet of oil production and distribution around the world. Moreover, the world’s dependency on oil is waning. Fossil fuels are still the driving force for industry and travel, but technology is pushing away from them. Though there are greater needs than ever before for energy, those needs are being met by a more diverse range of sources. Efficiency is a priority for everyone from automakers to farmers.

There’s another thing hurting the Saudis that isn’t discussed as often as the previous two challenges. They’ve blown their money. Instead of investing into infrastructure and diversifying their economic footprint, they’ve lived the last four decades under the illusion that their money wells were always going to sustain them. They didn’t start planning for a post-oil world until recently and if they don’t make major changes soon, it may be too late.

All of these factors are in play with their recent moves towards modernization. Crown Prince Mohammed bin Salman has been spearheading the charge towards a new Saudi Arabia, but he’s facing roadblocks both inside and outside of the kingdom. How he handles those roadblocks will affect a good chunk of the world, including the United States. Based upon his actions this weekend, we should be worried he’s heading in a precarious direction that could cause turmoil worldwide.

“Corruption”

17 major players in the Saudi government from princes to ministers were arrested over the weekend as part of King Salman’s anti-corruption push. This push is under the control of Prince Mohammed for a very important reason. He’s solidifying power and eliminating challenges to his ascension to the thrown.

Corruption is an ironic avenue through which the Crown is pursuing Prince Mohammed’s adversaries. Who is at the center of this corruption? The Crown itself. That means that they know where all the bodies are buried. They know every financial move made by all who have power in the kingdom. Of course, they’ll choose corruption as the way to mow down potential roadblocks. They have dirt on literally everyone.

It’s like the CIA taking down bureau chiefs for keeping secrets. They all keep secrets just as everyone in the Saudi government practices corruption of some sort. That’s the point. They were able to isolate those opposed to Prince Mohammed in a demonstration meant for them as well as anyone else who would fight him once the King dies. Anyone even thinking about supporting a different choice will now know they’ll face repercussions if they do. Those who were arrested have a choice: devotion or penalties. Nobody is exempt. They must either fall in line or fall on their swords.

Why this is bad

Contrary to popular belief, Saudi Arabia is anti-American. They’re anti-everyone. They play their “allies” for fools. This isn’t a secret. Every American president since Nixon has willfully accepted the unrighteous relationship we’ve maintained with the House of Saud because they’ve empowered the dollar to be the world’s reserve currency. They’ve given us much of the power we’ve enjoyed since the 1970s by being the producers and allowing us to be the bankers.

This isn’t a conspiracy theory. It’s just not talked about very much in public circles because to admit it would mean trouble for this “mutually beneficial” relationship. This is why every President, even President Trump, has looked the other way and even supported moves made by the Saudis that attack human rights, American excpetionalism, and the well-being of our nation’s stability. We need them to keep the dollar from collapsing under the weight of untenable debt. They need us to keep the wolves who would have at them at bay.

Despite the support Prince Mohammed has received from the White House, they are aware that he could take the nation in a direction that opposes our interests. This is why President Trump practically begged them to open their IPO for Saudi Aramco on the NYSE.

This is why Jared Kushner was sent on an unannounced trip to Saudi Arabia last week.

Kushner took unannounced trip to Saudi Arabia – POLITICO

https://www.politico.com/story/2017/10/29/jared-kushner-saudi-arabia-244291Kushner left Washington, D.C., via commercial airline on Wednesday for the trip, which was not announced to the public, a White House official told POLITICO. He traveled separately from Treasury Secretary Steven Mnuchin, who led a delegation to Riyadh last week to focus on combating terrorist financing.

Kushner was accompanied in the region by deputy national security adviser Dina Powell and Middle East envoy Jason Greenblatt. Greenblatt continued from Saudi Arabia to Amman, Jordan; Cairo; the West Bank city of Ramallah; and Jerusalem, where he was on Sunday.

It isn’t just London or Tokyo that makes the U.S. fear the Saudis won’t use the NYSE. There are rumors that Russia or China could work private investment deals with Saudi Aramco. Why? Because they would require much less transparency than the major stock exchanges. It might not be as lucrative for the Crown, but it would prevent them from having to disclose and eliminate corrupt portions of the money-flow through the company. In other words, they wouldn’t have to let the world know a bigger chunk of the profits go to the crown than they’ve been reporting.

Prince Mohammed wants to modernize Saudi Arabia. This makes sense for them and could even be beneficial for the world if they were to truly tackle corruption. They won’t. Doing so would mean draining much of the power the Crown currently enjoys. They are still extremely prosperous, so they’re not at a point that they’d be willing to trade transparency for security. As far as Prince Mohammed is concerned, they’re still a generation or two away from collapse. They have time to fix it. Why give up an ounce of power now when it’s not required?

The answer: they won’t. That was essentially confirmed by this weekend’s purge of Prince Mohammed’s adversaries.

Final Thoughts

Prince Mohammed is 32-years-old. He has the vitality and ambition to lead the nation for several decades. Moving against his opponents now means he’s starting off his reign with the same iron grip his father has held. If anything, he’s demonstrating an even stronger grip before he’s even ascended to the throne. This does not bode well for a world that is dependent on their direction regarding oil. It’s even worse for the United States’ dependence on them to keep the dollar at the center of world economics. If there’s no plan-B that doesn’t include Saudi Arabia’s support, the U.S. government needs to start putting that plan together immediately.

Perspectives

Saudi Arabia ‘corruption’ arrests are a bold but risky attempt by the crown prince to seize power

http://www.independent.co.uk/news/world/middle-east/saudi-arabia-arrests-coup-corruption-mohammed-bin-salman-latest-a8040961.htmlFor years, Saudis have complained of rampant corruption and misuse of public funds by top officials in a system where nepotism is also widespread.

The public would surely welcome efforts to eradicate both, particularly as low oil prices hurt the economy, but the arrests have simultaneously whipped up “apprehension and fear”, said Madawi Al-Rasheed, who wrote several books on Saudi Arabia and is a London-based critic of its leadership.

After more crackdowns, its clear: Saudi Arabia’s Mohammed bin Salman is acting like Putin

https://www.washingtonpost.com/news/global-opinions/wp/2017/11/05/saudi-arabias-crown-prince-is-acting-like-putin/?utm_term=.fdffc18a3c2bSaudi royals view themselves as The Party, sharing power and ruling by consent, in an arrangement that is largely opaque. What is absolutely clear after Saturday’s “Night of the Long Knives” is that Crown Prince Muhammad bin Salman is upending this arrangement and centralizing all power within his position as crown prince.

This purge comes on the heels of complete intolerance for even mild criticism of Mohammed bin Salman’s reforms, resulting in at least 70 arrests that have, unfortunately, garnered far less attention. Many of us living outside Saudi Arabia will not return home for fear of the same fate. Our families have been targeted instead.

Saudi Crown Prince Makes Dangerous, Unprecedented Power Grab

http://nymag.com/daily/intelligencer/2017/11/saudi-crown-prince-makes-dangerous-unprecedented-power-grab.htmlWhy he moved at this precise moment is not quite clear: Bin Salman likely either saw some threat looming that he needed to head off, or an opportunity to cement his authority and cut off possible rivals to his claim to the throne. As the favorite son and de facto regent of his father, the elderly, Alzheimers-suffering King Salman bin Abdulaziz, bin Salman was already in a position of strength, but he’s alienated a lot of his relatives to get to where he is, which means he has a good number of people to intimidate before they make trouble.

Hence the instant anti-corruption commission. The power he’s given himself here is considerable, though, and will be used to illiberal ends no matter how much his supporters insist he’s a reformer. Impossible as it sounds, Saudi Arabia is actually getting more authoritarian, in meaningful ways. The separation of control over the security forces was meant to keep any one individual or branch within the family from growing too powerful; bin Salman now has more power than any member of his family was really ever meant to have. He’s also breaking the mold of Saudi patronage politics, the consequences of which are unpredictable.

Carl is a gaming fanatic, forever stuck on Reddit and all-around lover of food. He writes about cars for several publications and lives in northern California.

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Economy

House passes tax cuts

Published

on

House passes tax cuts

By a 227 to 205 vote, the House passed the GOP’s tax cut package. That was the easy part. Now they have to try to pass a tax cut in the Senate.

If they can pull it off, it would be the first major piece of legislation Congress has been able to put on President Trump’s desk since he took office. After failures with Obamacare repeal, passing these tax cuts is an absolute must. It doesn’t matter whether it was rushed, sloppy, or directly contrary to many traditional Republican policies. They need a bill signed before heading into the 2018 midterm elections.

Watch Speaker of the House Paul Ryan make his plea before Congress:

Further Reading

BREAKING: Voting Results Are In From Tax Reform Bill Vote

http://www.dailywire.com/news/23678/breaking-voting-results-are-tax-reform-bill-vote-ryan-saavedraThe House of Representatives passed a massive tax reform bill on Thursday aimed at cutting taxes for businesses and individuals, which is a major step in the Trump administration’s effort to overhaul the tax system.

The bill, which passed with “227 votes in favor and 205 against,” had to survive opposition from several House Republicans as 13 of its members ultimately voted against the plan.

House Passes Tax Bill

http://www.nationalreview.com/corner/453803/house-passes-tax-billMinutes ago, the House passed its version of tax reform, which expands the standard deduction, shrinks the amount of individual tax brackets from seven to four, and cuts the corporate tax rate from 35 percent to 20 percent. The vote was 227–205, with 13 Republicans voting against the bill and no Democrats voting for it.

All but one of the Republicans who voted against the bill represent California, New York, or New Jersey, states with high income-tax rates whose residents could be affected by the elimination of the state-and-local-tax deduction. The onus now falls on the Senate to pass its version of tax reform, and on Republicans to negotiate the differences between the two bills.

House easily passes $1.4 trillion tax cut

https://www.washingtontimes.com/news/2017/nov/16/house-easily-passes-14-trillion-tax-cut/No Democrats backed the bill.

“This is the most irresponsible bill I will have been confronted with in 37 years,” said Rep. Steny H. Hoyer, a Maryland Democrat who said the massive deficits — as much as $2 trillion, when interest costs and other extensions are included — are a betrayed of what Republicans have long argued for

Continue Reading

Economy

Ron Johnson opposes tax plan, says it favors corporations over other businesses

Published

on

Ron Johnson opposes tax plan says it favors corporations over other businesses

Senator Ron Johnson has a point. He’s the first Republican to officially declare his opposition to the Senate’s tax plan, citing evidence the plan greatly favors corporations while continuing with oppressive taxes on sole proprietorships, limited liability companies, S corporations, and partnerships whose owners pay taxes based on individual income tax rates for the owners rather than the corporate rates.

In an interview with WSJ, Senator Johnson was clear with his opposition to the plan:

Republican Sen. Ron Johnson Opposes GOP Senate Tax Package

https://www.wsj.com/articles/republican-sen-ron-johnson-opposes-gop-senate-tax-package-1510777290“If they can pass it without me, let them,” Mr. Johnson said in an interview Wednesday, adding that the plan unfairly benefits corporations more than other types of businesses. “I’m not going to vote for this tax package.”

In addition to his concern about the details of the Republican proposal, he also complained about a process that he said has been closed to his input and also misleads the public about the nature of the tax overhaul.

“I don’t like that process,” Mr. Johnson said. “I find it pretty offensive, personally.”

The Senator from Wisconsin is correct in his assessment. This makes one wonder why GOP leadership didn’t take this into account before they started promoting it as a pro-growth plan. The majority of businesses in America will not qualify as true corporations and therefore will not receive the big tax breaks promised by its champions. In fact, many businesses will end up paying more under this plan.

Could it be that the GOP simply hoped nobody would call them out on this little detail? Yes. Though the number of businesses that qualify is lower than the number that don’t, the corporations that do qualify employ more total Americans. This means that when viewed through a lens of overall economic growth, it’s still a beneficial plan for most Americans in that it will increase the number of jobs available and make room for increased wages. Nevertheless, the millions of Americans who will be hurt by this are not an insignificant minority.

Can it be fixed? Probably not. To do so would mean reworking a huge chunk of the overall bill in order to keep it from being so massive of an overall revenue cut that the government would run into shortfalls. Of course, they could always cut expenses rather than passing a massive budget, but that doesn’t seem to be on the GOP’s agenda anymore. Perhaps it never was.

Continue Reading

Economy

Progressives’ new ‘state bank’ as the rocky road to serfdom

Published

on

Why does a bank robber rob banks?

“Because that’s where the money is.”

Or so goes the legendary response by the infamous bank robber Willie Sutton (who later denied ever saying it).

So why is the new progressive Governor-Elect of New Jersey (a former Obama Administration Ambassador to Germany and Goldman Sachs executive named Phil Murphy) proposing a “state bank”?

Why, maybe that’s because taxpayers are where the money is?

Can Gov.-Elect Murphy Make a Go of His Public Bank? – NJ Spotlight

http://www.njspotlight.com/stories/17/11/12/can-gov-elect-murphy-make-a-go-of-his-public-bank/Gov.-elect Phil Murphy often told a story on the campaign trail about how, as a relative newcomer to statewide politics, few people in New Jersey had even heard of him before he jumped into this year’s governor’s race. After his victory last week, the same could be said about one of Murphy’s core fiscal-policy proposals — a plan to launch a state-run public bank in New Jersey. The type of financial institution envisioned by Murphy would take state-government funds now deposited in accounts with large commercial banks, including those based overseas, and use them to back low-interest loans that would serve the public’s interest in New Jersey, including student debt, infrastructure investments, and small-business lending.

New Jersey already has the third-highest state and local taxes in the nation (behind only its neighbor New York and nearby Connecticut), thanks to a double whammy in an income tax and high property taxes generally credited with supporting the largesse of generous salaries and benefits for legions of public-sector employees.

One problem is where that state bank will get its money. The progressive Governor-Elect Murphy declares, “That’s our money!” Yet there is no thought to returning it to overtaxed taxpayers — not when there’s votes to buy and a money pot whose bottom is not yet visible. Because when Murphy and his progressive do-gooder allies use the first-person plural pronoun, they are referring to the government and not the people.

As politicians in the bluest of the blue states learn that promising endless “free” stuff, particularly when it’s paid for by political opponents and disfavored constituencies, is a recipe for getting elected, perhaps attacking liberals and progressives for wanting to raise taxes will no longer be a winning campaign argument. Not when many voters are net recipients of government monies, meaning, they simply don’t pay taxes. However, a “state bank” could cause numerous undesirable effects beyond taxes to infinity, beyond encouraging inflation.

Consider how banks work, and then consider the very premise of Murphy’s “state bank” is that it would step in where greedy conventional for-profit banks supposedly fail “to serve the community.” The suspicion here is that the state bank will be giving “low-interest” loans to people or businesses which otherwise are not getting loans on the terms they want, or at all.

When you seize the money earned and saved by the homeowner with an 800 FICO score, to underwrite a loan for his deadbeat neighbor in foreclosure who’s got a 520 FICO score, you aren’t being generous or compassionate. You are creating a moral hazard, and an immoral condition.

The second problem arises from a fundamental misunderstanding of — no, it is a fundamental disregard for — how a conventional bank works. A bank makes loans, because it makes money off the interest. It must put the capital to use. However, there’s the risk of nonpayment, of borrower defaults. Banks “fail” when they suffer too many nonperforming loans. No one wants to talk about this, because it involves acknowledging that the collateral is bad, that the bank made a mistake, that it issued a mortgage worth more than the underlying collateral to a bad credit risk on even worse terms (like the infamous no-income-no-assets-no-problem mortgages).

The lesson of the last decade’s housing bubble and nonperforming mortgages (of which many still are on the books of the largest lenders) apparently is going to be ignored for as long as there is a large supply of “marks” available to shoulder the eventual burden. So we can expect that the New Jersey state bank — and its copycats in other states, of that you can be certain — will soon start making bad lending decisions to borrowers of either questionable credit risk or otherwise connected to various “social justice” initiatives.

Then, when the loans start to “go bad” and go into default, you can expect the state bank to start playing “winners and losers” when deciding whose collateral to go after. Your car dealership may be seized, while the marijuana farm may be allowed forbearance on its defaulted loan. And just think what mischief can be made by politically-connected local prosecutors who can use their “discretion” to choose whom to investigate and prosecute, all to serve a progressive political agenda whose singular goal is to transform the society.

Taxpayers across America should shudder at the thought of government-run banks. Because those banks would be deploying our capital, raised from taxes and from government debt, often sold to foreign bond buyers like the Russians and Chinese. But without the nasty profit motive — which in plain English also amounts to old-fashioned accountability to savings account depositors like you and me — to ensure loan officers only make loans most likely to be repaid, the state bank is likely to accomplish only three things.

A new set of winners: tomorrow’s sellers of assets at inflated prices due to the availability of new credit for car loans, home loans, college loans and small business loans, often with no regard for the terms or creditworthiness of the borrower (and perhaps little to no expectation of repayment).

A new set of losers: Since the premise of a state bank is, we are told, to serve the poor and often first-generation immigrants or members of traditionally-underserved “minority” communities, we can expect the debt and wrecked credit scores from defaulting loans to be shouldered by these same groups. Tomorrow’s college students may be in greater debt than the current generation’s. More people may end up renting, as bad credit is no guarantee of affordability against inflated and rising home prices.

The result? Another generation headed for practical indentured servitude. The difference? This time, the lender will be the government.

A second set of repeat losers: These will be the owners of anything which can be indirectly collateralized to cover those loans. We’re talking property owners and the middle-class income producers. Future tax streams can — and in all likelihood must — be “securitized” to cover delinquent loans.

Again, the party able to place liens on stressed property owners for unpaid taxes? The government.

The rich white guy ex-Goldman Sachs may be able to escape checking his privilege while playing Robin Hood. The reality is that he’s playing the Pied Piper, but only as long as he plays the tune called by his decidely unmerry band of progressive, envious knaves, rejects and scalawags who now threaten to turn New Jersey today — and your state tomorrow — into a land of serfs beholden to the do-gooder lords of the manor.

Continue Reading

NOQ Report Daily

Advertisement

Facebook

Twitter

Advertisement

Trending

Copyright © 2017 NOQ Report.