I constantly see articles about economics that are meaningless. Here is the first paragraph of an article in the UK Daily Mail, dated 5 April 2016.
Let’s see if you can spot why it’s meaningless.
Saudi Arabia has unveiled its austerity plans as the nation prepares to cope with tumbling oil prices – but insists it will not start taxing people’s incomes. Deputy Crown Prince Mohammed bin Salman said his proposals would raise $100billion a year by 2020 as part of moves to balance the books. The amount of non-oil related income would triple through subsidy cuts and new levies, he revealed. It comes days after it emerged that the kingdom was preparing for the end of the oil age be creating a $2 trillion investment fund which is set to be ‘the largest on earth’.
Why is this meaningless? I’ll give you a second to think about it…
It’s meaningless because the article does not clarify what currency it is talking about. The Saudi government creates its own currency out of thin air (the Saudi riyal) — but because the Saudis have a lot of oil, they have become lazy, and therefore are not self-sufficient. They rely on imports for just about everything, because they have had enough oil to get dollars with which to buy those imports. But when oil prices started falling, the Saudis eventually began importing more things (in total US dollar value) than the oil they were exporting. They entered the red zone…
Since October 2014 when the Saudis entered the red zone, they have been using up their foreign currency reserves in order to buy imports.
So when the article says that “The deputy crown prince wants to raise $100 billion a year by 2020,” does that mean $100 billion a year in US dollars, or in Saudi riyals, or what? If it’s Saudi riyals, then the Saudi government can create them out of thin air. If it’s US dollars (or any other foreign currency) then the Saudis will have to climb back out of the red zone. Because the article does not clarify this question, it seems reasonable at first glance, but it is actually meaningless.
“He wants to raise $100 billion a year.”
In what? Dollars? Riyals? Peanuts? Monopoly money?
The amount of non-oil related income would triple through subsidy cuts and new levies, he revealed.
Why subsidy cuts and levies? Does the Saudi government need more riyals? No, the government creates riyals out of thin air. The purpose of subsidy cuts and levies is to reduce the amount of riyals that average Saudis have to spend on consumer goods. Less demand for consumer goods means less demand for imports. Less demand for imports means less demand for dollars (or for euros or whatever) with which to buy consumer gods. Less demand for external currencies (such as dollars) means less demand that the Saudi government burn through its foreign currency reserves.
The article intentionally does not clarify any of this, in order to tell readers, “See???? Even the Saudis recognize that austerity is necessary!”
The U.K. and Saudi Arabia are not comparable. The Saudis are in trouble because they entered the red zone. The U.K., by contrast, is always in the red zone. This is not a problem for the U.K., since pounds sterling are accepted worldwide. If you go to Laos or Kazakhstan, or wherever, you can’t spend your pounds sterling, but you can find a place that will convert your pounds sterling into the local currency. Not so with Saudi riyals.
In short, the article is trying to justify gratuitous austerity in the U.K. “See? Even the Saudis recognize that austerity is necessary!”
In the U.K., austerity is not necessary. Its sole purpose is to widen the gap between the rich and the rest.
Back to the article…
Bloomberg reports that non-oil income went up more than a third to $44billion last year.
What’s that supposed to mean? What is “non-oil income”? Articles like this throw out meaningless terms, and if you don’t understand them, you must be stupid. Let the “experts” handle the finances. Your job is to shut up and submit to poverty.
It emerged that the kingdom was preparing for the end of the oil age by creating a $2 trillion investment fund which is set to be ‘the largest on earth’. Last week he said a Public Investment Fund (PIF) will eventually be large enough to buy Google, Apple, Microsoft, and Berkshire Hathaway Inc. with money to spare.
This is pathetic. It is desperate Saudi braggadocio. The Saudi government knows that their economy is in very serious trouble. To conceal this trouble, they are bragging that, “We can buy Google, Apple, Microsoft and Warren Buffet with money to spare!”
Nonsense. That would require mountains of foreign cash. The Saudis are weak. They have carpet-bombed Yemen round the clock for an entire year, and still they can’t defeat a rag-tag resistance force. When the oil runs out, Saudi Arabia will instantly revert to one of the most backward and primitive nations on earth.
They have already gone mad. Their refusal to cut oil production caused an oil glut, which caused a price plunge, which caused Saudi Arabia to fall into the red zone. Now, instead of reducing their oil exports (so that oil prices will rise again) the Saudis keep saying they will only reduce their oil exports if other producers like Iran reduce their exports. That’s insane. Saudi politicians are telling their own citizenry, “Don’t blame us for the fall in oil process. No one else wants to reduce their output. It’s their fault.” This despite the fact that the Saudis are the world’s biggest oil exporters (for now).
The Western Empire knows all this. The Empire is temporarily allied with the Saudis, and will discard them when the oil runs out. Saudi Arabia will be useless. No oil, no native industry; nothing but empty sand.
It is nearly 80 years since the first oil was discovered in Saudi Arabia but, with crude prices plummeting worldwide, the nation plans to shake its dependence on the oil market. One of the first steps will be for Saudi Arabia to sell shares in Aramco’s parent company, which will transform the oil giant into an ‘industrial conglomerate’.
More lies. The Saudis want to sell Aramco (that is, privatize Aramco) not to create an “industrial conglomerate,” but to get foreign cash so the Saudis can buy imports. They are desperate.
Prince Mohammed said he doesn’t believe the kingdom has a ‘real problem’ when it comes to low oil prices, despite the fact the price of a barrel of crude oil has more than halved.
More braggadocio. The only thing the Saudis have is oil. And yet they say that although the prices of oil have dropped by 75%, they have no problem. Nonsense! They’re in the red zone.
Iran is in much better shape, despite the fall in oil prices, because years of sanctions by the Empire have forced Iran to become self-sufficient in many ways. Iran makes its own cars, appliances, weapons, and so on.
By contrast, the Saudis must import everything. They can’t even go to the restroom without help from their Filipino and Bangladeshi slaves. They’re so fat and lazy that they have a rampant epidemic in Type 2 diabetes.
My main point, however, is that most articles about economics are either wrong, or else they are totally meaningless.
I said it before, and I’ll say it again: if your economics discourse is not clear enough for a child to understand, then you are a bullshitter. You are a liar or a fool, or both.