House of Saud Quickly Going Broke?

In Saudi Arabia, 70% of the civilian population works for the government. This is a problem because the Saudi government is facing major financial strains due to low oil prices.

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The great Patrick Cockburn writes:

…today the cuts are for the first time hitting public sector workers who are Saudi citizens, 70 per cent of whom work for the government. So far the austerity is limited with lower bonuses and overtime payments and a 20 per cent reduction in the salaries of ministers, though those close to political power are unlikely to be in actual need.

There are political dangers in this move. In the oil states of the Middle East there is a trade-off between the spectacular wealth of a corrupt and autocratic elite and an extensive patronage system through which much of the rest of the native population plugs into oil revenues. Some $120 billion, or half of government spending, went on salaries, wages and allowances in 2015.

With a Saudi budget deficit of $100 billion in 2015, this haemorrhage of cash may not be sustainable but will also be difficult to rein in. Great construction companies like Oger and Binladen are having serious difficulties getting paid by the government with Oger alone reportedly owed $8 billion. South Asian construction workers, who once saw Saudi Arabia as an El Dorado, are going home after waiting for months for pay cheques that never come.

The woes of foreign workers, and even of the native public sector employees, are not necessarily going to destabilise an absolute monarchy like Saudi Arabia that mercilessly crushes dissent. The fall or destabilisation of the House of Saud has been forecast for decades with no real sign of the prediction coming true. What makes the present economic stresses more significant is that they come at a moment when Saudi political influence is visibly under strain in the region and the world.

When Saudi Arabia’s patronage system fails, there will be a major meltdown in the Kingdom — a bottled-up “Arab Spring” on the Arabian Peninsula.

Trudeau might be worried that the Canadian military-industrial complex will lose the evil House of Saud as one of its biggest customers.

— Read more at CounterPunch

 

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AIMCo Invests Alberta Tax Money in American Pipeline Companies

Today AIMCo announced that it is investing $500 million in an American company called Howard Energy Partners.

AIMCo is an Alberta crown corporation that manages money for government pensions and endowments. They have $90 billion under management. Virtually all of that money is derived from taxation.

What does Howard Energy Partners do?

Howard Energy Partners is an independent midstream energy company, owning and operating natural gas gathering and transportation pipelines, …

Alberta can’t get pipelines, in part because it is viciously opposed by US-backed opponents.

Meanwhile, the US continues building pipelines — lots of pipelines — and even has the pleasure of getting Alberta taxpayer money invested in its own pipeline companies.

The TPP Is a Bureaucratic Nightmare, Not Free Trade

After all the complaining about the Trans-Pacific Partnership, until now no one actually knew what it said.

The text of the agreement, negotiated in secret by state leaders with their armies of bureaucrats and lawyers, has finally been released.

Few critics who complained about the TPP will bother to read the agreement. It is a 5,544 page monstrosity of rules and regulations. Reading such a thing is so boring it may cause aneurysms.

But even a cursory examination reveals that despite all pretense suggesting otherwise, the TPP has nothing to do with free trade.

Free trade policies can be imposed unilaterally by any country at any time, without any complex multilateral agreements. This requires only a few things:

  • Legislatures must reduce or eliminate taxes on imports (tariffs) and import quotas.
  • Legislatures must reduce or eliminate subsidies and other support to their exporters (such as foreign aid requiring purchases of goods from domestic producers).
  • Governments must stop using customs agents to force citizens — at gunpoint, if necessary — to pay tax on goods they buy from other countries .

And that’s it.

In and of itself, a “free trade” document that exceeds 5,000 pages (more than twice as long as NAFTA!) must be regarded as an indicator of trade restrictions, regardless of what such an agreement is called .

Free trade policies can be summarized in less than a page: “Imports shall not be restricted. Exports shall not be restricted.” (You can make it a bit fancier if it’s really important to you that lawyers rack up a few more billable hours.)

The TPP, negotiated by the Canadian government in collaboration with the governments of the US, Mexico, Peru, Chile, Japan, Vietnam, Brunei, Singapore, Malaysia, New Zealand and Australia, is nothing less than the adoption of labyrinthine trade regulations and restrictions. Six other countries have expressed intent to join the TPP.

Rather than purely economic integration (which is good), the TPP represents political integration (which is bad) — harmonization of tax and regulatory structure across the member states and a decomposition of national sovereignty, especially in the realm of intellectual property. The TPP gives more power to those with the most political clout — which will never be Canadian citizens.

And the TPP allows unelected, power-hungry bureaucrats to bring lawsuits against Canadian companies if they ‘violate’ the agreement (the interpretation of which is not a simple matter).

Restrictions on trade imply only impoverishment. If Canada desires free trade, it should withdraw from the agreement and abolish all tariffs and quotas. Since exports pay for imports, this would enrich Canada and its trading partners.

And amazingly enough, this doesn’t require 5,000 pages of maze-like rules and regulations.

What the Middle East Really Needs

The West likes to say it stands with the Egyptians and the Syrians and so forth in their “fight for democracy.”

The conventional wisdom which says the Middle East needs more “democracy” is, like a lot of conventional wisdom, nothing but nonsense.

Democracy is not freedom.

What the 380 million Arabs need are property rights, not the right to cast a useless ballot every four or so years. If America and Europe insisted on only this, it would make millions of Arabs who hate us today love us overnight.

Read more at Taki’s Magazine

European Union Wants to Tax Heavy Crude from Oil Sands

The European Union is falling apart. It is desperate for money. The bureaucrats in Brussels will tax anything they can.

Now the EU wants to modify its fuel quality directives, so that refiners who use oil that is “too dirty” (according to bureaucrats) must pay a tax.

Joe Oliver, the Natural Resource Minister of Canada, thinks this amounts to specifically targeted tax on Canadian oil-sands product. He says Canada will sue the EU at the World Trade Organization if they implement the changes, because the oil-sands crude isn’t any “dirtier” than many other crude imports which are not subject to the tax.

Firstly, let me note the hypocrisy when an official from Harper’s government whines about tariffs, while Harper’s government loves tariffs. “Oh yeah, taxing our stuff is bad; taxing your stuff is okay.” Typical government knavery.

On a more general level, yes the EU fuel quality directives and its associated penalties are bad for the economy. They are bad for Europe and bad for Canada. They reduce production of the taxed good and divert resources to government approved fuels. The government is in principle incapable of knowing to what extent a given quality of oil should be used.

Oil sands production is “dirty”, sure. The industry has a lot of flaws. Really, the CO2 emissions aren’t even a big deal, although that’s what everyone focuses on. But the environmental situation is still very screwed up, because Alberta is essentially a mini-petro-state. Property rights and laws of tort can rarely protect the environment because virtually all the pollution takes place on government land.

Even so, that is true of most oil. There is very little “clean” oil where you just turn on the tap and get light, sweet, succulent crude with minimal impact on the earth. Most of it is heavy and sour and difficult to get. Due to inept government regulation and interference with property rights, its production is environmentally problematic. So the European tax seems to be not just destructive, but arbitrary.

If the WTO agrees with Canada that the fuel directives constitutes an unjustified tax, they can’t force them to change it. It just means the Canadian government can put their own tariffs up to retaliate. That is bad for everyone. It would be better to just accept one dumb tax over which one has no controlnthan implement another dumb tax to go along with it. If the Canadian oil producer finds it harder to sell its oil, that’s already bad enough. Why should the Canadian consumer also be punished? It makes no sense, and only a politician or a shyster would advocate this.

Read more at Market Wire

Australia to Join the World’s Orgy of Currency Debasement?

Australia’s mining boom is fading. Demand from China is slipping. The economy is going to contract. Yet their dollar is strengthening.

Central bankers are Keynesian-mercantilists that get bent out of shape when their own currencies are “too strong.” Especially when the economy is threatening to slow down. The bureaucrats at the RBA are no different.

What are they going to do? Try to hold down the price of the Australian dollar. They will join Europe, Japan, China, America, and the Swiss in the frenzy of currency debasement.

This is… a bad idea. Yet it is to be expected, as are the negative consequences it will create.

It might be best to start trading your Aussie dollars for something better. For other currencies, few good choices exist. I used to like the yen before Abenomics. Now I like the Singapore dollar.

Hardly any central bank  can resist racing to the bottom. I don’t think Australia’s can resist.

— Continue reading at Sunday Morning Herald —

Mini-Review: CBC Documentary “The Secret World of Gold”

On April 18, CBC aired a documentary called “The Secret World of Gold.” Though flawed, the program was interesting and covered many issues.

Here are some things talked about in the documentary:

  • The Bank of Canada has sold almost all our country’s gold over the last 30 years.
  • Underwater treasure hunts for gold.
  • Secret government deals to control gold.
  • Futures market manipulation (this was by far the weakest part of the show — the futures market is not explained and the case made for manipulation is very thin).
  • Buildings with gold windows.
  • Wars for gold.
  • How Chavez got all Venezuela’s gold back from the US and Europe
  • Gold shifting to the East from the West
  • Death gold from Nazi extermination camps (some of which was used to fill Hitler’s teeth — WTF).
  • Allocation of central bank gold holdings — who owns the gold? Is the gold even there?

Think about taking 45 minutes out of your weekend to check it out. You can watch it here for free, the only drawback is there are a few dumb CBC ads.

UPDATE: You no longer need to watch it at CBC. The copyright police got to “The Secret World of Gold” on YouTube, so it looks like you have to watch on CBC…

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