Weekend Wars: OPEC vs. The Inevitable
We spend a lot of time debating the welfare state here on WSO. Though the financial community is naturally geared to lean to the right on fiscal issues, we get a good bit of sentiment leaning the other way, as well. I myself often side with those who rabidly oppose any free lunches for anyone. But I have to say that if in making an illustrative equation "me" is to represent the OPEC nations and if "King Kong" is to represent the United States. Well then, KING KONG ain't got shit on ME.
$1 Trillion. That's right, 1T in 1Y. That is how much the combined OPEC nation kings, mullahs and oligarchs will be spending this year on welfare state politics. Whether it is $43 billion on "poor Saudis" and the kingdom's religious institutions. Free food for all Kuwaitis for a year. Or a 34% wage increase for Algerian civil servants, all of MENA now shows signs of bending to the inevitability brought about by the Arab Spring of 2011.
Imagine if the preceding occurred in the United States, people would go bat shit. I could definitely see our beloved monkeys slamming down their pitch books, making makeshift maces out of their Hermes ties and Christofle paper weights and finally going to war with SoHo and every BNT scumbag they see along the way. Those hipster fucktards occupying Wall Street wouldn't know what hit them.
But alas, a dark cloud looms over the heads of my dear sheiks and would be caliphs...
Unlike past booms, when Abu Dhabi bought English soccer club Manchester City and Qatar acquired a stake in luxury carmaker Porsche SE, Gulf nations pledged $150 billion in additional spending this year on their citizens. They will need to keep U.S. benchmark West Texas Intermediate crude oil at more than $80 a barrel to afford their promises.
Snicker, snicker. Maybe it is not very funny to peak oil heads, energy bulls or the weekly visitors of the Etihad Stadium, but it sure is to me. Anyone who looks at global affairs as chess rather than checkers is likely on board with me. Though regime change is likely the slowest political process known to man, it's economic effects are startling and travel at light speed when they eventually occur.
Though this news may seem like "investing in your own" to some, I see it for what it is... the first waving of the white flag. The initial appeasement attempt which always fails in the long run and leaves the penthouse falling because of its faulty approach to fixing a rotting foundation. I cannot wait to see the effects of these sort of policies in a decade or two. If these guys really wanted a shot at long term survival, they'd buy up all the alternative energy firms on earth... and shut them down.
buying all futures bitchez
smart move, by doing this they might be keeping oil above $80 but more importantly BELOW $120.
Great post. When you limit freedom you need to take care of your people. Eventually the base needs aren't enough and the desire for freedom wins. The Middle East is trying to keep the party going for a little longer, but in the end, the people will want a voice and more than a free meal and a subsidized education.
Long oil forever.
Without the oil revenue, there would be very little wealth in these nations. Instead of using that wealth in a constructive way, aka good governance, the elites of the region used it to enrich only themselves. Everyone else was a total afterthought, if they were thought of at all.
This is a naturally frustrating situation for the remaining 99.999% of the population. Instead of addressing these greivances head on like would be done here, the ruling elite (royal families and dictators) did primarily two things: A) strenghten the totalitarian controls (this also lends itself to other, primarily communist, totalitarian political alliances) B) exploit temporary measures to defuse the frustration of the citizens (funding madrasas to keep the tribal / clerical leaders on board, blaming western powers for their problems)
The resource curse is nothing more than a tight fisted group of tyrants who hoard resources. To date, very few political structures exist that both A) revolve around a central source of wealth and B) meet the definition of 'good governance'
Good governance: what works best for everyone. It's not so much a proscribed ideology or pseudo philosophy, but a general attitude of making the system work best, for the most people, in the best way. We more or less have it, they don't yet.
Planning to delve into this point a bit deeper this week, but I think it is the defining issue of ALL the problems coming out of/going into the region. Never ceases to amaze me how little it is discussed in the media. Then again if you know how media funding works, it shouldn't be the least bit of a surprise.
The Middle East needs its Thomas Jefferson.
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