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Saudi Petrodollar Reserves Fall To 32 Month Low Amid Crude Carnage, Proxy Wars, Budget Bleed
Two weeks after Beijing shifted to a new currency regime in an effort to bring about a managed yuan devaluation, we explained why it really all comes down to the death of the petrodollar. When China began to burn through its FX reserves in a frantic attempt to put the deval genie back in the bottle, the world suddenly awoke to what it means when emerging markets begin burning through their rainy day funds.
Of course the reserve burn had been unfolding for quite sometime. That is, China’s epic UST liquidation was simply the most dramatic example of a dynamic that was already at play. As Deutsche Bank noted, the “Great Accumulation” ended months ago, as the world’s emerging economies began to dip into their USD war chests to defend against commodity currency carnage and the attendant capital outflows.
Nowhere is this more apparent than in Saudi Arabia, where Riyadh has been forced to tap the SAMA piggy bank amid the largely self inflicted pain from slumping crude, the war in Yemen, and the necessity of maintaining social order by preserving the lifestyle of everyday Saudis. Now, as the fiscal deficit balloons to 20% of GDP and falling crude prices put the kingdom on the path to a current account nightmare, reserves have fallen to their lowest levels in 32 months. Here’s Bloomberg:
Saudi Arabia’s net foreign assets fell to the lowest level in more than two years in August and demand for loans among private businesses slowed, as the kingdom grappled with oil prices below $50 a barrel.
Falling for a seventh month in a row, net foreign assets held by the central bank dropped to $654.5 billion, the lowest since February 2013. That compares with $661 billion in July, the Saudi Arabian Monetary Agency said in its monthly report. Credit to private businesses grew 8.4 percent, the slowest rate since 2011.
The biggest Arab economy is showing signs of strain after oil prices tumbled about 50 percent over the past 12 months, pushing authorities to search for savings and sell bonds for the first time since 2007. The government, so far, has been short on specifics on how it will reduce spending, though planners are said to be considering measures long viewed as off-limits or unnecessary, including phasing out fuel subsidies and investing in renewable energy.
The uncertainty may slow demand for loans for the rest of the year, Dima Jardaneh, Dubai-based senior economist at investment bank EFG-Hermes, said by phone. “Until there is more clarity on issues like government spending cuts, there will be a lot of wait-and-see attitude from the private sector.”
Importantly, any meaningful intervention on the part of Riyadh in Syria will only serve to increase the SAMA strain.
For those interested in getting a read on where things are headed both in terms of global monetary policy and geopolitics, watch the Saudi FX reserve figure closely as it not only serves as a guide to how long the kingdom can hold out in the literal war against the Houthis in Yemen and the figurative war against the US shale complex, but also proxies (along with Chinese reserves of course) for the extent to which the quantitative tightening thesis is playing out in EM.
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Sucks to be the Saudi Boy Buggerers and head choppers. I hope the Houthi's drown them in whats left of their oil.
drowned ? ya got to be joking, lets start with this.
http://edition.cnn.com/2015/09/23/middleeast/saudi-arabia-ali-al-nimr-ex...
NBFD… just go drop another few million dollars worth of U.S. high explosives on some Yemini wedding parties and everything will be just fine.
We will blow up some charity clinics in Afghanistan to help things along.
I agree with you.
Let me voice my suspicion, the Saudis are preparing for pivot to China, so they are now getting rid of the US bills and bonds. And when they reach working zero, they will say: And from now we will take RMB as payment for our oil too. :)
No longer impressed with the Saudis. Immense wealth, bad decisions. They are just following the roadmap of every other country's dead-ended ideas. The latest boondoggle: Financial stress? Why go to war, of course!
Interesting read on the internal decay in the House of Saud.
http://www.middleeasteye.net/columns/collapse-saudi-arabia-inevitable-18...
indeed.........which explains this..........
“I’ll take that one,” said a Saudi Arabian royal, pointing down from a helicopter while with his realtor on an aerial tour over Beverly Hills’ tony Trousdale Estates. He was picking out a massive 11,000-square-foot estate (complete with pool, picturesque views and two acres of property) — before stepping one foot inside the off-market listing, which was then home to Mary Hart and Burt Sugarman. Instead, according to property records, he paid north of $27 million from the sky to get the couple, who had lived there 25 years, to move out in three weeks so he and his family could celebrate Ramadan in their new digs (once owned by Elizabeth Taylor), says a source close to the owners.''
http://www.unz.com/isteve/oil-arabs-would-like-to-help-their-syrian-bret...
The sooner the corrupt, criminal Saudis go bankrupt, the better it is for this world.
How many have the Saudis killed in Yemen? The free and fair press of the West has completely ignored that war.
The UN estimates that approximately 20 million people, or 80 percent of the country’s population, are in need of some form of humanitarian aid. Approximately 1.8 million people have been displaced from their homes by the assault, with tens of thousands fleeing the country for refugee camps in Somalia and Djibouti.
Wow, in 10 years they will be broke, if nothing changes.
Goodbye Petrodollar, we won't miss you.
Eat you fucking heart out Kissinger.
You mean that reptile actually has a heart?
this is going to be fun.
No differerent from any other hillbillies around the world. The one's in Saudi just happen to come from the desert.
Anyway, give a hillbilly mega money and it's just a matter of time before there isn't any left.
I don't understand it. they are cutting their own throats at this point in the oil war. They have to caputialte soon or their kingdom burns.
Also, this is bad for gold, right?
At some point they have to start selling these things on the open market: http://fofoa.blogspot.com/2010/03/us-mints-gold-disks-for-oil-payments-t...
and their fucking 24 ct gold toilets too.
The Saudis are very good at cutting throats.
How sweet it is to see these bloated Saudi parasites sweat a little.
http://edition.cnn.com/2015/10/05/middleeast/syria-russia-airstrikes/ind...
Turkey said it intercepted a Russian jet that violated its airspace over the weekend.
The country called in the Russian ambassador and lodged a strong condemnation of the violation, Turkey's foreign ministry said in a statement Monday.
"The Russian Federation will be responsible for any undesired incident that may occur," the ministry warned.
The incident occurred Saturday in the Yayladagi region of Turkey's southern Hatay province.
"The Russian aircraft exited Turkish airspace into Syria after it was intercepted by two F-16s from the Turkish air force, which were conducting patrols in the region."