Another Petro-State Throws In The Towel: The Last Nail In The Petrodollar Coffin

Tyler Durden's picture

Submitted by  Eugen von Böhm-Bawerk  of Bawerk.net

Another Petro-State Throws In The Towel - The Last Nail In The Petrodollar coffin

Source: Norwegian Ministry of Finance, Bawerk.net

According to the proposed budget submitted by the current ‘blue-blue’ government the Norwegian deficit will reach another record high in 2016. Mainland taxes are expected to bring in 1,008 billion NOKs, while expenditures are estimated at 1,215 billion NOKs. In other words, 2016 will be another year of record mainland deficit which need to be covered by the offshore sector and its 6,900 bn NOK sovereign wealth fund (SWF).

While record mainland deficits covered by the petroleum sector is nothing new in Norwegian budget history, on the contrary it is closer to the norm, the 2016 budget did raise some eyebrows. The other side of the ledger, the net inflow to the SWF from activities in the North Sea will, again according to budget, be lower than the required amount to cover the deficit. This has never happened before and is testimony of the sea change occurring in the world of petrodollar recycling. Interestingly enough, the need to liquidate SWF holdings is helping to create further deflation in the Eurodollar system in a self-reinforcing loop.

As Eurodollar liquidity dries up and consequently pushes up the price of actual dollar (note, Eurodollars are international claims to domestic US dollars but for which no such dollars actual exists) the problem for petro-states compounds. One way this manifest itself is through international purchasing power of prior savings. A SWF as the Norwegian was created through a surplus of exports over imports meaning it can only be utilized through future imports over exports. When the Norwegians look at their wealth expressed in Norwegian kroner it all looks fine, but expressed in dollars the SWF has shrunk considerably in size. Thus, the surfeit imports expected by the Norwegian populace cannot be met. Norway rode high on a wave of liquidity which pushed up commodity currencies, leading Norwegians to consume more imported goods today, without realizing they were tapping into the principal of their future. When the tide turns the gross misconception is revealed.

Source: Norwegian Ministry of Finance, Central Bank of Norway, Bawerk.net

The Government claims it is all fine though. The current down-cycle will, according to them, end early 2016 so despite a 2 percentage point reduction in corporate- and personal income tax, mainland tax revenues are expected to increase 1.9 per cent.  That is obviously a pipedream, just as the expected 17.9 per cent increase in interest and dividend income which will make sure the SWF continue to grow at a healthy pace despite the massive mainland deficit.

Assuming oil prices remain low, mainland tax revenue will plummet as they are very much a function of what goes on offshore, while expenditure will rise as they do in all welfare states during a down cycle.

If we are right, a global recession is imminent, meaning the expected increase in dividend income will never materialize.

In other words, the drawdown of the SWF will exceed its inflow even after adding financial income flows. The last remnant of the petro-dollar will thus die in 2016.

For a country 100 per cent dependent on continued leverage in the Eurodollar system the absolutely best case scenario is for the US economy to grow just slowly enough for international monetary policy to again realign; reducing the value of the USD through continued ZIRP in the US.

Robust growth in the US will prompt Yellen to hike, spiking the dollar (as Eurodollar claims scramble for actual dollars) while paradoxically a recession in the US will lead to the exact same outcome. The goldilocks scenario of 1-2 per cent growth is the best that the Norwegian government can hope for. It will minimize the gap between the lies and propaganda spewed out by the Ministry of Finance and reality.

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Latina Lover's picture

Death to the Fed Reserve! Time for a currency reset. Down with the Banksters, or rather, hang them high!

Deathrips's picture

Fiat money is neofuedalism...kill the fiat!

 

Long Physical!!

 

RIPS

macholatte's picture

 

Fundamental Transformation

Change You Better Believe In

 

GET USED TO IT.

Clockwork Orange's picture

I just hope somebody has The Courage to Act.

Pinto Currency's picture

 

 

Norway better have some of their SWF investments in gold bullion.

The paper is going to go whoof in the fiat debt system implosion.

deagel.com is projecting  a 50% population reduction in Norway over the next 10 years.

http://www.deagel.com/country/forecast.aspx?pag=2&sort=GDP&ord=DESC

Tells me they are holding paper.

McCormick No. 9's picture

Norway- like Saudi Arabia, the climate and ecology allow for only a subsistence economy, if humans try to live according to what the land provides. In other words, for thousands of years, Norwegians were impoverished and backwards, but free. The oil will only last so long, then, its back to fishing and farming and viking for a living.

uhland62's picture

They are taking them in as if they could print billions for these asylum seekers. Soon the empty bank towers in Frankfurt will house migrants, as they call them, but only if they can separate the ethnicities and religions. The many police hours and injuries are very expensive. Then comes the other cost, rent and once they're out, the usual damage that these people cause. The banks will want the damages paid for and if the government takes 'ownership' of these migrants, that'll be very costly. When living in ivory towers, people make wrong decisions.

Nenad's picture
Obama will not finish his second term! Banned independent documentary reveals the truth. This will scare millions! Current Events Linked to Ancient Biblical Prophecy! http://motivationdose.com/is-america-babylon/
HowdyDoody's picture

Sweden's immigration policy is controlled by whom? Who promotes Swedish mulitculturalism? How influential is the American Israeli Barbara Spectre?

Macon Richardson's picture

Let's go viking now.

Everybody's leaning how.

Come on a safari with me.

Renfield's picture

<<deagel.com is projecting  a 50% population reduction in Norway over the next 10 years. http://www.deagel.com/country/forecast.aspx?pag=2&sort=GDP&ord=DESC >>

Wow. What a page.

Australia is forecast to reduce from 22,510,000 to 8,882,220, 40% of current. Canada from 34,830,000 to 24,594,680, 70% of current. UK from 63,740,000 to 22,570,600, 65% of current. US from 318,890,000 to 64,879,000, 20% of current. Hell of a reduction rate for one decade. Russia fares relatively lightly, forecast from 142,470,000 to 136,979,80, 90% of current.

The reasons suggested include the following:

<<The key element to understand the process that the USA will enter in the upcoming decade is migration. In the past, specially in the 20th century, the key factor that allowed the USA to rise to its colossus status was immigration with the benefits of a demographic expansion supporting the credit expansion and the brain drain from the rest of the world benefiting the States. The collapse of the Western financial system will wipe out the standard of living of its population while ending ponzi schemes such as the stock exchange and the pension funds. The population will be hit so badly by a full array of bubbles and ponzi schemes that the migration engine will start to work in reverse accelerating itself due to ripple effects thus leading to the demise of the States. This unseen situation for the States will develop itself in a cascade pattern with unprecedented and devastating effects for the economy. Jobs offshoring will surely end with many American Corporations relocating overseas thus becoming foreign Corporations!!!! We see a significant part of the American population migrating to Latin America and Asia while migration to Europe - suffering a similar illness - won't be relevant. Nevertheless the death toll will be horrible... When pensioners see their retirement disappear in front of their eyes and there are no servicing jobs you can imagine what is going to happen next. At least younger people can migrate. Never in human history were so many elders among the population. In past centuries people were lucky to get to their 30s or 40s. The American downfall is set to be far worse than the Soviet Union's one. A confluence of crisis with a devastating result.>>

Gloom 'n' doom? Well, they're a military site. Pessimism may be their professional outlook, but I expect Deagle's done a little homework on his subject. Who is Dr. Edwin A. Deagle?

<<Portrait of DoD Dr. Edwin A. Deagle, Jr., Assistant to the Secretary of Defense and the Deputy Secretary of Defense, (U.S. Army photo by Mr. Scott Davis) (Released) (PC-192312), 6/29/1994>>

https://research.archives.gov/id/6671943

<<Edwin A. Deagle AWARDS AND CITATIONS: Legion of Merit
Awarded for actions during the Vietnam War
The President of the United States of America, authorized by Act of Congress, 20 July 1942, takes pleasure in presenting a Second Bronze Oak Leaf Cluster in lieu of a Third Award of the Legion of Merit to Colonel (Transportation Corps) Edwin A. Deagle, United States Army, for exceptionally meritorious conduct in the performance of outstanding services to the Government of the United States from July 1961 to July 1964.
General Orders: Department of the Army, General Orders No. 28 (August 24, 1964)
Action Date: July 1961 - July 1964
Service: Army
Rank: Colonel>>

https://research.archives.gov/id/6671943

He may be blowing smoke or have an agenda, but he's not your average crank and may know something of what he's talking about. I wouldn't dismiss his forecasts.

BurningBetty's picture

All Norwegian gold sold here...no gold in the vaults. Our super-insanely-educated-and-intelligent-phds figured gold in the vaults was just waste of space and was costing upkeep. So they sold all the gold for like $400 an ounce. They kept 1kg bar for admiration purposes, so people can admire an "outdated" pet rock.

GoinFawr's picture

+1 Now that could be a lynchpin yet

jeff montanye's picture

what i don't get is "paradoxically a recession in the US will lead to the exact same outcome".  indeed paradoxically.  how about some exigesis on this?  rate hikes/dollar strength in recession?

FireBrander's picture

$24 Billion deficit? Hardly worth mentioning.

caustixoid's picture

It's pretty big when you only have 5 million people.  I mean that's a 20% deficit right?  Don't think the Greeks managed that in a single year...

GoinFawr's picture

Oh indeud, another 3 decades or so of that and Norway might even begin carrying a national debt too.

Deathrips's picture

Promises from liars are bad enough..when they form a tidal wave and hit you like the great trash avalance in idiocracy...its not good.

 

RIPS

Freddie's picture

I guess those Muslims that the left ZWO flooded Norway with are getting expensive.   That young man Anders Brevik who went on a rampage had said oslo had been a nice town but now Norway was festering with third worlders.  Thanks to the ZWO,  Note: I am not supporting what he did.  He was one of the few people who have spoken out on the "transformation" that occurred in Norway.

Nostradumbass's picture

Here is someone who has been yelling from the rooftops about the invasion into Europe and Scandinavia:

http://www.redicecreations.com/

847328_3527's picture

Even the little town of Bergen is flooded with gangs of angry Muzzies roaming the streets at night. Used to be a pleasant place-------no more.

jcdenton's picture

Currency reset coming ..

So says Jim Sinclair, Bill Holter, Bix Weir, et al ..

Best source IMVHO would be Presidential Totten Doctrine (1875) Secret Agent, operating as we converse under EO 12333, Operation Stillpoint. He kept Soviet generals from pushing buttons, by buying their rocket fuel between '85 and '90. And actually paying KGB and GRU officers (among them GRU Lt. Col. Vladimir Putin) to guard such fuel stocks, and shoot to kill any rogue general from utilizing them against NATO forces.

Putin was there in '90, witnessing the signing of the General Agreement on Cooperation. This prevented a hot WW3/4 and saved many Russians and other Soviet subjects from starving and freezing to death in the winter months.

http://eagleonetowanta.com/wp-content/uploads/2015/03/General-Agreement-...

Same Totten Doctrine Secret Agent can do the same for America and Americans if they only knew about him, and openly prayed for his assistance ..

https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp

runswithscissors's picture

its always the "last nail" but the petrodollar marches on...DEATH TO THE PETRODOLLAR! 

Lucky Leprachaun's picture

Right on both counts.  The petrodollar must be perforated with nails at this stage.

FireBrander's picture

4200 people to run Twitter? WTF? That is insane.

jeff montanye's picture

thanks for the link.

what i liked: "the Clyde plant is the largest washing-machine factory in the world. . . . About 80-100 jobs will be created in Ohio."

manufacturing is not what is once was from the standpoint of the working person.

robert robot on the other hand . . . .

Tom Servo's picture

4200 FTE's, plus a TON of agencies like www.huhcorp.com

 

Iam_Silverman's picture

""Whirlpool Moves Production Of Washers To Ohio From Mexico" "

While most would think that this is in response to global pressures or the cost of transportation, the actual reason is more surprising.  The Whirlpool executives are actually being proactive! (I know, what a shocker, huh?).  They have seen the unwillingness of the current administration to stem the tide of illegal immigration, and figured in only a couple of years all of their workers in Mexico would be in the US anyway.  So, no training for new employees required.  Makes great sense, to me......

knukles's picture

Why would something like Twitter even need 4200 employees?  Seriously.

NoPension's picture

Because.

Or...

To justify the market cap?

Friends?

Oh regional Indian's picture

The FANG's have a whole lot of people doing nothing, or staring at their navels.

This is the Bankster way of keeping enough people on a sorta dole, so they can spend.

Were it not for these virtual wonders and their virtual employees, everything would be whooshing down the drain.

Well known fact in India, a ton of outsourcing companies have been keeping people with full pay on the bench for upto 18 months....

Which for-profit entity would do such madness unless there was an ulterior motive.

Now, everyone with an app idea and the ability to fog a mirror is getting funded....

Silly CON valley 3.0 or whatever...

swmnguy's picture

I would have thought they had a really bloated staff of, maybe, 200.  And a bunch of marketing contractors.

Killdo's picture

San Francisco is getting cleaner: a few months ago while walking by Twitter HQ on Market street I saw only one man taking a shit right in front of their entrance. At 11am

Hulk's picture

1 to manage the server and 4199 to spell check !!!

Freddie's picture

I thought maybe they sit around postuing content on twitter to fool the global sheep.

Maybe they can tweet about the #bumstakingadumpinsanfran

Secret Weapon's picture

If they have great tits who cares?

Tinky's picture

I could explain, but it would require 143 characters.

Sorry.

TSA gropee's picture

4000 chiefs, and 200 indians? In this strange world, who really knows...

shovelhead's picture

Someone has to drink all that Green Mtn. Coffee.

Blano's picture

Somebody has to censor those evil Christians and conservatives.  Doesn't happen all by itself.

BurningBetty's picture

 

That's easy. It's because they need to filter who tweets what to NSA.

Lucky Leprachaun's picture

Bloody hell, I could operate Twitter with about 50 people.

Slomotrainwreck's picture

OT Twiiter is hitting the shitter:

 

+1 for the shitter