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by adventured
2450 days ago
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The Saudis are not a minor trading partner or minor player in the global economy though. For decades they've been the cornerstone of the global fossil fuel economy and the controlling member of OPEC. While the US has been able to heavily shift off of Saudi oil more recently, now the Chinese are picking up that supply and are becoming increasingly dependent on the Saudis. That's a remarkable position of power & influence across multiple decades, to have superpowers vested in your stability and well-being (the well-being of the House of Saud specifically). Very few countries have ever had the sort of oil-derived slush fund (which enabled the Wahhabism push) that the Saudis have had since the early 1970s. However, for the Saudis those days are ending, as their population has skyrocketed and their oil output has not kept up (and can't), so they're under persistent budget crunch and their domestic population is increasingly growing restless as stagnation (more realistically they're seeing rapidly declining average standards of living) and unemployment become serious problems. Saudi Arabia's population has doubled since 1990, while their private industry has gone nowhere and their oil output has been near the ceiling. All you have to do is run that population growth forward another 20-30 years and it's obvious what's about to happen. The loose funding capabilities of the Saudis will decline markedly in the coming decades. |
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Of course it's not nothing. Imagine we do things some might consider a bit dubious. Perhaps accepting the running of a deficit in the trillions of dollars, or injecting trillions of dollars into the economy and calling the resultant price inflation growth. The natural consequences of these sort of actions are things such as inflation and a weakened dollar on the international scene.
But now here's the interesting thing. Imagine we do create inflation or weaken the dollar and so there is a surplus of USD in circulation and things start to increase in price. And now imagine a country wants to go buy oil from Saudi Arabia ( though now a days, it's not just Saudi Arabia but the majority of oil producing nations ). The first thing they need to do is accumulate the USD. And since they're getting less oil for the same USD (due to said inflation and/or a weakened USD) they need to take even more USD out of circulation than usual. They then go buy their oil. Saudi Arabia then ends up using that USD to secretly buy US treasuries. That money is now back in the hands of the government and out of circulation and, like magic, the inflation and/or weakening of the dollar starts to revert.
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This was an extremely clever strategy. This is why things like China and/or Russia increasingly becoming buddy buddy with Saudi Arabia is such a big deal. It's also why Saudi Arabia can get away with practically, if not literally, anything (so long as they keep on the petrodollar agreement). But the petrodollar also ended up creating a bit of a funny relationship. We thought we were using Saudi Arabia, but ultimately we ended up dependent on them as our economic behavior took them for a given. So we now have the nation with the largest military force in world and the largest economy in the world behaving in an oddly deferent way to one little nation in the Mideast.
So I do fully agree with you - the next 20-30 years are going to be incredibly interesting. But not just for Saudi Arabia. The interplay between oil, economic power, and all of these other major issues (let alone huge wildcards like space) mean we're in for one terrifically unpredictable and interesting future.
[1] - https://www.bloomberg.com/news/features/2016-05-30/the-untol...
[2] - https://www.theguardian.com/us-news/2015/oct/27/saudi-arabia...