Category Archives: Economics

Caliphate, Economics, Saudi Arabia, U.S. Politics

Jizya: ISIS Tax Plan, Republican Tax Plan, Royal Tax Plan………

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

KuwaitCox2

A new twist on the current, and perennial, political (not economic) tax debate in the USA:
Reports tell us that the Wahhabi Islamic States (ISIS or DAESH)  has demanded the United States, as the leading Western power, should be ready to pay a special Jizya tax to their Caliph Abu Bakr Al Baghdadi. This Caliph was born  Ibrahim Al Samarrai, so I assume Al Baghdadi is his married name, as they do in the West.

So he wants Mr. Obama to pay the old Islamic Jizya tax that used to be imposed on non-Muslim subjects partly in order to exempt them from military service. That tax used to have some logic to it: you can’t expect a Christian citizen, for example, to join an army that fought to convert other Christians to Islam. So maybe the U.S. Congress, under a new old leadership, will take up this new ISIS tax plan. Nothing like the promised miraculous “tax cuts and a strong defense and protecting social security and reduced deficit” plan they have been pushing. Should be fun watching C-Span. Should also be fun watching the Republican (and maybe the Democrat) presidential candidates take up the issue in their endless sound-bite “debates”.

The Saudi princes and other regional potentates, unlike ISIS, do not directly tax their people and businesses. They apply what I would call a princely (royal) tax on the whole country. The numerous Saudi royal princes get first cut of the oil revenues, for just being who they are, for the accident of birth. They also get to expropriate public land at will. In recent years they have been destroying ancient Islamic monuments and converting them into parking lots, half-empty shopping malls, and luxury hotels and apartments for local potentates and others from neighboring oligarchies.
Not a bad racket……….

Cheers
Mohammed Haider Ghuloum Follow ArabiaDeserta on Twitter

Economics, Europe, European Union, Greece

Greek Drama: Beware Europeans Bearing Poisonous Gifts……..

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

KuwaitCox2

Several years of disastrous economic policies imposed by the IMF and the European Union and its bureaucrats have brought Greece to its knees.
Now that Greece is in a deep recession, with low income and terrible high unemployment, the same European bureaucrats are set to impose deeper tightening economic policies on Greece. What can result from deeper tightening in an economy that is in deep recession with little to export? Why, the next step is logically a depression.
What seems to matter most to European bureaucrats is that European governments and banks do not reduce Greek debt. Unlike decades ago in the 1950s when the United States and others canceled about 50% for German foreign debt and extended reduced payments over several decades. But that was when the West was facing the Soviet challenge and needed to showcase the Western part of Germany. There is no Communist challenge, so the West can afford to tighten the screws on Greece, so the Greek people will suffer for many decades, years after they leave Europe. Unless the Europeans come to their senses.
Cheers
Mohammed Haider Ghuloum                          Follow ArabiaDeserta on Twitter
[email protected]

Arabian Peninsula, Economics, Petroleum, Saudi Arabia, Yemen

All the New King’s Men: Betting the Farm on Military and Economic Adventures……..

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

KuwaitCox2

“But Saudi Arabia and the other Sunni Arab states should not be so singularly obsessed with the danger posed by Shi’ite-led Iran. These states have other internal problems and economic worries to deal with, especially bulging youth populations and the lack of avenues for political expression. The House of Saud is facing a challenge from the militant group Islamic State, which carried out a suicide bombing last week that killed at least 21 worshippers at a Shi’ite mosque in the kingdom’s Eastern Province. The Saudi regime must also cope with the long-term consequences of declining revenue due to lower oil prices………….”

Saudi Arabia has taken a couple of big gambles in recent months. The ruling family has taken some questionable advice on how to slam its regional opponents and rivals, mainly Iran and Iraq, and tighten its alliance on the Arab side of the Persian Gulf. Both are extremely risky:

  • The Saudis have uncharacteristically allowed oil prices to plunge, thus aiming new economic blows at an Iranian regime that is already enduring a tough Western economic blockade. Along the way they also aimed a few left hooks to Mr. Putin’s Russia, a major supporter of Syria and Iran. (Unlike the Western powers, Mr. Putin has not yet threatened to put ‘boots on the ground’ in Syria or to keep a military option on the legendary table).
    The Saudis also struck at the very-cost-sensitive American and Canadian shale oil industry, now a major rival in the market.
  • In addition to “lowering” oil revenues, the kingdom has also started to bet high in a regional poker game. It started an expensive bombing war against the poorest Arab country, Yemen (now mostly controlled by Houthis and the Army). A costly and intensive bombing war that has shown no results in more than two months except destruction of Yemen’s fragile infrastructure. And plant cluster bombs across that country.
  • In addition to the high cost of bribing the rulers of Sudan and Jordan and Morocco and Senegal to join their Yemen military adventure.
  • The new King also immediately raised salaries of all military and security employees and granted every public servant (most working Saudis) and student a two-month extra salary bonus.
  • The total cost of all that is almost certain to exceed one hundred billion dollars: by how much depends on the duration and intensity of their new war. And how much the newly promoted princes (MBN, MBS, XYZ…..) skim off the military expenditures and other major contracts. Meanwhile oil revenues are down, creating a risky imbalance and a drainage on foreign reserves.
  • Contrary to what the Saudis expected, the Houthis and their army allies have expanded their territory since the air campaign in Yemen started. They have now started to attack inside the Saudi home territory, with a surprising degree of ease and impunity. Which is leading to more Saudi casualties, probably an unexpected consequence.

What makes all this riskier is that the new King Salman, in an un-Solomonic move, has started immediately to turn his country’s budget, which is essentially the ruling family budget, into a large deficit. In the process he is depleting his country’s foreign reserves.

The cash bonuses paid out are already eaten up by the inevitable higher prices. So far the war on Yemen looks set to drag on unsuccessfully, all the munitions and cluster bombs need to be replaced. The newly-promoted young princes try to get even richer while they can. Then they will all be back to the starting point……….

Their foreign reserves are still high. Maybe they can withstand it for a sustained period, maybe, but for how long and at what rate of depletion……..


Cheers
Mohammed Haider Ghuloum                          Follow ArabiaDeserta on Twitter
[email protected]

Economics, Finance, U.S. Congress, U.S. Politics

New Age Heroes: Financial Opportunists, Lobbyists, and Rogue Crusaders………

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

KuwaitCox2

“Haym Salomon funded not only the Revolutionary War but several leading politicians, yet passed on claiming huge debts. On January 6, 1785, Haym Salomon, the Polish-born immigrant to colonial New York who is revered in American history as the financier of the Revolutionary War, died. He was all of 44 years old — and he was bankrupt………….”

They have a picture of a 10 cent U.S. stamp from 1975 calling Haym (Haim) Salomon a “financial hero”. It says somewhere that he ran a “brokerage business” as well, but apparently he had nothing to do with Salomon Brothers firm that came later. Mr. Salomon died bankrupt, but only because he lived in a different era.

Speaking of financial heroes, I fully expect the new U.S. Congress (both houses) to start creating new “financial” heroes. I expect some top lobbyists to be named, as well as CEOs of Citigroup and JP Morgan Chase and Mr. Blankfein of Goldman Sachs. For their role in the crash of 2008 that required government funds to bail all these geniuses out. The Koch Brothers and Sheldon Adelson of Las Vegas gambling, financial godfather of the New New Republican Party, will surely be on the list. Not to ignore some other likely candidates: famous anti-tax, anti-affordable universal healthcare, anti-affordable higher education, and anti-welfare ‘crusaders’.

The New New Democrats, led by you-know-who-she-is, should they win the White House in 2016, will likely not only follow the same path, but revert to their old habit of appointing top bankers as top financial officers of the U.S. government.
As for myself, I would suggest an economist like Paul Krugman or even Robert Reich for treasury secretary. But that would limit the New New Democrat president to one term. Unless she or he is impeached and convicted first by an uncharacteristically outraged Congress.

Cheers
Mohammed Haider Ghuloum                          Follow ArabiaDeserta on Twitter

[email protected]

Economics, Russia, Sanctions

Russia: an Economic Barbarossa? Une Grande Armee économique?……….

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

KuwaitCox2     ChristmasPeanuts

Have Yourself a Merry Little——-> Kenny G. Holiday 

“Russia Reels” screams the headline in the Huffington Post. With similar headlines in other media. An old headline that goes back to another world…….
 You’d think we were back to Barbarossa and June 22, 1941. But perhaps with expectations of different results this time…...

Or perhaps a financial version of La Grande Armee of Napoleon, an economic assault. Which might have better luck, better results this time around, given the interdependence of the world economies.
Cheers
Mohammed Haider Ghuloum                          Follow ArabiaDeserta on Twitter

[email protected]

Economics, GCC, OPEC, Saudi Arabia

Crude Oil Price as a Two-Edged Sword for the GCC……….

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

KuwaitCox2     ChristmasPeanuts

Have Yourself a Merry Little——-> Kenny G. Holiday 

“Additionally, the Saudis get a chance to deal Russia, Bashar al-Assad’s stalwart ally, a bloody nose, by driving down the cost of oil and hurting Moscow’s hydrocarbon revenue streams, which prop up a shaky domestic economy. As oil prices have fallen so has the value of Russia’s Rouble, plummeting 35% since June. Killing two birds with one stone would seem a smart policy, especially since it is highly unlikely to result in the sort of military escalation the Saudis wish to avoid. How long can the Saudis keep this game up? Realistically a few months, but if the price of oil keeps falling the Saudis may have to rethink their strategy……………”

Oil prices normally rise during times of economic growth in the USA and especially during periods of geopolitical turmoil as is happening in Eastern Europe and across the Middle East and Libya. But oil prices have been going down for some time now in spite of speeding US growth and turmoil in producing regions.

Some have predicted that the oil price decline may come to bite those who engineered them for political reasons, such as Saudi Arabia and the United Arab Emirates. It was also argued that the Persian Gulf Arab producers have huge sovereign funds that can cushion the domestic economic impact.
Fine and dandy, but we must consider the impact on the sovereign funds and on local GCC Gulf financial markets and on the public finances: (a) The Gulf sovereign funds are invested mainly in the world markets and are losing value as American and other markets decline with the price of crude; (b) Domestic GCC markets are now also tanking, from Saudi Arabia to Dubai, which will bring political pressure on the princes, shaikhs and potentates to support the stock markets. Many middle class families in the GCC are suffering huge market losses, estimated in many billions of dollars. In the Gulf, princes and potentates from Abu Dhabi to Riyadh rely on patronage as well as a ruthless mercenary security apparatus to keep absolute political power. Now there will be clamor for some more patronage to help market investors: you want to keep absolute political power, you gotta pay for it (from the people’s money, of course). Which in turn will create more pressure on the domestic budgets and on the value of sovereign funds.

In addition, now the oil price decline is beginning to be seen as a negative for the US economy. Odd, after decades of blaming the rise of the same variable for slow growth.
Given the shale fuel industry and the huge investments in it, as well as the importance of the major oil companies and their credit standing, the US economy now shares one thing with the Iranian and Russian economies. Some market ‘analysts’ now stress that the U.S. financial markets need oil prices to move up for the markets to rebound from recent losses. But does Main Street America need high oil prices back? That is unlikely.

Interesting: the USA, Iran, and Russia all ‘need’ higher oil and gas prices now. 
Cheers
Mohammed Haider Ghuloum                          Follow ArabiaDeserta on Twitter

[email protected]

Economics, Finance, Globalization, Pacific, U.S. Politics, US Foreign Policy

Corporation Democrats and Globalization from Obama to Clinton: TP the TPP?……..

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

Follow ArabiaDeserta on Twitter   KuwaitCox2


“President Barack Obama is ready to buck his liberal base in order to advance the Trans-Pacific Partnership (TPP), the pro-corporate international trade deal currently being negotiated in secret by the United States and 11 other Pacific Rim countries……..”

It is the corporations, stupid.
There was a time when it was true that what was good for corporate America was good for mainstreet America. Not so much anymore. Now what is good for corporate America is mainly good for the large shareholders and for the club of CEOs of America in this age of bonus-hunting by management. The real shareholders matter, not the average Jane with an IRA, as they try to tell us on the financial networks.

If you want to know what American corporations probably prefer the ideal state of American labor to be, look at China, India, and some Latin American countries. Well, a mild exaggeration to make the point perhaps, but not by much. A huge lower lower middle class enshrined in a permanent American class society the like of which has not been seen in more than a century.

Mr. Obama is in many ways like ALL other American presidents since Ronald Reagan. He is a corporation president, even though the U.S. Chamber of Commerce strongly campaigned for his Republican rivals (that was just a matter of comparative preference). His party aspires that he will be followed into the White House by the two most corporatist Democrats available in decades: Hillary and Bill Clinton.
Given the country’s well-financed shift to the right, those two might be the only Democrats who have a chance to keep the White House for their party two years from now.
Cheers
Mohammed Haider Ghuloum

[email protected]

Caliphate, Economics, GCC, History, Money

ISIS Economics: Islamist Money with Ancient Heathen Names, Shekel 3.0………

Shuwaikh-school1 RattleSnakeRidge Sharqeya-Baneen-15

Follow ArabiaDeserta on Twitter   KuwaitCox2

“Islamic State says its leader has ordered that the organisation start minting gold, silver and copper coins for its own currency, the Islamic dinar. A website affiliated with the militant group said late on Thursday that its leader, Abu Bakr al-Baghdadi, had instructed his followers to start minting the coins to “change the tyrannical monetary system” modelled on western economies that had “enslaved Muslims”. The posting says the order was approved by the group’s shura council, an advisory board………….”

A state is not a state without some monetary unit that acts as a medium of exchange and a store of value (this last one is not completely a joke now). Even a Caliphate needs currency. Even an ersatz Caliphate like the Wahhabi one that has sprouted up for now in Iraq and Syria. So they try to go back in history and pick currency names that are supposed to be “Islamic”. But they are not Islamic. The early Muslims just used the ancient names available from heathen countries.

The Jihadis of this Mosul Caliphate don’t realize, or maybe they choose to ignore, that their minted currency carries coin names from ancient heathen societies. Mainly ancient Rome and Greece and Spain:

  • Dinar: Denarius (plural: Denarii) was the currency of Roman Republic from long before Christ, long before Caesar.
  • Dirham: Drachma (Draxma) was the currency of Greece before the Euro. It was the Greek currency in ancient times as well.
  • Riyal or Rial is almost certainly derived from Spanish ‘Real” meaning Royal. the “Real” was also the old Spanish currency. Of course the Iranian base currency is also the Rial, but I’m not suggesting a currency union with the mullahs.
  • As for the “fils“, I have no idea WTF it derives from. Maybe from the Arabic word Muflis, meaning broke or bankrupt. Which would be appropriate for this word.
  • At one time not so long ago the Gulf countries used the Indian Rupee as their currency. After Indian independence, a special Gulf Rupee was issued in India just for the Persian Gulf states.

How about picking something from the Old Testament, which Islam agrees with on most things? How about the Shekel? I once suggested in one of my older posts to the GCC they might consider the Shekel (they can call it Shekel 3.0). That was when they were seriously talking about a currency union. It is unlikely to happen now (the union not just the Shekel adoption).
Cheers
Mohammed Haider Ghuloum

[email protected]

Economics, Iran, OPEC, Petroleum, Saudi Arabia, U.S. Foreign Policy

Oil Weapon Redux: Saudi Oil Policy vs. Iranian Regional Policy vs. Ebola vs. Obama Sanctions……..

_9OJik4N_normal Sharqeya-Baneen-15    DennyCreek2

Follow ArabiaDeserta on Twitter   KuwaitCox2

There is new speculation about the ‘oil weapon’ in Arab media, in independent Arab media that is not owned by the Saudi or UAE or Qatari princes and potentates. This speculation has now also spilled into some Western media outlets. It claims that the Saudis, the usual crude oil ‘swing producers‘ of OPEC, are not playing their usual role these days. And they attribute this to regional strategic reasons.
The speculation is that the Saudis want to apply some economic pressure on their Iranian rivals (and perhaps on the Russians as well). Not the kind of direct crude type of economic pressure in the form of the blockades used by the Obama administration, but a more genteel ‘market’ type of pressure. If oil prices are low enough, this theory seems to go, then the Iranians will feel the economic pinch and reduce their support for Al Assad in Syria, Hezbollah in Lebanon, and perhaps reduce their involvement in Iraq and other places.
The idea is not new: it was expressed by the Saudis after they lost out in Iraq a few years ago. At the time, some minion at the Saudi Embassy in Washington opined in American media (the Washington Post?) that his country can drown the market in oil and hurt the Iranians. I wrote then (presciently?) that this may be a delusion, that the Saudis themselves cannot afford very low oil prices, given population growth and emerging political pressures at home.
The reduction in oil prices also coincided with the initial Ebola panic which impacted the travel outlook and hence the demand for fuel.

As if responding to this policy, or speculation about it, the Iranians have just announced a huge offer of weapons for the Lebanese military (which is secular but represents the sectarian and confessional divisions within that country). They seem to be in a race with the Saudis (who earlier announced a conditional $3-4 billion of French weapons) and the Americans to arm the (so far multi-sectarian) Lebanese military.

Cheers
MHG 

[email protected]

Economics, OPEC, Petroleum, Sanctions, U.S. Foreign Policy

Remember When the Oil Weapon Was Blackmail and Evil?……….

_9OJik4N_normal Sharqeya-Baneen-15    DennyCreek2

Follow ArabiaDeserta on Twitter   KuwaitCox2

“Now time has abruptly run out. The Arabs, who control nearly 60% of the world’s proven deposits, are slowing down the flow. Through this strategy of squeeze, they hope to pressure the industrial nations into forcing Israel to make peace on terms favorable to the Arabs. Moreover, they are steadily intensifying their oil shakedown. Originally they planned to reduce production by at least 5% each month. Later they embargoed all oil shipments to the U.S. and The Netherlands, in punishment for their support of Israel. Last week, showing new unity and clout, ten Arab countries announced that production for November will be slashed a minimum of 25% below the September total of 20.5 million bbl. per day. Though there has been promising progress toward a lasting settlement in the Middle East, the Arabs vow that they will continue their cutbacks and embargoes until Israel withdraws behind its 1967 borders………….”

That was during the Yom Kippur War of October 1973. The Arabs, at least the regimes and media, still claim that war was won. Initially the first round of the “Ramadan War” was won, but the military tide had turned decisively before the ceasefire that was engineered by the Nixon administration. But official celebrations and/or commemorations are held in Egypt every year on this occasion, sometime twice a year: once in October and again during the Islamic Hijri month of Ramadan (usually the two don’t coincide, although they did in 1973).
That Arab oil embargo of 1973 was widely denounced as blackmail and evil in Europe and North America. Looking back, the Arabs got a bum rap on that one: it is not the act of blackmail itself, but who does it that makes the difference. Something must have happened since then. Now it is the Western powers that impose oil and gas embargoes: against Russia, Iran, Syria, Iraq (in the past) and others who do not comply. Countries that break any Western embargo or blockade are punished, and embargoed themselves. And it is not blackmail anymore: it is cool now. It is considered as part of a wise clever strategy to “shake down” other countries, just as the Arabs were perceived as “shaking down” the West in 1973. The only difference is that the Western powers have the upper hand now, economically speaking. The shoe is on the other foot. Speaking of change………..
Not all blackmails, or shakedowns, are equal.
Cheers
Mohammed Haider Ghuloum

[email protected]