What this means is simple: as a result of the budget imbalance driven by low oil prices, largely a Saudi doing, the kingdom is forced to give workers an implicit pay cut. It also means that since the government has to "pay" through the issuance of debt, that the liquidity crisis in the kingdom is far worse than many had anticipated.
Which brings up the question of devaluation: how long until the SAR has to follow the Yuan and see a substantial haircut. According to the market, 12 month SAR forward are now trading at a price which implies a 12% devaluation in the coming months.Then Saudis are going to have to pump more oil to pay the bills, even though that means lower prices. The question is whether or how long the Saudis will maintain the the USD/SAR (dollar-riyal) peg.
Zero Hedge
Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, Debt
Tyler Durden
ht Don Quijones at Raging Bull-Shit
3 comments:
in case you thought the Saudis understood fiat currency operations
let's see;
The currency issuer doesn't have enough currency right now.
[When WILL it have enough currency?]
After it presses a key on a computer keyboard.
[Uh ..... (What's the difference between an IOU and a .... well, ... nevermind. No further questions .... except Where's the exit?) ]
##########
Makes you also wonder what it is in the KSA that's actually pegged to US policies, Saudi currency, brains, courage or imagination. Maybe all of the above, all the time?
The riyal is pegged to the USD. The Saudis are not currency sovereigns. They need to have USD and now that the oil rent is gone, getting $s a problem for them.
They could just unpeg their non-thinking, from US-so-called-thinking.
Post a Comment