Analyze Impact of Declaration of Sale of $750 Billion Assets of Saudi Arab

 

The word global bankruptcy is frightening to any nation or a person. We are in 2016 slowly moving towards 22nd Century. There is a global chaos, hunger for power. Drop in Oil prices have most countries to re-think their dependence of oil in other venues. 

Can oil, nuclear weapons and  money keep us alive? The answer is no. Here is a quick review to a major global issue. Many countries do trade with US and depend on US economy.  

US Trade Deficit with Solution 

Saudi Arab has taken strong measures threatening up White House to withdraw around $750 billion dollar worth assets from American Treasury.  It is a counter attack after getting information about the possible declaration of bipartisan bill   to have legal action against Riyadh due to its double standard policy to boost up militancy outfits to attack innocent people in America.  Saudi Arab is one of the powerful countries in Gulf. It has the powerful economy with excellent GDP rate.   Even during sudden land slide in the oil prices, this GCC member has built up confidence to fight with recession.  However, this country is facing another big issue when it criticizes the role of White House to stamp out Saudi Arab as conspirators to help terrorists to make air strikes during 11th September in 2000.  This blitz Krieg invasion claimed many innocent Americans.

The Effectiveness of Bipartisan Bill -   How Saudi Arab Reacts?  Current Facts

Bipartisan Bill is yet to be approved by Congress in America.  If it is passed, Saudi Arab will be held responsible to confess their guilt.   The court will start prosecution based on tectonic of powerful evidence and facts.

At Glenn Beck Program, Glenn didn’t hesitate to admit that American administration has deeply and meticulously cross checked  all facts, images and finger prints. They have done data comparison and analysis. It is true that Saudi mobilized this destructive mission to blow America in flames.  11th September is the day for lamentation in despair.  On this very day, few fresh   young lives were destructed on the American soil. The air strikes were severe to demolish trade center in America.   

Therefore, Riyadh can’t go Scot free. Bipartisan Bill will unveil the face of Riyadh in daylight. It is a matter of humiliation and outrage. Therefore, Saudi Arab has already made an official declaration stating its futuristic role to deal with America.  

King of Saudi Arab has taken few bold steps in retaliation. First of all, he has acted promptly by doing the preliminary table work.  He thinks that the stored $750 billion worth wealth in the form of bonds and securities in America can be blocked or frozen by America.   It will worsen the financial stability of this gulf nation. So, before the introduction of Bipartisan bill to the Parliament for approval, Riyadh will withdraw all assets. This switchover must be unexpected.   It will bring down the credit scores of America to a great extent.  

America has already the burden of $19 trillion national debt to bear.  Obama has to answer properly due to such over-expenditure.  In addition, the bold decision of Riyadh will be a setback to American government.  However, many economists and senators in America opine that Saudi Arab’s financial assets cover   just a 1 percent of the total financial assets owned by US.  So it will have the least side effect for Americans to undergo.  

Besides, Saudi Arab has to wait for few days to accumulate and then   bundle up all assets for sale or switchover.  They have to do proper documentation for shifting assets from America to Riyadh. It is time consuming and   American higher authority will not allow Riyadh to transfer valuable assets to Gulf region without cross verification. 

Glenn admitted gleefully with lot of sarcasm in his dialogue that Riyadh would basically sell some bunches of T-bills. They will have to grope for these treasury bills for restoring all their stored financial assets.  So, they have to learn how to grow patience to sit for inventing innovative ways to solution through the comprehensive discussion with Obama administration.

Bankruptcy of Other Nations

Greece

In   last July, Greece was decorated bankrupt due to its $ 1.7 billion debt to IMF.  61 percent votes were registered   against the government of Greece for its huge debt.  There should be massive economic reforms to upgrade credit scores.  In past, Spain, one of the wealthy nations in the world, found no way to revive the financial strength. It also announced that the country was insolvent in 1557.

Iceland

 In spite of deregulation in banking sectors in 2001, the top national banks faced the financial downturn with poor credit rating.  These banks had to spend billion dollars to expand the various projects.  After the recession in American economy, Iceland broke down because of economic crunch in   America.  Banks were not comfortable to pay back to remove debt.  However, this country introduced new economic reforms to restructure the financial sectors.

Argentina

Thescenarioofnational economy in Argentina   in 2001 washorribleowing to thepesodevaluationandhigher debt .  Argentine president opted for one to one peg to US dollar to prevent the capital flying/flight to foreign countries.  This peso devaluation forced account holders to withdraw currencies from banks. However, the unrest became severe in the country when the president decided to enforce Corralito convertible plan.   He instructed bankers and other national financial sectors to freeze accounts.   People won’t have to withdraw over 1000 pesos on a single go.  This new economic reform disheartened Argentines and they went for   revolt against the president. $145 billion debt was recorded in 2001.  Argentine president Rua had to elope by a helicopter putting the economy of the country in jeopardy.   

Russia

After bringing Glasnost to   redecorate the country, Russia again faced a recession due to the crisis in oil industry. Demand for crude oil started running downward and Russian economy was affected. The GDP growth declined. Value of Rubble depreciated in 1998 and national stock market in Moscow lost 75 % value. Inflation reached 80 percent. Foreign investors preferred to go back to their home land during such crisis.  Out of $17 billion debt to IMF, Russia was able to pay back as low as $10 billion.

Mexico

In 1970 Mexico had introduced a new macroeconomic structure which enhanced the massive growth and stability in the beginning.  However, the country didn’t hold this economic growth for longer.  Debacle occurred when Luis Echeverria tailored   fiscal expansion plan to do the makeover.   Mexican pesos were devalued with 50 percent depreciation. The   GDP made an unexpected downtime touching 11 percent. In this way there was new   Latin American financial downturn.   Mexico borrowed billion dollars from IMF as a part of reconstruction of the economy.   In 1982, the estimated   debt of Mexico is $80 billion.

US Trade Deficit and the Possible Solution

American trade deficit made a downward movement faster comparing to previous months. Experts have estimated that current US trade deficit is hovering somewhere between $40 and $48 billion with the rise in product exporting. There is a dazzling1.6percentgrowthto total it $187.9 billionin exporting industry due tothe stronger and higherpossibilityof sale of sophisticatedjet engines f and air buses.  

The oil imports are reduced with the prominent drop in prices of petroleum product in the global market.  Economists predict that due to the acceleration of value of dollar,   American products in foreign countries are becoming   expensive.  So   trade deficit will gear up slowly in   America.  Obama has talked to consultants and finance minister to find the solution. 

American trade deficit  needs to be controlled by designing innovative plans to narrow down the gap. The patchwork will be helpful to   Obama to have control over the current US trade deficit to minimize the trouble.  US citizens have already had the burden of $19 trillion debt. 

TPP agreement 

In a statement, American president has given a solution to overcome the trade deficit.  Trans Pacific Partnership or TPP agreement is the new gateway to do business deals with other foreign nations in a more stable commercial environment.

There are twelve countries including US, Canada, Mexico, Japan,  Vietnam and Australia to form the TPP. These   countries will change or modify the foreign trade policies to have more benefits.  

For instance, many complicated tariffs and trade taxes   will be either reduced or totally removed.  TPP model will work just like the EU trading format. These 12 nations will prioritize the reduction of higher taxes to export or import goods.  They will follow new free trading rules which must be useful to American government to reduce the trade deficit.  However, Obama has not got green signal from senators and opposition party leaders to approve the TPP membership.  

US government has not yet made further declaration about the introduction of bipartisan bill.  Saudi Arab is building up a strong challenge. However US economy will be less affected in the event of the transfer of $750 billion assets from US. Other GCC members may follow to increase the digit 5x. 

Conclusion 

Both the US and Riyadh must showcase patience as their economic growth depends on trade.  Sudden fall in prices of crude oil is a negative determinant to affect vast industries of these two nations uber.  There is a fear of Global bankruptcy. 

Meanwhile, there is US election which will be conducted this year.  So, Saudi Arabia  is waiting fornew resolution oftheAmericanpresidentwho willcome to powerafterthe election.   There   may be a dramatic change in foreign diplomacy to deal with foreign countries.