That’s a relief! Knowing that Algeria will be able to balance its budget if the oil barrel price remains over $71. But not $69.765, that would be a problem. And how about $69.872, would this do? We don’t know. All we know is that Algeria will be OK with an oil barrel at $71.
The Algerian newspaper Ech-Chorouk reports in its article “A barrel at $71 is enough to balance the budget in 2013”, according to the Finance Minister Karim Djoudi.
The article goes on when the Minister explains that such an equilibrium price allows to cover the “real” budgetary expenditures, which for some reason are always higher than the revenue!!
No, we are not making this stuff up.
We don’t know what’s more pathetic. A country fully dependent upon the price of ONE commodity or a Finance Minister incapable of balancing the books or explain the discrepancy, for that matter.
But then again, this all happens in Governmentland, a mythical place where logic, science, and common sense do not apply.
We brought this issue to your attention (nice figure of speech, isn’t it?) because it highlights the enormity of governmental madness. An entire country will be bankrupted if the price of the oil barred drops under a given number. Of course, governments do not go bankrupt, they simply accumulate debt.
However, eventually, they stop paying… and then all the population pays with their economic lives being destroyed.
The real tragedy is not that the Algerian government is taking all this oil revenue money, but that this is a pyramid scheme. Those who got into the game early, benefit. Those who got in late, reap all the disastrous financial consequences.
The enormity of this process and inevitable failure is what’s staggering. When the oil starts to run out, what will the Algerian government do? What all government do: borrow. And when they can’t borrow no longer? They will go into an incessant and spiraling cycle of booms and boosts. Let’s be clear. This is all government doing. There is no one else to blame but the government.
What’s staggering is the fact that a single organization yield such a power to make everybody’s life miserable.
Compare this scenario with an Absolute Austro-Libertarian case. In this environment there are no governments and hence no budgetary deficits that may affect people. There are only people and companies. Companies are profitable for as long as there is oil. This profit is shared with shareholders, employees and other people through the benefits oil provides. In time, as oil reserves decrease, these companies are less profitable, so they have less to share. When this happens, companies usually invest in different technology to remain profitable or people move on to more profitable companies. There are no massive cycles of boom and boost. Everything is smooth and understandable. And even if these oil companies make mistakes, such mistakes can never revert entire countries into poverty, as governments can.
Remember, for really gigantic screw-ups you need a government. The free market and only the free market protects you from those.
Be protected or be exposed. Your choice.
Note: please see the Glossary if you are unfamiliar with certain words.