DECEMBER 2007

Antonio Negri

Recently, I have been putting myself through a crash refresher course on political philosophy and social theory, reviewing Macchiavelli, Rousseau, Marx, Herbert Marcuse, Hannah Arendt, Murray Bookchin, and others. The most satisfying analysis of the contemporary situation that I have found is Michael Hardt and Antonio Negri's Multitude (Penguin, 2005), which was a follow-up to their best-selling Empire (Princeton, 2000). Hardt is a political philosopher at Duke University, while Negri is Italian, and spent four years in prison for conspiring with the Red Brigade, an Italian revolutionary group (though the charges were highly dubious). Negri and Hardt aspire to be the Marx and Engels of our time; like Marx and Engels, their collaboration meshes the theoretical depth of Continental philosophy and the pragmatic tendencies of the Anglo tradition.

Today, the entire stream of radical Communist and revolutionary thought has been marginalized and forgotten in the US, outside of abstruse academic circles where it is employed in a distanced and theoretical fashion, and in shrill coteries that produce newspapers and protests but lack any meaningful influence on mainstream debate. Communism is associated with the grey, bureaucratic, murderous totalitarianisms that developed under that name in the 20th Century. What is forgotten is why Communist and socialist ideology once posed such a dangerous threat to capitalism as an alternative to the oppression of oligarchic rule. Because of this history, the very notion of ideology or social theory continues to be shunned in mainstream progressive circles, which focus on reformist initiatives.

In Empire and Multitude, Negri and Hardt do a heroic job of revisiting and revising Marxist philosophy in the light of recent developments. Negri and Hardt argue that the main or "hegemonic" form of production in our world is no longer material production, as it was in Marx's time, but "immaterial production," the production of concepts, images, communications systems, and affective relationships. If industrial capitalism created "surplus value" by hoarding the excess productive capacity of labor, our post-industrial capitalism creates value in a different way, by "expropriating" the "commons," in other words, putting tolls and privatized barriers around areas that could be freely available to humanity, such as intellectual property, the electromagnetic spectrum, or genetic material. The authors of Multitude see tremendous potential for human emancipation in the new collaborative networks of late-stage capitalism. They point out that the development of collaborative networks, such as those that produce open-source software, reveals there is no longer a need for a boss, or for any hierarchical form of organization. As an alternative, they present the possibility (though without providing any tangible models) of an emergent direct democracy that would function on a global level.

Negri and Hardt barely mention the ecological crisis in their work, and do not address the psychic and shamanic elements involved in transforming human consciousness. However, their work addresses one very real question that must now be explored, as we face the accelerating cataclysms of species extinction, resource depletion, militarism, and climate change: Whether the current political system -- with its compromises, corruptions, and multi-year cycles -- can be reformed, and transformed, to deal with these challenges to the continued survival of the human species. If not, then an alternative must be found -- and quickly.

As I learned while writing my books, certain areas and discourses are subject to extreme taboo and repression – repression not only of the ideas themselves, but even of the original intent behind the repression. In these arenas, the repressed material, when it is brought up to consciousness again, is greeted with ridicule, resistance, contempt, or utter blankness. I found this to be the case with psychedelics and psychic phenomena, along with other subjects. This knee-jerk dismissal is currently our attitude toward a straightforward reevaluation of Marx, Engels, Lenin, Rosa Luxembourg, and so on. On the other hand, items of "revolutionary chic" – such as Che Guevara t-shirts – are mass-produced as commodities, made ironic, and in this way emptied of significance or threat. The extreme blankness produced by repression can be a positive thing, as it opens the possibility for a quite sudden and powerful "return of the repressed," and a reassessment without preconceptions. The prospect that an egalitarian planetary culture - where, instead of being free to own private property, we are free from private property, as Marx once quipped -- would be preferable to this one now seems so impossible that it might catch on.

The absence of social theory from mainstream discourse is underscored by the lack of class consciousness in the US today. Recently, labor conflicts are becoming more visible and virulent again – the writer's guild strike in Hollywood and the stage hands strike on Broadway are just two of the most publicized examples. Yet these particular disputes are not analyzed – as far as I know – in a larger framework that looks at the development of class relationships as a whole. This is the case even though the disparity between average workers' income and the income of CEOs has grown to grotesque proportions, becoming a form of economic apartheid.

There are good reasons to propose that, in the very near future, a post-Marxist analysis of current class relations and social consciousness could become extremely relevant. Right now, we appear to be approaching a severe breakdown of the US financial system, with deep repercussions for the global economy. The ongoing meltdown of the subprime mortgage market is, according to this hypothesis, stage one of this process, and a crisis in personal debt will be the second stage - the dropping of the other shoe. Below, I have enclosed a summary of the economist David Martin's recent speech to The Arlington Institute,(included below, please scroll down.JBraddell,editor) a futurist think tank in Virginia. Two years ago, Martin made a speech at Arlington where he foresaw the subprime mortgage market meltdown with impressive acuity (a transcript is available on the Arlington's website). His analysis of the credit landscape suggests that mass defaults on personal debt, starting in December, are going to overwhelm the capacity of banks and insurers, who will not be able to find bailouts. Bank insolvencies would lead to the failure of the privately held Federal Reserve. Currently, OPEC and China are shifting their holdings out of US currency, and the Euro is becoming the reserve currency around the world.

Martin proposes that by March we will be entering an entirely transfigured economic landscape. The logic of his argument seems compelling to me. As bank failures and mass defaults begin to mount up, people are going to need interpretive tools to understand their new situation, in order to react to it practically and deal with it psychologically. During a crisis, there is the potential for a major opening of awareness and compassionate understanding, or for a large-scale retraction into fear-based belief systems and Fundamentalisms. Sometimes you have both at the same time.

The imminent economic plunge, if it happens, cannot help but act as a multi-generational wake up call. These days, when I talk to people – especially people in their twenties – I often find myself stunned by their ignorance of the economic and social situation that surrounds them. And yet, I grew up with the same attitude of jaded indifference and the senseless assurance that nothing about politics, economics, or the environment had any real meaning, or would ever affect me in any tangible way.

This jaded indifference is the result of intensive conditioning by the media – the phenomenon of the "flattered self" brilliantly described in Thomas De Zengotita's book Mediated – and an alienated education system which "produces subjectivities" that fit the status quo. These manufactured subjectivities are cut off from any sense of responsibility for the social reality or the life-world that sustains them, and they are carefully conditioned to identify with this alienation as a mark of pride -- celebrities like Mick Jagger and Jack Nicholson, or their younger iterations, are patron saints of cynical hipness and smug narcissism. The concept of the "production of subjectivity" is a major one for Negri and Hardt, who see it as the most important form of production in post-industrial civilization. I will discuss this in greater detail in a future piece.

In our contemporary context, Negri and Hardt posit a global "multitude" of working people, rather than the Marxist proletariat of the past. Class distinctions do not hold in the same way -- as Negri notes in an interview, it is the total organization of society that is the "enemy," not a particular class. They argue that the dynamics of capitalist development have been shaped, primarily, by the desires of the laboring multitude, and the antagonism between the working many and the ruling few. The New Deal, for instance, arose out of the worker's movements here and abroad, above all the Russian Revolution, which sent shock waves through the Capitalist system.

Over the last decades, the US system has been increasingly based on debt. Where the media encouraged comatose consumerism, politicians succeeded by offering happy-faced visions of a world without sacrifice while they supported policies leading to increasing economic apartheid. In an atmosphere of extraordinary plenty and overt overproduction of comforts and goods, where huge fortunes are controlled by the elite few, where enormous waste is built into the system and encouraged by it, it seems only natural to be profligate, to assume that the hard limits defined by the shrinking realities of income are actually the delusion, and the media displays of endless bounty are the reality. The delusional and self-destructive profligacy of the populace is, possibly, also an act of subliminal aggression against the system’s false promises and betrayals (the deepest betrayal being the delusion that material success leads to sustained happiness).

The profligate spending of the masses is also a natural – almost biological – reaction to the corruptions of Empire. When the populace sees CEOs, politicians, and millionaires routinely escaping from their crimes, fleecings, and defraudings, they subliminally identify with them, accepting that this is proper behavior within the society, and will be rewarded rather than punished. Of course, the assumption of massive personal debt was not a conscious and calculated strategy of the populace to dismantle the capitalist system, but it could be seen as an unconscious strategy of sabotage. This could be the case, even though the financial system developed predatory, invasive, and deceptive tactics to reach the consumer base with constant inducements to accept more credit cards, loans, and mortgage refinancings. Psychosis and hypnosis work together to reinforce consensus trance.

In his book The Politics of Subversion, Negri argues that the ultimate discovery of the 20th Century was that “Capitalism is impossible,” and this was proved by the failure of the two major attempts to reform the capitalist system, the New Deal of the 1930s and the Great Society of the 1960s. This failure of reformist efforts was ultimately linked to the integration of the world market, which defined a limit of capitalist expansion. These limits were reinforced by the many forms of resistance that developed in response to the extensions of capital, from guerrilla wars to Green Parties. According to political philosophers of the past, capitalism cannot exist without new markets to exploit, in order to create surplus value. Marx wrote that Capitalism “is the first mode of economy which is unable to exist on itself, which needs other economic systems as a medium and support.” Without a new outside to absorb and digest, capitalism confronts “devaluation resulting from overproduction.”

Naomi Klein’s new book, The Shock Doctrine, analyzes how contemporary neo-conservative practice is based on utilizing natural or manmade disaster as a tool for leveraging increased privatization. Internal landscapes of the Empire can in this way be re-colonized by capital, after a catastrophe, and transformed. This is another symptom of the evaporation of any outside realm for capitalism to penetrate and absorb. The mass psychology of capitalism centers on this continual aggression, this need to grasp hold of the Other and make use of it, to convert difference to sameness. When the entire planet has been converted to sameness, as is now the case, this aggressive psychology goes into regression, seeking to defend itself at all costs. This entrenched psychology -- given iconic form by football games and right wing "shock jocks" -- must be properly understood so it can be addressed and its violent tendencies defused.

After the 1960s, the main engine of the US financial system shifted from the production of finished goods to financial speculations and transactions. This shift was symbolized by the iconic construction of The World Trade Centers in the early 1970s, “tuning forks” for the new frequency of predatory finance capitalism that developed through the 1990s. Unlike factory production, financial speculation does not require a large working class. In the United States over the last decades, we have witnessed an astonishing degradation. As Capital moved its factories overseas, the US dismantled its productive infrastructure and converted a population of trained technicians to unskilled “surplus labor,” filling service jobs. In some ways, the US has reverse-engineered itself into a Third World country, with its nomadic elite no longer tied to nationalist obligations - the financial meltdown should make this clear. Today, our primary export to China is soy beans, a raw material, while we receive electronic devices and finished goods from them.

During this process, the US rulers were confronted with the difficult question of what to do with the huge pool of nonspecialist surplus labor no longer required for the functioning of the system. One solution was to warehouse them in prisons (the US is 5% of the world population with 25% of the world’s prison population), another was to put them in the military (but popular resistance to the draft has made this difficult); another option was to create new bureaucracies and expand unnecessary aspects of the service sector. Another idea – a short-term solution but one that created the temporary illusion of abundance – was to encourage the amassing of personal debt, and then to turn that debt into a financial product, through securities, and sell those bundled debts up the financial pyramid.

With the end of any ideological effort to reform capitalism, the oligarchic elite began to shift increasing amounts of wealth to the top of the financial pyramid, crushing the middle class and the working class in the process. As Negri and Hardt point out, this shift was accompanied by a change in paradigm. Instead of classes with different interests, we now have a dualistic divide between the “included” and the “excluded”. Politicians incite and manipulate the fear of being part of the ever-expanding group of the excluded. For this reason, to take one recent example, Bush vetoed the child health care bill. To keep the fearful populace in line, the ruling regime offers "Neo-Malthusian" policies, and enforces a divide between respectability and misery.

It is increasingly obvious that the short-term thinking behind these arrangements has created a fragile and unsustainable situation. Something, or, more likely, many things all at once are soon going to break. At that point, the US political system's drift toward authoritarianism (as documented in Naomi Wolf's The End of America) may be given another strong push. However, as we have seen in Iraq and New Orleans, the control apparatus that is emerging is nothing at all like the efficient organization of European mid-century Fascism, driven by a mythological teleology and collective fantasies of racial purity. Instead, the postmodern form of authoritarian control involves a crude application of force and a general sloppiness, an almost uncaring attitude even toward its own intentions. For this reason, it is possible that a new level of authoritarianism and an intensified, nonviolent movement for positive change, orchestrated by civil society, could exist at the same time, at least for a while. But any significant change would require a serious raising of social awareness and consciousness of oppression among the populace, along with a deeper collaboration among progressive groups.

An imminent meltdown of the US financial system, if it is indeed on the way, should be welcomed, despite the hardship it may cause to many of us, our friends and relations. The system of globalized post-industrial capitalism is quickly destroying the planetary ecology, and if it is allowed to run unchecked for much longer, we will forfeit our future on this planet. Historically, crisis is the crucible for transformation. If the illusion of US prosperity disappears, the world may be receptive to alternative development models. After all, China and India are seeking to achieve the "American Dream" promised to them by decades of our pop culture propaganda.

With the approaching economic collapse, the Left has one more opportunity to emerge from dormancy and build a social program and a transformative plan of action. Negri and Hardt suggest that a revolutionary shift might not emerge in successive stages over time, as in previous insurrections, but in one sudden unfolding: "It may be that insurrectional activity is no longer divided into ... stages but develops simultaneously. As we will argue in the course of this book, resistance, exodus, the emptying out of the enemy’s power, and the multitude’s construction of a new society are one and the same process."

This possibility is based on Negri’s fascinating view of the nonlinear dynamics of historical transformation. He suggests, essentially, that events lie on a spiral, and an entire complex of concepts and organizations can reassemble itself all of a sudden, based on patterns of the past that are lost to conscious awareness. The long history of humanity’s struggle against oppression is available to all of us, encoded within us. Negri’s rhizomatic view of transformative processes calls to mind Rupert Sheldrake’s concept of “morphogenetic fields” as well as the Jungian archetypes, defined as clusters of psychic energy that can spontaneously appear within the psyche of the individual or society. It also fits the alternative model of time and development that some visionary scholars find encoded in the Mayan Calendar. According to this hypothesis, the entire complex and rich history of radical thought and praxis could suddenly emerge once again, in a new iteration, when conditions are prepared for it.

The immediate need for the progressive community is to articulate a positive agenda, along with tactics and strategies for bringing this agenda to fruition in the shortest time possible. The main thrust of the “Left” in the last decades has been criticism and complaint. This has failed to create a powerful attractor or an organizational infrastructure for social transformation. As the Dalai Lama put it, everyone wants a better life. If you can show them how to get there, they will follow. The Left has failed to achieve this simple task. Regeneration of the movement requires a new visionary paradigm that integrates the spiritual shift made by the counterculture since the 1960s with a compassionate and egalitarian program that has tangible solutions to offer to a broad spectrum of the populace.

Considering the preponderance of military force, there is no hope for violence as a tool of social transformation. Any radicalized program should focus on an absorptive strategy that neutralizes its potential opponents by engaging and transforming them - a Tantric approach, that sees no dualities nor enemies. If we are going to save the world situation from pitching over into the abyss, the media – especially the mass media – has to be intensively repurposed to beam out a new paradigm that integrates sustainable practices with inner transformation. The mass media could be used for the “production of subjectivities” focused not on the toxic "American Dream" of omnipotent ego, competitive greed, and endless material abundance, but on sustainability, interconnectivity, community, and psychic development. By my reckoning, this unlikely reversal has to happen in the next few years.

Dr.David Martin's Response on the Global Financial Situation

Berkeley Springs, West Virginia -- November 19, 2007 -- At a recent board meeting of The Arlington Institute, Dr. David Martin, CEO of M·CAM and one of the members of the board was asked for his assessment of the global financial situation in the coming months.

Here are the notes from his response:

I stand by my commentary in July of '06.

• The next shoe to fall is consumer credit

Currently as reports came in on 3rd quarter, foreclosures were up 470% this quarter alone. They will be up over 500% this coming quarter (4th). A foreclosure in our terms is when the bank has officially declared an account insolvent and tries to regain the asset (if it exists). The person who is foreclosed upon can no longer secure any traditional consumer credit. This in turn goes straight to the banks as no one will be able to get the store issued charge cards.

A minority of people pay off their consumer debt every month. When one considers the combination of consumer credit card debt and the compounded debt of "home equity" financing, we estimate that less than 20% of people actually carry no consumer credit from one month to the next. Many of the ones who don't pay off their carried consumer debt have at least one credit card at its limit and therefore lack credit capacity. Most have their paycheck directly covering bills and servicing the minimum balance due.

Therefore people who are foreclosed upon will not be able to obtain credit and since their paychecks will be maxed out, there will not be extra cash left over from the paycheck to service a new debt.

Next, everybody buys things at Christmas. As much as 40% of retail sales are done in the 4th quarter of the year -- i.e. the retail miracle. The purchase decline in retail goods this fourth quarter will occur because many credit-only consumers will lack the credit capacity mentioned above. Frequently, people overcharge their limit and the banks (albeit a profit center for subprime credit users) levy a penalty by increasing interest rates and charging additional fees. In the 4th quarter of 2007, the amount of people overcharging their limits will be too many for the banks to handle. We do not have a system in place to deal with overcharge on that scale. A substantial number of this December's purchases will go into an overdraft on credit limits.

CDO -- Collateral Debt Obligation -- Consumer Credit

Consumer credit pooled debt investment instruments (a form of CDO) are originated and rated based on underlying historical credit behavior and a complex series of predictive models for repayment dynamics. CDOs have "strips" which are a combination of similar profile tranches within a larger investment product. Based on the market's appetite for risk, investment performance guarantees (or credit enhancements) are packaged with the credits. These credit guarantees are issued by insurance companies, reinsurance companies, and other specialty finance companies -- many operating with extra-territorial jurisdiction rendering fiscal oversight more complicated.

These strips come in several categories:

• Investment grade
• Almost investment grade
• Junk and
• Why did we give them a credit card?

All of these grades are priced on historical default rates. The credit insurance companies (AIG, MBIA, Ambac, Financial Security Assurance, Channel Re, XL, Zurich Re and other reinsurers) have, from time to time, issued credit guarantees to the securities. Banks sell debt in the form of a Collateralized Debt Obligation (CDO).

Minor shifts in default actuarial activity (+/- 25 basis points) from normative behavior is absorbed within pricing of these financial guaranty contracts. However fundamental shifts (hundreds or thousands of basis points in one quarter) are not built into the model and result in credit enhancement insolvency on a major scale. When the insurer cannot pay based on its own liquidity impairment, the bank is left with catastrophic (an insurance term for excessive loss outside of expected) exposure.

If in a single quarter we have an increased foreclosure rate of 400% (or 4000 basis points) the insurance contracts simply cannot handle that kind of drastic shift as evidenced by the write offs in the third quarter. When we will follow the drastic third quarter with a loss of 500% in the fourth quarter, the trajectory becomes clear.

Neither the banking nor the insurance industry has a historical experience in dealing with this type of challenge and neither has the liquidity linked to these contracts to support system wide collapse.

• Where was the announcement of this? There was no announcement.

However Hank Greenberg is resurfacing in AIG leadership even during an SEC investigation because without him, no one else can remember where the counterparty risks are. In order to save the insurance industry, shareholders have looked past alleged SEC violations as there is no one with Mr. Greenberg's awareness of the market and counterparty agreements who can hope to navigate the coming challenges. In the 4th quarter, the US will have another record foreclosure announcement. Once you're over 25% (25 basis point) foreclosure, all models are broken.

Under a consumer credit melt-down, Capital One and/or Wachovia are likely going to put a massive foreclosure liability to an insurance company and the insurance company will not have liquidity to cover the exposure.

This is the problem we got into when we issued credit card debt on top of secondary mortgages -- (inflated the value of the home) and gave out credit based on faux equity that no one really had.

The reason why this problem is the second shoe to fall (subprime mortgage collapse was the first shoe) is because consumer credit has a different foreclosure frequency than traditional mortgage credit.

December is when the maturity of the giant buyout of the economy moves.

By December, you'll have a second round of charge offs based on consumer credit. The real big problem -- when you foreclose on consumer credit, people stop buying things. When people stop buying things, we don't have a tertiary way to pump liquidity into the market. People won't have extra cash from their paychecks and won't have capacity on their cards.

Try this case study:

Go to the mall and stand in front of counter at Victoria Secret. Watch what happens when someone wants to pay with cash. The clerk won't know how to ring up cash. They will need a manager to come over to give change and unlock drawers. When you don't have capacity on those cards, you don't buy things. VISA credit cards actually denigrate using cash in their run-up-to-Christmas add campaign.

Next, go to any savings bank data set. If you were going to spend $1000 in cash this Christmas, can you do it? For the most part, the answer would be "no" because we have had a net negative spending for the last 5 years.

Therefore there will be depressed consumer spending this Christmas but what is spent, people will overcharge. This will take what used to be good investments in CDOs and will change the dynamic. If you used to be a person who paid their bills on time, you will now only pay half. If the credit companies are counting on the top two tranches to pay their card off in full and they don't, they won't have liquidity to cover the rest. The banks cannot afford the top tranch paying half.

The estimates are out. There will be at least $400B in the first round of charge offs in the CDO market.

We're not going to be done with the subprime mortgage when the CDOs fall. Therefore we will have an insolvency problem with the banks that are mentioned above.

This is the kiss of death of a privately held Federal Reserve. For the Federal Reserve to function, its stakeholder banks (like JP Morgan Chase) must remain viable and liquid. When one of them, or any major bank in the U.S. (like Bank of America, Citibank, Wells Fargo, Bank of New York, Washington Mutual, etc.) is impaired or ceases to exist, the architecture of the Fed's capacity to respond to systemic challenges is unsustainable.

If the banks have no money, they can't pump liquidity into the market. Taking half of a trillion dollars out of market in a single distressed write down becomes problematic. The US banking system does not have the liquidity to take the hit.

The actual solvency of the Federal Deposit Insurance Corporation is relatively indecipherable due to the fact that their treasury management processes (and the risks of their own investment strategies) are not uniformly disclosed with sufficient transparency. The FDIC was set up for isolated problems with a few bad banks but is NOT prepared to "insure" the system in an industry-wide crisis. The actual liquidity reserve of the "insurance" that Americans view as their safety net is 1/100th the actual exposure of outstanding deposits. The actual coverage ratio for the Bank Insurance Fund (BIF) fell below 1.25% in 2002, the same year that less stable credit practices were adopted by America's leading banks.

The funny part is that the Federal Government will be on holiday when all of this happens. There will be no one to put freeze actions and moratoria on actions. The only way you stop the cataclysm is to put together civil actions on deposit withdrawals.

As I discussed previously, the Chinese currency wild-card may become relevant far sooner than expected. An effort by China to convert its $1.4 trillion U.S. Treasury holdings into euros is not viable for many reasons -- not the least of which is the European Central Bank's inability to absorb such an event. As China continues its rush away from supporting U.S. Treasuries and as Middle Eastern investors are buying them up in more diversified holdings, a new "currency exchange" is unfolding. Realizing that they cannot liquidate their holdings, it appears that the Chinese are currently using their U.S. Treasury holdings as collateral for euro denominated purchases and long term infrastructure transactions. In other words, they may be "liquidating" their holdings as collateral and, in so doing, effectively migrating to non-dollar value without ever having to officially dump their current Treasury holdings.

Therefore, collateralize the credit in dollars -- especially if you're long in dollars. The lender/financier won't call the note because you have it structured in such a way to both allow it to perform and hold illiquid collateral that no one wants. This essentially inflates euros. Although you can't sell dollars, the whole purpose of collateral is that it is a second source of payment -- collateral is there to down rate the risk of the loan. Secondary becomes irrelevant.

When February comes, the Chinese are going to do something as they will have to decide what the exposure is going to be with the treasury. As I see it they have to just dump the treasury. They only keep it because they can use it -- they have 43% direct/indirect of US treasuries so they'll dump them on the market.

The US Congressional pressures to decouple the RMB will work, but not in the way we want. Our plan includes helping them hold on to the treasuries, it does not involve them not holding the dollar anymore. The US wanted the tether to be part of the float. This will cause disenfranchisement of the US electorate (during primary season). February is also when public (media) will realize we won't pull out of this.

Side note: Mayor Bloomberg could enter the race at this point, being the savior candidate (at least economically), but has $1B dollars in non-liquid money so he may not be able to enter.

• March is when we realize that the dollar doesn't come back.

OPEC price with the whole fluctuation of oil futures presages the event. They are going to run the price of oil as high as they can get it on the dollar, while buying US treasuries from China with the money. When the dollar does collapse, they'll flip denominations. The wild card is long about March when the OPEC cuts spot oil off the dollar to the euro. One can look at the current oil price at close to $100/barrel and fail to see that, as this premium price is currently turning around and investing in a weakening dollar, the effective price (less the dollar investment hedge) is probably closer to $50/barrel than the spot price reflects.

Currency problems will change the game -- they are financially structuring themselves to take the hit.

When we can't afford to buy oil commodities on a spot market -- it compounds the problem however the consumer that Saudi Arabia ships to is liquid (China). In the US it is a big problem. There is still a market for oil; it just changes. When you come out of Straits of Hormuz, turn left.

For more information see: The Arlington Institute.