Commodities Crumble After US Says It May Ease Rusal Sanctions

That didn't take long: just one day after we reported that "in a surprise twist", most of Europe was pushing the Trump administration to ease Russian sanctions due to growing concerns of stagflation and outright recession should supply chains remain crippled, on Monday morning the US appears to have caved, and in a notice the Treasury announced it would provide sanctions relief to the world's largest aluminum maker outside of China, United Co. Rusal, if Oleg Deripaska relinquishes control and sells his controlling stake, while extended the deadline for companies to wind down dealings with Russian aluminum producer.

In the notice, the Treasury said that for Rusal, "the path for the United States to provide sanctions relief is through divestment and relinquishment of control of Rusal by Oleg Deripaska."

"Rusal has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on Rusal and its subsidiaries," the statement added.

In a separate statement, Treasury Secretary Steven Mnuchin said that the U.S. said it was considering a petition from Rusal to remove it from the sanctions list.

The Treasury also issued a new general license, extending the period during which companies may continue to trade with Rusal to October 23; the notice is below:

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) today issued General License 14 in the Ukraine-/Russia-related sanctions program.

General License 14 authorizes U.S. persons to engage in specified transactions related to winding down or maintaining business with United Company RUSAL PLC (RUSAL) and its subsidiaries until October 23, 2018.  In accordance with preexisting OFAC guidance, OFAC will not impose secondary sanctions on non-U.S. persons for engaging in the same activity involving RUSAL or its subsidiaries that General License 14 authorizes U.S. persons to engage in.

"RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries," said Treasury Secretary Steven T. Mnuchin. "RUSAL has approached us to petition for delisting.  Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL's petition." 

In addition to General License 14, today OFAC also published several FAQs regarding to the general license's authorizations and limitations, and issued an amended General License 12A.
On April 6, 2018, OFAC designated RUSAL for being owned or controlled by, directly or indirectly, EN+ Group.  In that same action, OFAC designated EN+ Group for being owned or controlled by, directly or indirectly, Oleg Deripaska and other entities he owns or controls.  RUSAL is based in the Bailiwick of Jersey and is one of the world's largest aluminum producers.

"If it wasn't previously clear if Rusal will still be sanctioned in case if Deripaska sells out, now we have a clear answer," Oleg Petropavlovskiy, an analyst at BCS Global Markets, told Bloomberg. "Changing the ownership structure would be a solution."

As Bloomberg adds, the U.S. statement will add pressure on the aluminum magnate as he seeks a way to save his company without surrendering control. While analysts have suggested that nationalization may be the only solution, Finance Minister Anton Siluanov told reporters Friday that Rusal was not on the list to be nationalized.

As a result of what appears to be a sudden thaw in relations, and an ease in US sentiment toward Russia and Rusal - which produces 6% of the world's aluminum and operates mines, smelters and refineries across the world from Guinea to Ireland, Russia to Jamaica - and thus a first step in the removal of Russian sanctions, aluminum prices crashed, tumbling over 8%% after the news, the biggest drop in 13 years in London...

... while oil was also sharply lower, some 1.5% down on the report.

The news has also dragged the 10Y back to unchanged on the day, last trading at 2.965%, down from a session high of 2.996%.

The Markets Are Speaking and No One Is Listening

It almost never works out when commentators assure us this week or next week will be the big one. All will be revealed. Then we move on to the next hugest event. Which goes to show, with many exceptions, that it's usually the surprises that pack the most bang for the buck. They haven't been analyzed to death with all the reasons at the ready to explain any deviations from forecast to be trotted out. If there wasn't weather, we'd have to invent it.

So, fully aware that I'll no doubt regret it, we are in for a very interesting patch. With, as far as I can see, an awful lot of traders ignoring the price action in favor of the preferred narrative. And resolutely positioned against what seems the pull of the tides. An unusually resolute stance in a year when things have been going merely so so for asset managers. I can only surmise that being "flexible" hasn't worked to plan so traders are choosing to stand their ground. Good luck with that.

There's no arguing that the world has plenty of problems to go around. But the not even dead-cat bounce in equities, emerging markets or the likes of the Australian dollar from headlines about Treasury Secretary Mnuchin considering a trip to China to work on trade differences and China cautiously welcoming the gesture shouldn't be ignored. Positioning is working against traders right across the board. And looking at the charts, stale positions, which are growing not shrinking, are not on the side of the path of least resistance.

Take CFTC positioning with a grain of salt. Especially if you only look at the top line. But it struck me that with all the news flow, geopolitical and relative monetary policy related, the dollar short position increased last week. Yet you don't have to be a dollar bull to wonder why. The dollar index isn't out of the woods, but support levels look a lot clearer than resistance. The more inclusive Bloomberg dollar index paints a similar but even more constructive picture. Even the supposedly impregnable emerging market currency indexes are noticeably sagging.

The euro and yen, both of whose central banks have meetings this week are giving a wonderful presentation of currencies looking to probe their downside. Yet there's no shortage of wishful thinkers opining on "someday when they get going."

The S&P 500 future last week tried and failed to surmount resistance marginally above 2700. Don't dismiss the protective reaction functions but we know now the clearly defined topside challenge. Which as of last week became even more formidable. And watch the ever creeping higher and much ballyhooed 200-day moving average. Eventually the ever- hopeful earnings season will begin to wind down. It's one thing to challenge support on a headline. Another if it happens just because.

As for bonds, using an investment thesis of, it has to stop somewhere, is a very QE view of the world. Several times over the weekend, I read about bond vigilantes. I reject the characterization. The sellers who have driven yields to multi- year highs aren't protesting monetary and fiscal policy developments. They are embracing them.

Trading off news is what we do. Trading off the sheer weight of flows, however is the better way to make money.

"The Big Fear today Is "Liquidity" – What Happens If We Do Get A Meltdown?"

"Time you straighten right out, better think of the future, else you'll wind up in jail."

This morning we are all "cautiously optimistic", apparently

The world reminds me of a duck: Serene and calm(ish) on the surface. Paddling furiously under the water. That's one way to picture the current round of geopolitical manoeuvring across Asia: China-Japan, US-Korea, China-US dialogs. Forget the Trump noise, but these discussions are likely to lead to new dynamic across Asia.. If the outcome of the current games are as positive as we expect/hope, then the prospects for the global economy are pretty solid. Ducks can pivot on a heart-beat! Over the next 10-years or so we expect to see South-East Asia's middle classes grow from around 600mm to over 2 billion – that's an enormous market to sell into. It will be ripe with opportunity – and we have ideas, but not without challenge.

Much of what we see on the news, and read on the wires is just NOISE. It's getting more confusing as twitterfeeds, fake-news, and rogue media provide more information than analysts can analyse to strip facts from the sturm-et-drang of "click-bait". Noise can cause markets to go up, down, sideways and shake-it-all-about – but within the noise are clear trends. Some negative, some positive. Much to our surprise – like what's happening in Asia -some of the noise is far more positive than we expected!  

This morning I'm tempted to check some of the stuff I'm reading about Macron.. comparing himself to Trump seems a mistake of the first-egg, but hey-ho! As for the UK – the less said about our sorry excuse for government.. the better. They've dug themselves into a horrible mess over Windrush…. But I'm afraid it could get worse. As the blame game deepens, the Conservatives unerring ability to do the wrong thing is coming to the fore. Apologise Now! Put right the wrongs that have been done to our citizens, and then do the decent thing by resigning. End of.

Noise can be the small stuff – like an article that flashes up quoting a "reputable" investment manager trashing the outlook for a particular stock. It gets whooshed round the market as "click-bait": with everyone reading it, sagely agreeing and the stock plummets. Few folk bother to check the facts: that the article first appeared in some meaningless rag somewhere obscure, or the supposedly "reputable" investor actually runs a $100k "hedge fund" from his garage. Its news and views and gets read no matter how wrong it is. (Sorry if this reads like Fake-News 101 to millennials who understand modern media..!)

At the other end of the scale is Big Noise. A good example is Oil. We've collectively bought into three big arguments over the past few years: i) the collapse of the oil monopoly (the increasing irrelevance of OPEC), ii) the US becoming the swing producer likely to constrain prices when shale/fracking kicks in at, say, £50. iii) Oil is no longer such an important commodity as the big carbon shift continues. Our conclusion was oil prices are likely to remain lower into perpetuity. That ignores the dynamics– we've absorbed most of the floating oil glut of excess stocks, demand is rising in line with economic growth and cheap oil, the swing producer is more than happy to produce, and the dynamics of Russia/Saudi oil have surprised us by becoming a fixed market feature. Folk need Oil. Higher oil prices, and a good example of how the NOISE led most of us to expect something utterly different.

Which leads us to this morning's conundrum – where are markets going? We have two things worrying us:

• Stock Markets look due a correction – they've wobbled along this year, and the noise from pundits saying they look overvalued and need a price correction is thunderous. Yet, we've still got solid company results coming in, and an economic environment that feels solid (although more tenuous to perceive 18 months down the road.)
• Bond markets remain overly tight – spreads between asset classes and risk look implausibly tight, get continue to ratchet in. At some point risk vs return has to be considered, yet default rates remain low.

We're all aware why markets are so tight. Too much money chasing assets as a result of unconventional monentary policy – QE? (I still reckon there is an enormous bill coming our way when we experience the unintended consequences and lashback of QE – but that's a story for another morning….) Or is due to yield tourists rolling down the risk curve in search of higher returns in assets the don't properly understand? Or is it the number of asset bubbles; like tech valuations, Fin-tech, cryptocurrencies etc that look ripe to burst?

All these things worry and concern asset managers. The big fear I'm hearing today is "liquidity" – what happens if we do get a market meltdown, bond and stock markets take a knock and we see the kind of market suspension we had in 2008? Investment managers will always tell you they are long-term investors – while keeping a time frame of a few days if markets look likely to go up/down (because that's how their bosses measure them!).

Liquidity is whatever someone else is prepared to pay for your asset. In times of market dislocation its bound to be wide. Perhaps a better answer is not to worry about it – but choose the assets that are not only defensive, but most likely to simply get wet when the rains come and dry off quickly thereafter? Thinking back to the great bond rout of 2008 – most of the bonds that crashed far below 100 par as a result of liquidity being switched off, rose back very quickly as markets recovered.

Therefore: pick assets with duck like characteristics. They will get wet when the storm comes, but will shake their feathers remaining dry, warm and snug when the sun comes out again.. Not quite so sure about the legions of triple BBB issuers and inflated stock prices..  but…

And finally, my contribution to the "Click-Bait" world. Listening to my teenage nephews and nieces (plus my own millennials) at my parent's Diamond Wedding party, I'm seriously worried about Facebook. They've already made up their minds… they understand stuff I just don't….

From Fake Boom to Real Bust

Paradise in LA LA Land

More is revealed with each passing day.  You can count on it.  But what exactly the 'more is of' requires careful discrimination.  Is the 'more' merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.

 

 Normally, judgment would be passed on a Thursday, but we are making an exception. [PT]

 

For example, here in the land of fruits and nuts, things are whacky, things are zany. Last month, State Senator, Dick Pan, introduced Senate Bill (SB) 1424, which would require California based websites to utilize fact checkers to verify news stories prior to publishing them.

Who exactly these fact checkers would be – the moral servants that would save the world from the ills of fake news – was conveniently missing from the bill. Ironically, the control freaks in California state government can't control themselves; they want to muck around with people's lives unconditionally.

Nonetheless, screwball proposals like this out of Sacramento fall into the mere noise category – for now.  We estimate it will take another Presidential election cycle, or two, before such nonsense is taken seriously by the majority of state lawmakers.

At the local level, there are more demanding problems that require more demanding solutions.  Here in Los Angeles County, according to something called the Los Angeles Homeless Services Authority, there is now a homeless population of precisely 57,794.  For perspective, Chavez Ravine (i.e., the Dodger Stadium), has a capacity of 56,000.

This army of indigents, roaming about the LA LA land paradise, has become a significant embarrassment for local leaders.  Haphazard urban campsites litter the bank tops of the colossal, concrete Los Angeles River Channel between Downtown Los Angeles and Downtown Long Beach.  The massive collection of tents and makeshift shelters has become too much to ignore.

 

 Homeless in Lost Angeles – skid row is beginning to intrude on City Hall (note this photograph was taken in 2015). [PT] Photo credit: Daniel D. Teoli Jr.

 

A Novel Pilot Program

Obviously, an unpleasant situation like this requires big, outside the box, solutions.  Free brown bag lunches and roll-out blankets won't cut it.  Hence, the clever folks at the LA Community Development Commission have launched a pilot program to pay homeowners to construct backyard dwelling units to house the homeless.

Loans of $75,000 are being granted for constructing a new backyard unit for the purpose of housing vagrants.  There's even a design competition for model secondary dwelling units.  What's more, loan interest stops accruing after five years in the program, and the loan is forgiven after 10 years.  All for turning your backyard into your very own rescue mission. What could be a more noble endeavor?

Our objective is not to ridicule this novel homeless housing program.  Though, we'll point out that every subsidy backed solution generates a horde of new problems.  What we're really after today, is a better understanding of how this diminished condition came to be.

What is going on?  What is it that has produced a world where homeowners must be paid to build backyard homeless dwellings?  It is certainly not the world that is presented by the government's statistics.

The last we checked the U.S. unemployment rate is just 4.1 percent – a 17 year low.  The unemployment rate in Los Angeles County is 4.5 percent, which is near a record low. So if everyone has jobs, why is everyone homeless?

 Unenjoyment rates in LA County haven't been this low in recent memory – things have probably never been better! This makes it difficult to explain the sudden proliferation of Hoover-towns – are they a fata morgana? The desert is nearby after all.  [PT]

 

From Fake Boom to Real Bust

Similarly, the economy has been on a continuous growth streak since June 2009.  That is a remarkable run.  In fact, it is the second longest economic growth period for the U.S. in the post-World War II era.

The current nine year bull market in U.S. stocks is also one for the record books.  It is now the second-longest U.S. bull market in history. What in the world is going on? After a 400 percent increase in the S&P 500, shouldn't everyone be rich?  Wasn't Ben Bernanke's wealth effect thesis supposed to bring prosperity to the masses?

After a nine year economic expansion, and an unemployment rate of just 4.1 percent, shouldn't everyone have arrived at a place where they can sufficiently afford even a small, rundown apartment?  Why is it that so many people have given up, and checked out from pursuing a productive, self-supporting life?

Perhaps, it is because the nine year economic boom has, in effect, been a fake boom.  Government statistics may say one thing.  But open eyes, and a crude awareness, tell a completely different story.  It is a story of large segments of the population being left behind.

 

 Missing judgment day for reasons of long-standing left-behindness… [PT]

 

Alas, when the stock market cracks, and the economic growth charts can no longer be fabricated upward, the fake boom will turn to a real bust.  We suspect this real bust will coincide with the breakdown of the debt based fiat money system.

In other words, the entire capital structure that's been propping up the present mirage of prosperity will cascade down like a Mammoth Mountain avalanche.  After that, things will really get out of hand.

Upcoming attractions on the long judgment day weekend. [PT]

 

China's Monetary Shell Game

Throughout much of last year, we were told repeatedly that the PBOC was tightening monetary policy. China's central bank had raised its reverse repo rate twice early on, and then once more last December (and would do so again just last month). These moves coincided with Federal Reserve "rate hikes", seemingly in line with the whole idea.

Not only that, a "hawkish" PBOC would tend to confirm globally synchronized growth. Shifting stances from the way it had conducted monetary policy during the "rising dollar", a new directive apparently prioritizing inflation rather than deflation risks is exactly how this central bank would respond to a boom – if it was real.

The narrative, as is usual, contained more inference than evidence. It started with the premise, globally synchronized growth, and then worked backward to find "evidence" of itself. There was never a pickup in Chinese growth, there still isn't any today, and the PBOC was doing the opposite of tightening particularly later in 2017.

It is mere symbolism, which from the Western perspective might seem a bit silly in a "why bother" kind of way, but on that side of the Pacific it is viewed officially as worth the charade so little margin is left in China. For one, PBOC officials know all-too-well that the media will characterize Chinese monetary policy as shifting to, or going further toward, "tightening." As with both prior "hikes", the mainstream has dutifully done just that.

And did so again in March. Contrary to all that, there has been a clear downward bias in RMB markets dating back to last October.

What changed in October isn't exactly clear, but clear enough. Prior, both secured and unsecured funding were being driven by illiquidity not of the policy rate variety but of the more organic kind owing to bank reserve growth that continues to be hugely constrained. The central bank contrary to the Western narrative began to increaseliquidity in those markets. Though it may not seem like it by convention, even the PBOC has to face trade-offs.

They did not, however, use the MLF to the same degree as they had been doing in 2016. The MLF was meant as a targeted gesture, an intentional funneling of funding into only the largest of Chinese banks. It was believed that rather than flood the system with RMB willy nilly, this targeted approach would be more discerning as China's biggest institutions would take care in how new funding was productively used in the real economy.

It doesn't seem to have worked out quite in that way. Instead, the big banks began to hoard liquidity for reasons that also aren't immediately clear (though we can reasonably speculate). Left out of this "reflation" in RMB were smaller and medium-sized real-economy firms.

If the PBOC had been serious about tightening, it would have done a whole lot more than raise its reverse repo 5 bps at a time. I also wrote in December, "If economic and financial conditions were really improving, [RRR] is where monetary policy would respond (you know, like every other time in the past)." Today, they did – only nottightening.

Starting next week, the RRR for large firms will be cut by 100 bps. 

This isn't going to be an isolated maneuver, however, as the PBOC is ordering those banks to use reserves freed up by the reduction to repay MLF borrowings!

We've seen this before, in the middle of 2015. This is different, though, and in several important ways.

At root, I continue to believe, is CNY. Beginning early last year, there was a clear choice made to prioritize the currency over every other consideration. Unlike the media, Chinese officials very early on realized the overriding factor in everything (globally) – the "dollar." Thus, they knew CNY DOWN = BAD.

But how does one reverse that devastating equation? It's not an easy thing, as it turns out. Authorities tried several times throughout the "rising dollar" period with little success (as already noted). As a result, they blew through a huge chunk of so-called reserves and the currency dropped anyway as it became self-reinforcing (a run).

To figure out what to do differently, ask yourself, what is it that made CNY a primary target in eurodollar dysfunction? The answer is always risk; prior to 2013, it was widely believed that though China was racking up debt at an alarming rate it would in the end prove entirely manageable made so by a recovery of pre-crisis growth levels. That's what really changed in early 2014, the realization that maybe there would be no return to that economic stateand therefore financial risks were much more than previously believed.

The result was "outflows."

To combat this perception of risk is therefore two parts simultaneously.

China's economy needs to be at least stable even if there is no longer any plausible path back to the 2006 economy.Second, the financial system must also be steady so as to buy time in order to try and manage some degree of deleveraging (to stay Japan 1987 rather than have the doomsday debt clock tick far too close to Japan 1989).

The second part is tricky as it almost turns into a loop of circularity; CNY must be stable so that the financial system can be stable so that CNY can be stable. What it means in practice is to reduce all the factors that might be perceived as contributing to its downfall.

Among them, no more "selling UST's" as the most visible sign of distress (if possible). Instead, the currency is to be given the rock-solid treatment, which given CNY's history means continuing its "dollar" backing. De-dollarization is, at this juncture, being judged as too risky of a proposition.

That would mean great(er) attention to the asset side of the PBOC balance sheet which continues to bleed forex "reserves." In other words, increases in RMB lending to the market via the MLF or anything else absent an actual increase in forex leaves Chinese RMB more and more unbacked on the money side. Unless forex starts to rise again, which appears very unlikely (CNY rose for months, and they still bled), there is only so much the PBOC can do through these RMB windows without breaking what sure looks like an imposed (policy?) limit (shown above).

So, you don't want to destabilize CNY by leaving RMB (bank reserves) more and more unbacked, so why not then make big banks pay down the MLF?That would create more margin for the central bank to deal with the prospects for further forex drawdowns in the months ahead.

The obvious downside to withdrawing bank reserves is immediate liquidity. To address what would otherwise be an acute shortfall, shift the burden onto large bank private balance sheets by cutting the RRR. They've been hoarding it anyway. The central bank reduces its RMB footprint to better align with "dollar" levels, leaving the private banking system to pick up the liquidity slack in a way that doesn't endanger CNY. Since you just hiked the reverse repo rate for a fourth time last month, it will leave the "experts" wholly confused. 

I believe that's the theory, anyway. It's a further lesson in how to continue to loosen RMB while making the rest of the world think you're doing something else (at worst neutral). China has a sustained money problem it cannot by definition fix. Next best thing? Hide it. Why?

There is no recovery coming. 

The Economy Is Cooked

Hours ago, European Central Bank chief Mario Dragho conceded: "The growth cycle may have peaked"

Of course, those paying attention to the data already knew this. Our politicians and central planers have been peddling to us the fantasy that the global economy is strengthening, finally ready to fire on all cylinders after nearly ten years of dependence on monetary stimulus.

That just ain't so.

The Federal Reserve of Atlanta's GDPNow measure, which gives a forecast of Q1 2018's expected GDP, is currently coming in at 2.0%, down from the much more vigorous 5.4% growth predicted as recently as early February:

Generating this growth, meager as it is, has required a tremendous amount of new debt. So much more so that the US will soon have a worse debt-to-GDP ratio than perennial fiscal basket-case Italy:

U.S. Debt Load Seen Worse Than Italy's by 2023, IMF Predicts (Bloomberg)

In five years, the U.S. government is forecast to have a bleaker debt profile than Italy, the perennial poor man of the Group of Seven industrial nations.

The U.S. debt-to-GDP ratio is projected widen to 116.9 percent by 2023 while Italy's is seen narrowing to 116.6 percent, according to the latest data from the International Monetary Fund. The U.S. will also place ahead of both Mozambique and Burundi in terms of the weight of its fiscal burden.

The numbers put renewed focus on the U.S. deteriorating budget after the enactment in December of $1.5 trillion in tax cuts, and the passage more recently of $300 billion in new spending. President Donald Trump's administration argues that the tax overhaul combined with deregulation will help the economy accelerate, which in turn will generate enough extra revenue to avoid any fiscal fallout.

Officials with the Federal Reserve and Congressional Budget Office are skeptical about those expectations, as they forecast long-term economic growth will fall short of expansion rates needed to fund tax cuts. The central bank's most recent forecasts show a median estimate of 2.7 percent for this year's expansion slowing to 2 percent in 2020, while the CBO sees GDP growth slowing from 3.3 percent this year to 1.8 percent in 2020.

Looking back across the past 50 years, we can clearly see that the 2008 Great Financial Crisis was a turning point. That was the moment where our addiction to exponentially increasing our debts began to have real consequences.

The chart below clearly shows that, since then, we've been in an era of diminishing returns in exchanging debt for growth:

What can ride to the rescue at this point? Not much.

Our 'recovery' since 2008 is now one of the longest on record; another recession will occur sooner or later (Fannie Mae head economist Doug Duncan thinks one will likely arrive by next year).

Rising interest rates will only accelerate the advance of a recession. And interest rates are indeed on the rise, with 10-year Treasury yields having nearly doubledsince July 2016:

10-YEAR TREASURY YIELD (%)

And with the arrival of recession, what will our leadership do? The only thing it knows how: print, borrow and deficit spend in attempt to boost 'growth'. Except the debt will be even more expensive this time, and it's ability to generate incremental growth per unit of new debt even weaker.

The Bigger Predicament

But sadly, as prodigious as it will be, our growing pile of debt isn't going to be the primary limiter of growth in the coming decades.

Instead, it will be Energy.

Oil prices are on the rise again, as the world is waking up to the fact that annual demand will exceed supply for decades to come and that the US shale 'miracle' will be a short-lived mirage. All while new oil field discoveries are the worst since World War 2.

With increasingly expensive energy -- and increasing global competition for it -- the economy will find itself increasingly constrained. We will be faced with a future of doing less.

This is not fear-mongering; it's science. Specifically, our destiny is in the hands of the Laws of Thermodynamics. Without a surfeit of new, plentiful, BTU-dense and affordable energy sources (which we simply don't see on the horizon), economic growth cannot be sustained.

Our economy specifically, and humanity in general, are totally unprepared for a future of even slightly less energy. Everything is tuned to grow exponentially. There is no "plan B".

We have no models yet for how to manage in a world of de-growth, so we will blindly slam into this crisis head-on. But as painful as they will be, the economic woes at that time will be the least of our worries.