IAS39, ‘mark to market’ and UK GDP (June 5th 2012)

From June 5th 2012)

There is a significant divergence between the way the mainstream present the UK’s Debt to GDP ratio and the approach taken by ‘alternative media’ economists and writers in the blogosphere.

It very much depends on what you include and what you don’t.

Back in early 2011 the Office for National Statistics (ONS) included this under-reported gem as a header for its 25th January public finances news release:

‘For the first time data for Royal Bank of Scotland and Lloyds Banking Group have been fully incorporated into the public sector finances. This has impacted considerably on the measure of public sector net debt that includes the effects of the financial interventions. It has not materially affected the measures excluding temporary effects of the financial interventions, that are used by HM Treasury for the purpose of fiscal policy and are the measures that are forecast by the Office for Budget Responsibility.’

Further into the release we find out that at the end of December 2010:

Net debt excluding the temporary effects of financial interventions was £889.1 billion,equivalent to 59.3 per cent of gross domestic product (£2322.7 billion, equivalent to 154.9% including interventions)

The measures excluding the temporary effects of the financial interventions are used by the Office for Budget Responsibility to forecast the public finances and by HM Treasury for the purposes of fiscal policy.

For the record let’s bring the numbers through to the end of 2011. They are slightly less obvious in this January 2012 release but are still there to be seen:

Public sector net debt at the end of December 2011 was £1003.9 billion (64.2 per cent of GDP). This compares to £883.0 billion (59.4 per cent of GDP) at the end of December 2010;

Public sector net debt at the end of December 2011 was £2329.9 billion (149.1 per cent of GDP). This compares to £2257.0 billion (151.8 per cent of GDP) as at the end of December 2010.

And a link to the ONS media release:

http://www.ons.gov.uk/ons/dcp171778_253584.pdf

So the ’64.2%’ ratio is our officially recognised year end rate, not the ‘149.1%’ which happens to include the liabilities of our semi-nationalised banking system.

It is ‘temporary’ of course, however long that may be.

My concern lies in what happens if we have a system-wide crisis with Europe acting as a catalyst. Will those banking liabilities crystallise? After all, although not included in the headline debt ratio by bringing them on to the national balance sheet the UK is effectively announcing to the world that it is standing behind them. How could the UK not be held to account in the panic of a crisis?

And of course what other ‘off balance sheet’ derivatives are also lurking in the banking undergrowth? Are there additional unknown contingent liabilities?

But our nationalised banks have assets. The £1.3 trillion is not reported because the assets of these banks exceed their debt. Indeed, there is a net book gain so there is nothing to worry about.

Enter IAS39, ‘mark to market’ and our global property problem.

Over on the asset side of our balance sheet we have lots and lots of loans and complex derivative securities predominantly secured by some form of property or financial asset. Alas, in many cases the underlying value of that security has tanked since the bursting of the property bubble.

But for the support of the regulatory authorities on both sides of the Atlantic in 2008 and 2009 we would already be in something of a pickle. Without labouring the point the U.S. authorities relaxed the ‘mark to market’ rules at the height of the credit crisis. In other words if the systemic drop in value threatened the system, get rid of the rule that required assets to be based at market value. I’ll leave Wiki to explain the background on this little wheeze:

http://en.wikipedia.org/wiki/Mark-to-market_accounting#Effect_on_subprime_crisis_and_Emergency_Economic_Stabilization_Act_of_2008

I mention this because within the profile of our local banks U.S. investments are not exactly under-represented.

IAS 39 is an international accounting standard that sets the basic framework for the recognition and measurement of financial instruments:

http://www.ifrs.org/NR/rdonlyres/BCE30C2D-F85E-42B7-ADB6-E91B50F13B39/0/IAS39.pdf

It is a technical document so I will get to what I find the most interesting element, the paragraph on the measurement of financial assets. On the face of it the document seems to make a lot of sense but the problem of course has been current market conditions. During 2008 and 2009 the banks carried too many assets as ‘available for sale’ which would have involved making them down to a ‘fair value’. The quantities involved were so great that they would have threatened the integrity of the entire system.

So, as in the U.S., a way was found to take these assets out of that category. They would be ‘held to maturity’. Some elaborate and very creative balance sheet manipulation took place, SPV’s, ‘Special Purpose Vehicles’, were created to hold ‘bad’ assets which could be held to term. Tainted and overvalued assets could be shifted and legitimately held at book value without impacting future profitability. No significant write-downs were necessary; the banking system survived and bonuses continued to be paid.

Our £1.3 trillion or so of banking assets are ‘backed’ by an asset portfolio which on the face of it should not cause concern. But what proportion of these assets are held at book value and how much of it truly represents underlying market values?

What happens when the sovereign debt problem does become a systemic issue?

Which number should we be looking at?

All roads lead to gold (June 3rd 2012)

From June 3rd 2012

I once made the unfortunate mistake of suggesting that the revenue interest cover (not EBIT!) on my employer’s debt pile looked like it was heading for 25%. In other words revenues covered annual interest payments by a factor of four. It was obvious to me that the situation was unsustainable and that at some point in the not-too-distant future cash flow would bring the situation to a head. The comment was made to an exec board director of a large PLC, whose brand you would have recognised then, but which has now been consigned to corporate memory. It wasn’t what he wanted to hear.

Eighteen months later its U.S. holding company filed for Chapter 11 bankruptcy protection in what at the time was regarded as the largest failure in UK corporate history.

My analysis had been spot-on but my timing was off.

During 2009 and 2010 I came to the conclusion that the structural issues within the global economy would manifest themselves in some way through some sort of crisis. A few years earlier a move out of employee status into that of an independent had forced me into thinking about how to improve management of my investment portfolio – you need to carefully plan for those ‘downtime’ periods. It wasn’t long before I discovered gold and silver. Perhaps surprisingly, I had never really considered them as monetary alternatives. As with most people my education had conditioned me to think of that paper stuff as ‘money’. Keynes had come into favour by the time I had started to study my economics ‘A level’; it certainly did seem to make some sense, especially some of the basic formulae which seemed to suggest that you could manage an economy by pulling certain levers from time to time. In retrospect I feel pleased that I did not pursue the subject to degree level. While I had picked up an elementary understanding of the subject it was not enough to condition my thinking for the ensuing decades. I could still exercise an open mind about ‘alternative’ economic paradigms, unencumbered by an economics higher education. So I bought-in to the gold and silver story, literally, in 2006.

2006 and 2007 were still boom years. But the seeds of collapse had been planted many years earlier and artificially nurtured by nutrient accelerants. Those nutrients of course later manifested themselves as poison. Growth had certainly been substantial and endemic. Unfortunately our economic roots were not strong enough to hold the overwhelming foliage of debt that had appeared. Ugly, improbable and aberrant derivative growths appeared, exacerbating an already distorted and misshapen construct. Our economic tree looked like it was about to topple, slowly being crushed by the effects of its own weight, and being eaten away by elements clearly violating natural law. There had simply not been enough time to build strength into the eco-system, nor had it been effectively nurtured.

Our economic tree started to topple.

The Neo-Keynesian rulebook was consulted. Or eco-system needed more nutrients and better accelerants. Interest rates were forced down and money printed. A rapid injection of both provided some respite. Ugly, distorted and a fundamental violation of natural law it might be, but it still stood. We had a cure. When the system looked uncertain all that was needed was another injection of medicine.

But we don’t have a cure. Those economic steroids may have kept the system afloat for a time but our eco-system is still fundamentally flawed. Those genetically engineered derivative ‘growths’ are still there and the weight of debt shows no sign of decreasing.

The threat of entire branches falling away suggest an early autumn. Leaves, people and small businesses, are already falling; unemployment is on an upward trajectory. But it’s the threat of entire branches cascading down that will catch the headlines. Greece, Spain, Cyprus, Portugal may be followed by Japan, the U.K. and ‘eventually’ the U.S.

Only a few months ago it looked like we had a cure. The U.S. and the U.K. appeared to be in recovery, and the talk was of a ‘soft landing’ in China.

How things change.

The world is now polarised into two separate thinking paradigms. The U.S. conditioned by the awful effects of the Great Depression is fearful of an even greater depression. Concern is not with inflation but deflation. On the other side of the Atlantic Germany sits as marionette-master. It has a genetic memory of the Great Inflation, the wheel barrow Weimer Republic experience of the early 1920’s. And within Europe we have a tussle between an intractable Germany and an equally incorrigible European periphery, desperately seeking a world where someone else continues to pay.

We have an impasse. We don’t even have outcomes that could be seen as binary, none look positive.

As I write we also seem to have the worst of all worlds: decision paralysis. Twenty summits with no decisions have finally led to the Eurocracy being ‘found-out’ by the markets; and Europe’s people are starting to vote with their feet.

The politicians have effectively terrorised the Irish into voting ‘For’ austerity. In Greece, Cyprus, Spain and Italy the situation is different. Unemployment is already off the scale in some areas, thousands are homeless and the prospect of power cuts and food shortages threaten Greece. And Spain cannot afford to bail out Bankia, not to mention the queue of IAS 39 protected banks behind it. IAS 39, the one that facilitates ‘innovative’ presentation of property related assets on bank balance sheets. The unemployed in Spain and Greece have little more to lose; many have already lost a roof over their head, resorting to bins for the next meal. What possible hope can ‘austerity’ offer these people?

So the world teeters on the brink. What looked like years away only a few weeks or months ago may already be upon us.

My timing is not always exact.

But the analysis is usually close.

And the analysis suggests that all roads lead to gold. The move in gold on Friday June 1st should act as a beacon to the world. The forty year experiment in a purely fiat based system is coming to an end. The rhyme and rhythm of history is repeating and natural economics law will reassert through creative destruction.

Fear has taken hold.

Whatever happens over the next few days, weeks or months does not look encouraging for the old fiat based system. Either we get a nuclear level of money-printing into the world’s system, or we don’t. Tinkering at the edges simply threatens to fuel the panic. Confidence evaporated on Friday and money is looking for a new home. Printing threatens high, possibly hyper-inflation in time; not printing will totally eviscerate confidence and almost certainly lead to a global deflation based ‘super-depression’. There are no good choices.

Nobody wants to be in a currency backed by a nation whose sovereign debt is supported by negative growth. And don’t forget that GDP does not matter. Borrowing and spending to create income would put you in jail in the private sector. It’s tax-take that matters. Taxes support payments, not GDP.

All roads lead to gold. If precedent is anything to go by, gold and gold-backed equities are amongst the few havens of safety in the new world, at least for the period of transition – however long that may be.

Meanwhile I feel uneasy on the timing.

While billions across the planet distract themselves with myriad tasks and entertainment, small groups of financial power-brokers are making decisions about what to do next. But they don’t think and act at internet speed. They work within a political paradigm where seconds of time in the markets equate to months of dialogue and dialectic.

They think they have time.

I’m not so sure.

The wheel of history looks ready to turn.

Silver at a crossroads? (June 2nd 2012)

From June 2nd 2012

The increase in the price of silver on Friday was not as dramatic as that of gold. I’ve already seen some comments in the media about the fact that it is the ‘industrial metal’ aspect that is weaker because the global economy is showing signs of turning down.

But we need to remember that for the past year the U.S. was supposed to be in recovery mode, and that China has ostensibly been growing in the upper single digits.

And yet the price of silver declined during this ‘recovery’ period.

Now that the economic indicators are looking very weak gold has helped to pull silver up again, within striking distance of $29.

It’s the paper spot game that has been driving the silver price up and down – ‘short and cover’ – in a mechanical and cynical weekly trading routine.

One thing is for sure, once the economic downturn takes hold base metal mining volumes will tail off and the 70% of silver output associated with those metals will likewise fall.

On the other hand I can’t see silver investor demand dropping off. If anything the fear factor will act as an accelerant.

Gold back as a safe haven? (June 2nd 2012)

From June 2nd 2012

Around lunchtime on Friday gold recovered its safe haven status in the U.S. During the afternoon it moved up by $66, an almost unprecedented jump, from $1550 to $1626 smashing through old resistance points like a knife through butter. Hedge funds panicked into covering exposed positions, accelerating the leap:

http://www.kitco.com/charts/livegold.html

The HUI, the gold bugs equity index, had an equally stellar day on the North American markets, up by 6.74% to 444.50:

http://finance.yahoo.com/q?s=^HUI

Similar moves were seen on the XAU:

http://finance.yahoo.com/q?s=^XAU&reco=1

Meanwhile, the DXY, that beacon of fiat safety dropped below 83 showing some distinct signs of breaking an upward pattern established for the last three months:

http://www.marketwatch.com/investing/index/DXY

So what has driven this dramatic turn?

1) The U.S. NFP came in at 69,000 less than half the 150,000 expected by the markets.

2) The U.S. Chicago PMI released on Thursday is turning down, along with other U.S. LEI’s.

3) China LEI’s are now falling; there is fear of a hard landing.

4) Europe remains a basket case, paralysed by indecision and weak leadership more prone to eternal debating society level summits.

5) Bond yields in the U.S. and U.K. are now the lowest in history. German bunds are also at similar levels and you have to pay the Swiss to hold your money.

It’s just dawned on the markets, of which the U.S. is still the biggest player, that there is nowhere else to go. If sovereign debt looks safe, you had better watch out for QE3 and a similar policy in Europe. Expect that tiny return on bonds to evaporate with inflation when the big print starts.

And don’t think that retaining funds in USD is any safer. U.S. debt is already at $15.8 trillion and will crash through the $16.2 trillion limit before the U.S. election; Obama is already sending out signals about a $20 trillion limit.

With a U.S. economy turning down, the inflationary spectre of QE3 on the horizon and an uncontrollable debt burdon, already over 100% of GDP, how long will the USD retain its status a safe haven? How many years has it got left as the globe’s primary reserve currency?

So what’s all this got to do with us?

Well gold is obviously off the starting block. The North American PM sector has already made some initial moves but the full implications of what is happening has not been completely understood within the AIM PM sector. Some of the larger players inched ahead on Friday, but nowhere near the moves seen in post-Europe-close trading on the North American markets.

Our first moves have yet to be seen.

It’s time to make a move.

Anything Condor, Ortac or Red Rock specific will be accentuated once we see a firm sector trend move up. Gold will help arrest the old decline pattern, not Greenland.

Back to the Future 2008 (May 30th 2012)

From May 30th 2012

Looks like we have a 2008 situation on our hands albeit in slow motion at this point:

DXY up as Euro plummets:

http://www.marketwatch.com/investing/index/DXY

Gold falls on paper liquidation and reversion to risk-off USD/Treasuries:

http://www.marketwatch.com/investing/index/DXY

Even Brent has dropped to 103 although supply threats probably mean that it won’t go anywhere near the $40 we saw in 2008:

http://www.livecharts.co.uk/MarketCharts/brent.php

EUR/USD ping pongs around 1.24, a long way down from the 1.30 only a couple of weeks ago:

http://www.livecharts.co.uk/ForexCharts/eurusd.php

So we are back to considering the the context and implications:

– Germany still won’t agree to a big CTL+P
– The ECB can still only provide liquidity not solvency related bailouts.
– Spain can’t afford to bail out its banking system.
– Greece runs out of money on June 20th a few days after its election.
– Greece has already run out of bank collateral which means the ECB may legally have to cut liquidity flows before the June 17th election.
– U.S. LEI’s are faltering but have not all turned down yet.

At the moment it still looks like it will be down to FED to make the CTL+P decision on June 20th. It’s looking more and more like if they don’t do something on the 20th global markets could actually implode.

Why would the FED CTL+P?

1) U.S. equity indexes are starting to decline.
2) U.S. LEI’s are faltering.
3) U.S. U3 is still at 8.2%, months before the election.
4) It’s the last chance they can do something before actions become ‘political’.
5) The DXY is already too strong as is the EUR/USD. A strong USD threatens a U.S. export led recovery and thus unemployment.
6) Additional credit swaps may be necessary to provide additional liquidity in the EZ – buying time until after the elections.
7) Black Swans a) Israel/Iran; Israel may just press the button add inflame already nervous markets. b) An Ireland surprise c) Bond vigilantes take a pop at Portugal or Italy d) Greece tax receipts plummet even further bringing forward the day the Greece current account moves into the red.

With the news that: ‘Euler Hermes, the world’s biggest trade insurer, has suspended cover for exporters shipping to Greece amid fears the debt-laden nation could be forced out of the euro, hindering Greek importers’ ability to pay their bills.’ Greece could have some real trading issues in June.

Implications on U.S. inflation of Yuan/Yen trading (May 27th 2012)

From May 27th 2012

Correct me if I’m wrong but on a combined basis (import/export) wouldn’t that be about $342bn heading straight back into the U.S.?

Where else is it going to go? Russia? Brazil? I think not.

Now $342bn doesn’t sound a lot against annualised U.S. deficits of $1.2trillion but how much of that $342bn will be in M2? In other words over the next 12 months is the U.S. about to face an inbound avalanche of inflation producing cash (and credit)?

Will the FED need to go QE3 with all this cash about to return home?

http://www.gata.org/node/11416

I don’t think the media economists have thought through the implications of this yet, given the emphasis on the Euro and the (looming) Iran issue.

Note:

one trillion Japanese yen = 12.55600 billion U.S. dollars
12.48ty + 14.78ty = 27.26ty x $12.556bn = $342.27bn gross transaction value.

Early June Grexit? (May 27th 2012)

From May 27th 2012

It could be a rather nervous week for the markets. There are already rumours of a Grexit next weekend, and we also have the effects of the Spanish Bankia nationalisation to wash through:

‘The comments came amid rumours – detailed by the bank of Tokyo Mitsubishi-UFJ – that a Greek exit is now imminent. The bank said there was speculation that a “planned departure” would take place over the weekend of June 2 and 3.’

http://www.telegraph.co.uk/finance/financialcrisis/9291187/Greece-faces-G

What else do we have?

– Germany is still sticking with the ‘no Eurobond’ line:

“We’re not willing to pour money into a bottomless pit,” German Interior Minister Hans-Peter Friedrich told newspaper Leipziger Volkszeitung.

– The ‘only topic of discussion in Spain is whether to switch to a German bank’ (Niall Ferguson interview):

http://www.zerohedge.com/news/are-europeans-about-start-second-half-our-great-depression

– The Greek polls have suggested a ‘no austerity’ result although the latest poll does hint at the fact that that it’s stil not a done deal:

http://in.reuters.com/article/2012/05/27/greece-election-poll-idINDEE84Q00C20120527

– The Greeks themselves are withholding tax payments as they think it will be better to pay in drachma. In other words money may run out before the June 17th election, especially if the slow bank run continues.

– Large insitutions (e.g. Lloyds) have already prepared systems for multi-currency transactions:

http://www.bbc.co.uk/news/business-18226128

– The Eurocrats ‘big idea’ is a pan-European deposit guarantee scheme but that could take weeks to sort out. Even then there is no guarantee that it will save the Euro from ‘contagion’:

http://www.telegraph.co.uk/finance/financialcrisis/9293205/Brussels-could-take-control-of-struggling-European-banks-under-secret-plans.html

I am expecting a pretty volatile week ahead. My overall sense is that the markets and people may not wait until June 17th to resolve the Greece issue.

It’s now Spain that we really have to worry about.

Greece, ‘the third way’ (May 26th 2012)

From May 26th 2012

The world seems to have polarised into the majority that expects Greece to leave the Euro at some point in the next few weeks or months, and those that think that Germany will cave-in and bail out all its peripheral cousins for all time.

In the red corner stands the world of Finance and in the blue corner we have the Eurocracy, the Central Banks, Jim Rickards and Niall Ferguson. The Germans of course have their heads in the red corner and their hearts in the blue.

It cannot work shout the reds; monetary union will only sustain with a single pan-European fiscal and political structure. Only when this has been achieved can true eurobonds be launched, and north to south financial transfers become a permanant feature of the Euro landscape.

It will cost too much for Greece to exit suggest the blues. Contagion will spread instantly, the economic sky will collapse, to be followed by a financial nuclear winter of misery for all. The 80% of Germans who oppose eurobonds will see sense over the next few weeks and underwrite a Merkel super-bailout in June.

Meanwhile Greece suffers. It wants the Euro but can’t afford to pay its price. Voters think that Germany will blink and that a less austere bailout package will be tabled by the end of June.

Positions appear to becoming entrenched.

Suppose that Greece votes for the Euro but against austerity as is currently expected.

And that the bailout 3 talks fail in late June, if indeed the markets don’t force a situation earlier.

What would happen if Greece decided to stay with the Euro but default on its sovereign debts?

The European and North American credit markets would certainly close, and Greece would have to live within its tax base means. But it could still retain the Euro. In other words become Montenegro. The Greek people would get what they voted for, the Euro and no bailout austerity.

I have visited Montenegro. It has some stunning coastline and a growing tourist industry particularly favoured by Russians. Other than the vast quantities of Russians the other aspect that hits you very quickly is their use of the Euro. They are not in the Euro nor do they print Euros, but they do successfully use it. And the punchline is that the EU acquiesce to its use.

What would stop Greece emulating Montenegro?

After all, the June 17th election is effectively a plebiscite on a ‘yes to the euro/no to bailout austerity’ proposition. Living within their means would be tough. But would it be tougher than having a mathematically unpayable hundreds of eurobillions round its neck for at least a generation?

And would the EU want to be seen kicking a member state out of the Euro?

Interesting times indeed.

The Costa Bankia (May 25th 2012)

From May 25th 2012

The BANKIA piece probably comes across as just another headline. Unfortunately it isn’t. It was only a day or two ago that we learned that the entire European inter-bank lending system is almost at stall speed.

So where is the money going to come from?

Spain the state?

Where will they get it from?

The ECB?

And how will Spain pay it back?

Even with the sponsorship of Spain, what collateral will Bankia provide in order to access the ECB’s largesse?

How many people are familiar with IAS39 or IFRS9 in the UK?

It’s the one that says if, as a bank, you hold an asset to maturity (i.e. a non-trading asset) you can leave it on the books at par.

I wonder what the fair value of the securities on the asset side of the balance sheet will be, when a realistic assessment of the bank’s loan book is made?

I wonder if we will find that some of those ‘assets to maturity’ are in fact trading assets but have not been properly disclosed?

Late night Friday downgrades associated with a further €19bn bailout requirement (possibly more).

Would you as a depositor want to leave cash in the bank on Monday?

Would you believe the assurances of a national government that could have to face more bailouts and more austerity as the ECB price for further loans. With unemployment at 24% and youth unemployment at 50% what are the chances of that government actually being around by the end of the year?

Bank runs on Monday?

And we thought Greece had a problem.

Expect the unexpected (May 22nd 2012)

From May 22nd 2012

All eyes are currently on the June 17th election in Greece and slow but inexorable rise of Spanish bonds.

But is there anything else in the world that the markets should be reflecting upon?

What about the U.S. deficit ceiling? That $16.2 trillion limit which is supposed to last until after the U.S. presidential election, but by some calculations could be reached as early as ‘Labour Day’, September 3rd for those on this side of the pond. While this could be a pessimistic view a timeline based on a 2013 exhaustion is almost certaily optimistic. So we could be left with something in the middle; in other words just as the election rhetoric is at its zenith. What will the markets make of that?

Then there is the ‘forgotten war’, not the ones in Iraq, Afghanistan, Somalia or Sudan, but the asymmetric version being waged against Iran. The presence of two or three U.S. carrier groups in the Gulf at any one time is itself a strong message to the regime. We also have the ongoing and covert probing of infrastructure and the intermittent removal of WMD related specialists. ‘Talks’ with Iran about its weapons programme may be ongoing but could fail at any time given the lack of any track record of successes in earlier negotiations. With media attention focused on the Euro what better time could there be to prepare for a pre-emptive strike?

Could Israel be simply waiting for those negotiations to fail, formally or informally? How long will it wait for the Iranians to yield? Do they see Iran’s nuclear capability success as a 2012 event or 2013? Will they wait until the November elections to complete before taking action?

Can the U.S. and the EU maintain a hold over Israel by maintaining a ‘negotiation’ status with Iran?

How long will the Iranians be prepared to negotiate? On the one hand it may be in their interests to stretch them for as long as possible; on the other there is the question of the impact of the June/July 2012 oil sanctions.

There is also the question of China. The property bubble has burst, its export markets are faltering and many commodities have started to move into reverse. Could the ‘soft landing’ morph into the other variety over the next few months?

Japan’s economic nuclear winter rolls on. Its power reactors may have been shut down but its energy use and cost profile has moved in the opposite direction. How long will it be before the economic analysis reflects the fact that a new energy driven ‘step-up’ in costs is a permanent feature on the landscape? The often cited expected renaissance in Japanese markets now looks more like a mirage than a sanctuary for investors.

Those black swans may not yet have taken flight. Greece may be the only one in the air at the moment but it doesn’t take a major stretch of the imagination to see that single creature become an entire flock.

Indeed, by the end of the crisis we might even be talking about the appearance of ‘gold swans’ or ‘silver swans’ in the grey and gloomy economic twilight.