Category: zerohedge

Following Yellen’s uncharacteristicaly hawkish tone, the odds of a July rate-hike have shot higher – now higher than June or September have ever been – to record highs. This has sent short-term bond yields higher, the yield curve dramatically flatter, stocks lower, and gold down…

July Rate hike odds soar… (note these are the odds of a rate hike in that month – which suggests The Fed will be “one more and done”)

 

and the reaction in asset markets as bonds close early and correelations break down…

 

Big flattening in the yield curve suggest the market remains doubtful that this is the right move.

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Submitted by Charles Hugh-Smith of OfTwoMinds blog,

There are limits on what the Fed can do when this bubble bursts, as it inevitably will, as surely as night follows day.

It's no secret that virtually every pension fund is dead man walking, doomed by central banks' imposition of low yields on safe investments, i.e. Zero Interest Rate Policy (ZIRP).

Given that both The Economist and The Wall Street Journal have covered the impossibility of pension funds achieving their expected returns, this reality cannot be a surprise to anyone in a leadership role.

Many unhappy returns: Pension funds and endowments are too optimistic

Public Pension Funds Roll Back Return Targets: Few managers count on returns of 8%-plus a year anymore; governments scramble to make up funding

Here's problem #1 in a nutshell: the average public pension fund still expects to earn an average annual return of 7.69%, year after year, decade after decade.

This is roughly triple the nominal (not adjusted for inflation) yield on a 30-year Treasury bond (about 2.65%). The only way any fund manager can earn 7.7% or more in a low-yield environment is to make extremely high risk bets that consistently pay off.

This is like playing one hand after another in a casino and never losing. Sorry, but high risk gambling doesn't work that way: the higher the risk, the bigger the gains; but equally important, the bigger the losses when the hot hand turns cold.

Here's problem #2 in a nutshell: in the good old days before the economy (and pension funds) became dependent on debt-fueled asset bubbles for their survival, pension fund managers expected an average annual return of 3.8%–less than half the current expected returns.

In the good old days, the needed returns could be generated by investing in safe income-producing assets–high-quality corporate bonds, Treasury bonds, etc. The risk of losing any of the fund's capital was extremely low.

Now that the expected returns have more than doubled while the yield on safe investments has plummeted, fund managers must take risks (i.e. chase yield) that can easily wipe out major chunks of the fund's capital if the bubble du jour bursts.

Here's problem #3 in a nutshell: everyone who rode the great bubble of 1994 – 2000 (including pension funds) soon reckoned 10%+ annual returns on equities was The New Normal, so expecting 7.5% – 8% annual returns seemed downright prudent.

When that bubble burst, decimating everyone still holding equities, the Federal Reserve promptly inflated two new bubbles: one in stocks and another in housing. Once again, everyone who rode these two bubbles up (including pension funds) minted hefty profits year after year.

This seemed to confirm that The New Normal included the occasional spot of bother (a.k.a. a severe market crash), but the Federal Reserve would quickly ride to the rescue and inflate a new bubble.

When the dual bubbles of stocks and housing both burst in 2008, once again the Fed rushed to inflate another set of bubbles, this time in stocks, bonds and rental housing. Lowering interest rates could no longer generate a new bubble. This time around, the Fed had to lower interest rates to zero indefinitely, and embark on the most massive monetary stimulus in history–quantitative easing (QE) 1, 2 and 3–to inflate a third bubble in stocks.

This unprecedented expansion of free money for financiers and dropping interest rates to zero generated a bubble in bonds and an echo-bubble in real estate–specifically, commercial real estate and rental housing.

These three bubbles once again generated handsome yields for pension funds. Once again fund managers' faith in the Federal Reserve maintaining a New Normal of occasional crashes quickly followed by even bigger bubbles was rewarded.

But the game is changing beneath the surface of Fed omnipotence. The returns on zero interest rates (or even negative rates) have diminished to zero, and the Fed's vaunted monetary stimulus programs have been recognized as enriching the rich at the expense of everyone else.

Even with the unprecedented tailwinds of one massive bubble after another, pension funds are in trouble. The high-risk returns of Fed-induced bubbles followed by the inevitable crashes cannot replace the safe, high yields of the pre-bubble-dependent economy.

If funds are in trouble with stocks in a new unprecedented bubble high, how will they do when stocks fall back to Earth, as they inevitably do in boom-bust cycles?

The usual justification for nose-bleed valuations is sky-high corporate profits. But profits have rolled over, and irreversible headwinds are increasing: a stronger U.S. dollar, an aging populace desperate to save more for retirement, an entire generation burdened with student debt and often-worthless college diplomas, a global economy on the brink of recession, diminishing returns on firing workers, diminishing returns on financialization legerdemain, etc.

Meanwhile, commercial real estate loans have soared above the previous bubble highs.

This seems to prove that no bubble bursts for long with the Federal Reserve at the helm, but there are limits on what the Fed can do when this bubble bursts, as it inevitably will, as surely as night follows day.

The Fed can't lower interest rates below zero without signaling that the economy is well and truly broken, and it can't force people who are wary of debt to borrow more, even if it effectively pays borrowers to take on more debt.

All the Fed can do is extend new debt to unqualified borrowers who will default at the first sneeze. This will trigger the collapse of whatever new credit-fueled bubble the Fed might generate.

The political winds are also changing. The public's passive acceptance of central banks' let's make the rich richer and everyone else poorer policies may be ending, and demands to put the heads of central bankers on spikes in the town square (figuratively speaking) may increase exponentially.

It's looking increasingly likely that third time's the charm: this set of bubbles is the last one central banks can blow. And when markets free-fall and don't reflate into new bubbles, pension funds will expire, as they were fated to do the day central banks chose zero interest rates forever as their cure for a broken economic model.

*  *  *

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Authored by Jim Strugger of MKM Partners

Death by Theta

Even the most skeptical among us have to be impressed by the rip higher in U.S. equities over the past week. Absent an obvious positive catalyst, the S&P 500 Index (SPX, 2090.10) jumped 2.5% after flirting with lows since March and a potential test of the 200-day moving average.

More broadly, the SPX is just revisiting the top end of its range back to late 2014 while equity volatility has shifted back to a trough though importantly without having descended to a level that suggests a structural change in the high-volatility regime.

Still, there is little doubt that if stocks do manage to break out and sustain fresh highs than the broad swath of volatility metrics will collapse to levels more indicative of a low-volatility cycle. The period dating back to last August will have been an anomaly relative to historical regimes that have lasted upwards of five years. We are skeptical of that outcome and see support from measures of crossasset and geography risk that remain elevated (GFSI Index in left graph).

As of next week, the U.S. economic expansion will reach its seven year anniversary. The prior three cycles since 1990 averaged 95 months in length measured from trough to peak. That puts the current cycle just shy of a year from eclipsing the mean duration. As MKM Partners Chief Economist Michael Darda points out, business cycles historically survive for around two years once the Fed begins tightening. If the U.S. cycle is late in its expansion then it follows from precedent that  volatility broadly but more specifically U.S. equity implied volatility should remain structurally elevated into and through an eventual recession (and likely bear market) before subsiding once the next sustained recovery has begun.

That is precisely why we have struggled with the idea that the high-volatility regime intact since last August may truncate at less than a year. If our reasoning is correct and volatility remains structurally elevated, it follows that the recent three-month cyclical trough, as the longest such period on record, is statistically unlikely to last much longer.

Admittedly, it doesn’t feel that way. Stocks have displayed impressive buoyancy over the last couple of months when pressed lower even while the SPX remains contained within its range back to late 2014. Of course, market psychology can turn on a dime and we can’t help but to see underlying instability amidst this recent market strength. That suggests a dislocation is likely prior to equities escaping to a new all-time high.

For those looking to get directionally longer, we prefer synthetic exposure which can be had simply via outright calls where implied volatility is suitably low rather than by deploying significant capital at the top of the range. While it is tough to push hedges and long volatility given the theta burn from prior recommendations, we still think clients should retain a healthy dose of skepticism about how much longer markets can ward off a bout of instability.

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Dove, hawk, or nothing at all? That's the question as Fed chief Janet Yellen speaks after she receives the Radcliffe Medal from Harvard University's Radcliffe Institute for Advanced Study. There are no prepared remarks, but a scheduled 30-minute Q&A session with Greg Mankiw could give insight into Yellen's thoughts on two key issues: whether she now has more faith that recent evidence of rising inflation is convincing, and the degree to which she feels overseas risks have receded. Most (including the market) expect Yellen to stick to the hawkish meme ascribed by the latest FOMC statement and numerous Fed speakers. Some, including DoubleLine's Jeff Gundlach expect a dovish Yellen to re-appear. Still others believe she will say nothing at all – instead waiting for a more formal speech on June 6 to drop her tape bombs.

As SocGen notes, Fed Chair Yellen will be honoured at Harvard, with a conversation on her achievements at the ceremony. However, little emphasis on the monetary policy outlook is expected at this event. The appearance to look forward to will be the Chair's speech in Philadelphia on June 6, the Monday following the May employment report and a day before entering the blackout period for the upcoming FOMC meeting.

Live Feed (The event started at 1030ET with Yellen is due to speak at 1315ET.. though it appears they are running late)…

• *BERNANKE SAYS WE'RE LUCKY TO HAVE YELLEN LEADING THE FED

click image for link to Harvard live feed – no embed available

 

As we noted previously,

With verious Fed presidents having whipping up the market into a hawkish frenzy in the past two weeks, leading to a dramatic repricing in summer rate hike odds with expectations for a July rate hike now over 50%, many can be "disappointed" by Yellen's speech today, at least according to Jeff Gundlach who said Yellen appears to be more cautious on raising interest rates and he expects her comments to be dovish again on Friday, when she is scheduled to speak at an event in Harvard-Radcliffe.

 

Specifically, during a DoubleLine event in Bevely Hills, he said said the Fed is "a bit stuck" given that it will not have ammunition available for the next recession unless it raises rates, despite continued lackluster economic growth. He noted that some developed countries, including Australia and Sweden, tried to raise interest rates in 2010, but ended up having to reverse course. "The Fed seems hell bent on raising interest rates until something breaks, which is what happened in these countries," he said.

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Following last week's unchanged oil rig count – breaking a 21-week streak of declines – as the rig count inflected perfectly with lagged oil prices. However, despite a rise in lagged oil prices, the oil rig count declined 2 to 316 this week – new lows since Oct 2009. Total rig count dropped to 404 – a new record low. Crude traders appear to have left for the day as there was no visible reaction to this data.

• *U.S. OIL RIG COUNT FALLS 2 TO 316, BAKER HUGHES SAYS
• *U.S. TOTAL RIG COUNT 404 , BAKER HUGHES SAYS

Is production about to slump?

 

Charts: Bloomberg

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With Janet Yellen due to speak in under an hour (in a speech that will be a big dud because as SocGen notes, “little emphasis on the monetary policy outlook is expected at this event”), a recurring question is why does the market remain so nonchalant about the possibility of a rate hike as soon as one month from now.

One of the better explanations on the matter comes from Citi’s Steven Englander, according to whom it boils down to the market’s sentiment about what happens with the Fed’s hiking path after the first hike.  As the Citi strategist points out, this is merely the latest feedback loop the Fed has found itself trapped in:

Asset markets have done very well since the fed funds market began pricing in a summer hike. The question is why? We think that investors are trading the equation

 

an extra 2016 hike but very little else  +   better Q2 growth data = stronger asset markets

 

The question is whether this is a sustainable equation. Better growth, if sustained, is likely to induce more hikes. If we go from ~2.5% GDP in Q2 to 1.5-2% subsequently, we are likely to unwind the recent optimism.

Or maybe we won’t, because the only thing more bullish than a hawkish Fed is a dovish Fed.  Let’s assume for the sake of this argument that the market is, like it was in December, fixated on the favorable “growth” outcome as a result of an upcoming rate hike (something with Jeff Gundlach mocked two days ago), as the alternative of yet another Fed policy error may be just too much of a shock. Here is why Eglander is cautious in reading this interpretation:

On the better sustained growth/faster hiking scenario, the slope of the Fed’s policy rate path will steepen. This will be another challenge to commodity and EM currencies. It may well turn out that a modestly steeper path of Fed hikes does not damage global growth prospects or asset prices a lot, but that is not likely to be the immediate response.

 

Alternatively if the hiking path reflects the expectation that better growth is temporary, the recent strength of US asset markets may come into question. The shallow path of hikes now priced in will not take the Fed away from the danger zone of a negative shock pushing them into the incipient negative policy rate. So a resumption of 1-2% growth rates after a solid Q2 may sap the confidence that markets have displayed in recent weeks.

In other words, the market is confident that the Fed’s rate hike itself will be enough to stop any more rate hikes, irrelevant of the data. What the market is forgetting however is that the rate hikes in early 2016 were delayed not so much because of the data, which was already deteriorating as the Fed hiked, but because of the market’s reaction. As such, the “market” is hoping to skip the critical step where it sells off to delay even more tightening. That however is the very problem the market, which no longer can discount anything, would create.

Consider the chart below which shows from bottom to top how many bps of hikes has been added fed funds expectations for July 16 (light blue), Dec 16 (dark blue), Dec 17 (red) and Dec 18 (green).  We have 15 extra bps now for the rest of 2016 and only 21 or 22 for the next two years. And obviously there has been no change of expectations for 2018 relative to 2017.

 

As Englander points out, “literally since the trough of fed funds the market has not even added a full hike over the next three years and about 70% of what  has been added is in 2016. By contrast when lift-off expectations were priced into fed funds last October, the outyears moved much more than the near contracts. This suggests that the market then saw liftoff as signaling a steepening of the pace of fed hikes, whereas the recent move is add one but no accelerated pace beyond.”

Or, on other words, one and done.  Cue Englander:

The scenario that the market seems to be buying is that the signs of growth that we are seeing will embolden the fed to one but no more additional hike.  The rationale may be that EM currency weakness will deter the Fed in the future, although that is not clear. If we look at asset price performance since May 9,  oil (dotted green), equities (thick dotted blue),  and high yield (solid dark blue) have done the best. EM equities (solid light blue), and non-oil commodities (red) are up but not quite as much. EM currencies overall (solid grey) and non-CNY Asia (dotted thin blue) are down. It is possible that the outperformance of US asset reflects an assessment that the hike won’t damage US growth prospects a lot but could lead to underperformance in EM assets. This is, of course, a very speculative explanation for the lack of conviction that on future fed hikes, despite their reiteration of the 2+ hikes scenario in various speeches and discussions.

 

 

Whether this is true or not, and whether the Fed’s rate hike will only damage the “global environment” while leaving the US and domestic corporate profits unscathed, is unclear but what the market makes very clear is that it itself is confident none of that will impact the market itself. What the market is also forgetting most of all, is that the only “data” the Fed is dependent on is the “Dow Jones” – in other words, if the market is pricing in no more rate hikes, it itself will have to crash, a step which the market is hoping it can simply skip at this moment.

Head spinning from all this reflexivity yet? Good.

How does all this get resolved? Here is Englander with the longer explanation:

The way to reconcile these asset price moves is either 1) investors see a temporary pick up in US activity (GDP ~2.5%), but will fall back in H2 to around trend without any significant inflation move, 2) US activity will be ok  but not great and the spillover into the rest of the world will be negative enough to deter further hikes.

 

It is also possible that the outcome is a compromise between optimists who see an extended period of 2.5% GDP growth and the 2-3 hikes that come with it and pessimists who see ongoing soft outcomes and FOMC worries about drifting into recession. Anecdotally, it is hard to find any client or colleague who feels that economic outcomes we will be on the knife edge that the market is pricing  – just good enough to prevent disaster but not good enough for anything beyond token subsequent hikes.

 

But it would seem to us that the equity outcome in the weighted average view is a lot less positive. There are few S&P 2500 optimists even at 2.5% growth but plenty of S&P 1600 or less pessimists on the negative scenario.

 

Bottom line – one more and pretty much done is unlikely to be as risk positive as recent asset market prices action suggests. But it may allow EM to bounce back a bit once the snail pace of Fed hikes is restored as the baseline expectation. We do not think that EM is as vulnerable to two hikes a year as pessimists argue, but the transition to pricing in two hikes a year is likely to be rocky, even if the EM ultimately bounces back.

That was the long way of saying the market is currently overpriced for precisely the event it is trying to price in, and not correctly accounting for the path of future rate hikes.

The short one is far simpler, and goes back to the chart we showed a week ago. 

In short, the only thing that can prompt the Fed to delay a rate hike is neither the global nor the local economy, but the market itself… which because it is back at 2100 shows no interest in actually prompting the Fed’s move that it is “pricing in.”

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French president Francois Hollande is not bending to pressure by labor unions trying to force the government to retract unpopular labor laws that were recently forced through parliament. Unions have gone on strike in order to shut down refineries, and have blocked fuel distribution with barricades and pickets in hopes that the economy will suffer enough to get the government to back off the reforms. In response, the government is now sending police in riot gear to break up the blockades.

The unions, as they intended, are certainly having an impact. Fuel shortages intensified as 30 percent of the country's 12,200 stations across the country are short of fuel and Total SA, France's largest oil company said that 346 out of it's 2,200 French gas stations are completely out of stock, while 395 lack some fuels according to Bloomberg.

Walkouts at Electricite de France SA cut more than 5,000 megawatts of combined output at a dozen nuclear reactors on Thursday (but have since returned to normal on Friday), and unions have gone on strike at all 8 French oil refineries, with Total reporting that five of its refineries have been completely halted.

In response to the actions, Prime Minister Manuel Valls told the unions that continued disruptions would be dealt with "extremely firmly", and president Hollande has shown no signs of letting up on the new laws. Hollande warned protesters that he would not let them strangle the economy, perhaps taking comfort in the fact that consumer confidence surged to the highest level since 2007.

"I'm going to stick with this because I think it's a good reform. This is not a moment to endanger the French recovery."

Hollande further added "We can't accept that there are unions that dictate the law. As head of state, I want this reform. It fits with everything we have done for four years. I want us to go right to the end."

Indeed, it will be a bitter fight between Hollande and the unions to get this situation resolved. CTG union boss Philippe Martinez said the strikes will continue until the labor law is reformed.

"We'll see this through to the finish, to withdrawal of the labor law. This government which has turned its back on its promises and we are now seeing the consequences."

In another important development, oil tankers at the country's biggest oil port (the Fos-Lavera oil port in southern France) are still waiting to unload, and the backlog is growing. According to Reuters, 38 oil tankers are queued up waiting to unload at the port Friday, up from 12 the previous day. To make matters worse, members at the CIM oil terminal at the port of Le Havre which handles 40 percent of French crude imports voted to extend their strike until Monday.

• UNION OFFICIAL SAYS MANAGERS HAVE REOPENED PIPES TO SUPPLY CRUDE TO EXXON MOBILREFINERY, FUEL TO PARIS AIRPORTS

As Reuters reports, at least some relief has come since police started to break up barricades. In the Seine Maritime region North of Paris, local government official Nicole Klein said the number of petrol stations without fuel had fallen significantly and rationing orders have been lifted.

• *TOTAL: 659 FRENCH STATIONS OUT OF GAS AT 5PM VS 815 YDAY

In addition to the economic issues, there has been violence as well. As hundreds of thousands of protesters have taken to the streets, hundreds of police have been hurt and more than 1,300 arrested according to Reuters. Most recently, protesters attacked a police station and smashed bank windows on Thursday during rallies against the reform. According to the Interior Ministry, seventy seven people were arrested during the rally in which  more than 150,000 marched.

France is hosting the Euro 2016 soccer tournament in two weeks, and with already dwindling popularity, the last thing Hollande wants voters to draw upon during elections next year is such a huge event being a disaster because labor reforms were forced through parliament without a vote. It will be interesting to see which side blinks first in this standoff, but at the moment it appears that nobody is willing to budge.

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Federal investigators revealed another blow to Detroit Public Schools this week. Meet Carolyn StarkeyDarden – the system’s former grant-development director – who has just been charged on suspicion of obtaining nearly $1.3 million by lying about children’s tutoring services. As The Burning Platform's Jim Quinn rages, this is called the “No School Administrator Left Behind” Program.

As CNN reports, Carolyn StarkeyDarden set up a company and allegedly ran a scheme between 2005 and 2012 in which she submitted fake invoices for tutoring services that were never provided to students, according to charges filed by the U.S. Attorney’s Office in Michigan’s Eastern District.

StarkeyDarden, 69, was charged Monday with federal program theft, for which she could receive up to 10 years in prison and fines of up to $250,000 if convicted.

 

“Ms. StarkeyDarden cheated the students of Detroit Public Schools out of valuable resources by fraudulently billing for her company’s services,” said David P. Gelios, special agent in charge of the FBI in Detroit. “In fact, Detroit students were cheated twice by this scheme.

 

“Students that needed tutoring never received it, and money that could have been spent on other resources was paid to Ms. StarkeyDarden as part of her fraud scheme.”

 

Calls made by CNN to StarkeyDarden and her lawyer were not immediately returned Wednesday evening.

 

The charge is not the first to be leveled this year against school officials in Michigan’s most populous city.

 

In March, 13 principals were charged with bribery in an alleged kickback scheme, the U.S. Attorney’s Office said.

 

A vendor paid bribes and kickbacks to the principals to allow their schools to be charged for supplies that were never delivered, authorities say.

 

These charges are compounded by ongoing fights by the teachers for pay in the financially ailing school district, as well as deterioration in “hazardous” schools.

 

In May, the 47,000 students in Detroit Public Schools went for days without their teachers after a “sick-out” protest was held by the educators, concerned that they would be unpaid by a school district that has $500 million of operating debt.

As Jim Quinn concludes so eloquently,

The utter corruption of liberal led, union controlled school districts in urban ghetto kill zones across America is disgusting to behold. The Democratic party controls every one of these shithole cities and is 100% responsible for the administration of these criminal school districts. They matriculate functionally illiterate dumbasses into society while enriching themselves with taxpayer money.

 

Vote for Hillary if you want more of this. And of course the liberal MSM wouldn’t possibly put a picture of this despicable human being in their story, so we found one.

 

 

Is that raciss?

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In order to press his individual agenda of preserving optionality to intervene in the FX market and push the Yen lower (using increasingly more desperate measures), Japan’s Prime Minister had just one task in the latest G-7 meeting: to have the Group of Seven leaders warn of the risk of a global economic crisis in the final communique issued as the summit wrapped earlier today in Japan.

He failed. In fact, the final statement went the other way and declared that G-7 countries “have strengthened the resilience of our economies in order to avoid falling into another crisis. The global recovery continues, but growth remains moderate and uneven, and since we last met downside risks to the global outlook have increased,” the statement says. “Weak demand and unaddressed structural problems are the key factors weighing on actual and potential growth.”

The communique urged a coordinated, albeit differentiated, response to storm clouds gathering over the global economy. Leaders pledged to use a mix of tools depending on their circumstances.

The G-7 statement compromised on the austerity-versus-stimulus debate by leaving each country’s road map open – saying they will take “into account country-specific circumstances” as they move to use “all policy tools, monetary, fiscal and structural, individually and collectively to strengthen global demand and address supply constraints while continuing our efforts to put debt on a sustainable path.”

As Bloomberg adds, Japan had pressed G-7 leaders to note “the risk of the global economy exceeding the normal economic cycle and falling into a crisis if we did not take appropriate policy responses in a timely manner.” On Thursday, Abe presented documents to the G-7 indicating there was a danger of the world economy careering into a crisis on the scale of the 2008 Lehman shock.

This is not surprising: this past weekend we wrote that following the G-7 meeting of finance ministers and central bankers which also took place in Japan, Japan ended up ‘humiliated” due to a “sharp rift over Yen intervention” with Jack Lew and the rest of the G-7 making it abundantly clear that Japan no longer has sole authority over its own monetary policy. The reason: fears that any unilateral action by Japan, such as the country’s still inexplicable descent into NIRP, would push China over the edge and lead to another uncontrolled round of global currency turmoil.

Meanwhile, the kindergarten that is Japan’s government finds itself increasingly the laughing stock of the world. As a reminder, Abe has frequently said he would proceed with a planned increase in Japan’s sales tax in April 2017 unless there is an event on the scale of Lehman or a major earthquake. He is expected to announce next week he is deferring the tax rise, Japanese media reported.

However, the lack of the G-7 endorsing his gloomy version of the world, has made the Japanese PM lose even more face with the global community because while Japan will certainly delay the sales tax increase, it now has lost its doomsday justification for doing so.

Abe can thank China for being relegated to the very bottom of the developed world scrap heap. According to Glenn Maguire, Asia-Pacific chief economist at Australia & New Zealand Banking Group, “Asia is feeling the brunt of the Chinese slowdown given its trade exposure, with a more marginal impact so far on the U.S. and Europe.”

“Hence it is not entirely surprising that a coordinated response to an unevenly felt dynamic could not be reached at the G-7 negotiating table,” Maguire said. “Moreover, the G-7 is obviously aware of the ‘announcement effect’ the official communique has,” he said. “In such a situation, warning of negative risks and sentiment can become self-fulfilling.“

The biggest irony is that Abe is absolutely correct in asking for a warning, however just like in Europe’s relentless war against Grexit in the 2010-2014 period, the mere admission that this was a possibility would create a self-fulfilling prophecy that would accelerate the process.

We have now gotten to the point where the world’s leaders are too scared to admit the truth over fears it will merely accelerate its inevitable arrival.

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Submitted by Patrick Buchanan via Buchanan.org,

“Something startling is happening to middle-aged white Americans. Unlike every other age group, unlike every other racial and ethnic group … death rates in this group have been rising, not falling.”

The big new killers of middle-aged white folks? Alcoholic liver disease, overdoses of heroin and opioids, and suicides. So wrote Gina Kolata in The New York Times of a stunning study by the husband-wife team of Nobel laureate Angus Deaton and Anne Case.

Deaton could cite but one parallel to this social disaster: “Only H.I.V./AIDS in contemporary times has done anything like this.”

Middle-aged whites are four times as likely as middle-aged blacks to kill themselves. Their fitness levels are falling as they suffer rising levels of physical pain, emotional stress and mental depression, which helps explain the alcohol and drug addiction.

But what explains the social disaster of white Middle America?

First, an economy where, though at or near full employment, a huge slice of the labor force has dropped out. Second, the real wages of working Americans have been nearly stagnant for decades.

Two major contributors to the economic decline of the white working-class: Scores of millions of third-world immigrants, here legally and illegally, who depress U.S. wages, and tens of thousands of factories and millions of jobs shipped abroad under the label of “globalization.”

Another factor in the crisis of middle and working class white men is the plunging percentage of those who are married. Where a wife and children give meaning to a man’s life, and to his labors, single white men are not only being left behind by the new economy, they are becoming alienated from society.

“It’s not surprising,” Barack Obama volunteered to his San Francisco high-donors, that such folks, “get bitter, they cling to guns or religion or antipathy to people who aren’t like them…”

We all have seen the figure of 72 percent of black children being born out of wedlock. For working class whites, it is up to 40 percent.

A lost generation is growing up all around us.

In the popular culture of the ’40s and ’50s, white men were role models. They were the detectives and cops who ran down gangsters and the heroes who won World War II on the battlefields of Europe and in the islands of the Pacific.

They were doctors, journalists, lawyers, architects and clergy. White males were our skilled workers and craftsmen — carpenters, painters, plumbers, bricklayers, machinists, mechanics.

They were the Founding Fathers, Washington, Adams, Jefferson and Hamilton, and the statesmen, Webster, Clay and Calhoun.

Lincoln and every president had been a white male. Middle-class white males were the great inventors: Eli Whitney and Thomas Edison, Alexander Graham Bell and the Wright Brothers.

They were the great capitalists: Andrew Carnegie and John D. Rockefeller, Henry Ford and J. P. Morgan. All the great captains of America’s wars were white males: Andrew Jackson and Sam Houston, Stonewall Jackson and Robert E. Lee, U.S. Grant and John J. Pershing, Douglas MacArthur and George Patton.

What has changed in our culture? Everything.

The world has been turned upside-down for white children. In our schools the history books have been rewritten and old heroes blotted out, as their statues are taken down and their flags are put away.

Children are being taught that America was “discovered” by genocidal white racists, who murdered the native peoples of color, enslaved Africans to do the labor they refused to do, then went out and brutalized and colonized indigenous peoples all over the world.

In Hollywood films and TV shows, working-class white males are regularly portrayed as what was once disparaged as “white trash.”

Republicans are instructed that demography is destiny, that white America is dying, and that they must court Hispanics, Asians and blacks, or go the way of the Whigs.

Since affirmative action for black Americans began in the 1960s, it has been broadened to encompass women, Hispanics, Native Americans the handicapped, indeed, almost 70 percent of the nation.

White males, now down to 31 percent of the population, have become the only Americans against whom it is not only permissible, but commendable, to discriminate.

When our cultural and political elites celebrate “diversity” and clamor for more, what are they demanding, if not fewer white males in the work force and in the freshman classes at Annapolis and Harvard?

What is the moral argument for an affirmative action that justifies unending race discrimination against a declining white working class, who have become the expendables of our multicultural regime?

“Angry white male” is now an acceptable slur in culture and politics. So it is that people of that derided ethnicity, race, and gender see in Donald Trump someone who unapologetically berates and mocks the elites who have dispossessed them, and who despise them.

Is it any surprise that militant anti-government groups attract white males? Is it so surprising that the Donald today, like Jess Willard a century ago, is seen by millions as “The Great White Hope”?

via http://ift.tt/24bmVGV Tyler Durden