Quote:
Originally Posted by MRM
Reading the economy isa little like alchemy, but if you know what to look for, anyone can read the signs that give insight into the general direction things are going and you can make judgments for yourself rather than relying on the advice of people who are trying to sell you something. Something old is new again that I thought is important enough to share. The yield curve is coming back into the news. Yes, the 1980s called and wants its economic indicators back. The yield curve is not the only sign to read, but it is an objective piece of economic data that is a good indicator of the health of the overall economy and can be the basis for your own analysis.
The yield curve is basically the relationship of short term interest rates to long term rates in the government bond market. Typically short term rates are the lowest and rates get uniformly higher as the term of the loan gets longer. A good, healthy economy usually sees a sharp yield curve with even correlation between interest rates and the length of the loan.
Sometimes the yield curve flip and becomes inverted - short term rates are higher than long term rates. This is a serious danger sign for the economy because it suggests that the economy is slowing.
The yield curve is abnormally flat right now and is poised to become inverted. https://www.nytimes.com/2018/06/25/business/what-is-yield-curve-recession-prediction.html This alone doesn't mean that a recession is coming, but recessions rarely come without an inverted yield curve.
You can't draw any conclusions from one statistic or a single data point, but an inverted yield curve is a big deal and it bears close watching. If the money supply expands without inflation kicking in, the labor market stays tight but not overheated, it will probably straighten out again and we'll mark this data point down as nerves over the impending trade war. It's just a whiff of rain that could turn into something on what seems like an otherwise sunny day. |
All right on the money, if you had normal monetary and fiscal policy Globally. But it ain't normal, since 08 you have had an Alice In Wonderland through the looking glass monetary and fiscal policy. The old rules of gravity do not apply anymore. It is upside down and topsy turvey, and since you do not seem to realize that fact after so much time it means you still do not grasp it.
PS Do not feel all alone most people (who are paid to know) do not get it, they are living in a world of what once was and not what is.