Is the Current Yield Curve Inversion a genuine predictor of impending recession?

[Xavier]

"Yield Curve Inversions" is fancy economic-financial jargon to indicate things are the reverse of what they would normally be expected to be: i.e. to say, long term interest rates are lower than short term interest rates, whereas normally short term interest rates would be lower. e.g. the yield on 2 year bonds would be lower than that on 5 year or 10 year bonds. Such "inversions" in the interest rate trajectory over time are of interest (pun intended!) to economists because they usually indicate the onset of a coming recession.

From: https://www.npr.org/2019/06/30/737476633/what-just-happened-also-occurred-before-the-last-7-u-s-recessions-reason-to-worr

"Signs are pointing to a coming U.S. recession, according to an economic indicator that has preceded every recession over the past five decades.

It is known among economists and Wall Street traders as a "yield curve inversion," and it refers to when long-term interest rates are paying out less than short-term rates.

That curve has been flattening out and sloping down for more than a year, raising worries among some analysts that investors' long-term view of the market is not positive and that an economic downturn is looming.

But on Sunday, an inauspicious milestone was achieved: The yield curve remained inverted for three months, or an entire quarter, which has for half a century been a clear signal that the economy is heading for recession in the next nine to 18 months, according to Campbell Harvey, a Duke University finance professor who spoke to NPR on Sunday. His research in the mid-1980s first linked yield curve inversions to recessions.

"That has been associated with predicting a recession for the last seven recessions," Harvey said. "From the 1960s, this indicator has been reliable in terms of foretelling a recession, and also importantly, it has not given any false signals yet." ...

So, is it time to panic? My opinion is, not necessarily, though it is advisable to be cautious. The difference, this time around, could be that interest rates in general, for now, remain relatively lower: e.g. the fed funds rate is now at 2.5%, it was around 5.25% when the 2007 Recession struck. They knew well that this rate was too high, that's why it was immediately reduced once the recession began. The best thing to do now imho would be to take the threat of recession seriously and lower this rate to near-zero levels.

Wiki: "The last full cycle of rate increases occurred between June 2004 and June 2006 as rates steadily rose from 1.00% to 5.25%. The target rate remained at 5.25% for over a year, until the Federal Reserve began lowering rates in September 2007. The last cycle of easing monetary policy through the rate was conducted from September 2007 to December 2008 as the target rate fell from 5.25% to a range of 0.00–0.25%. Between December 2008 and December 2015 the target rate remained at 0.00–0.25%, the lowest rate in the Federal Reserve's history, as a reaction to the Financial crisis of 2007–2008 and its aftermath." https://en.wikipedia.org/wiki/Federal_funds_rate When the rate was reduced to near zero levels, the recession gradually ended. Central banks around the world implemented a similar monetary policy, with successful results.

What do you think could be a plausible future solution to ending recessions altogether, once society is restored to Christian Principles? Two simple steps that could be taken imho: (1) Ending usurious fractional reserve central banking. (2) Keeping interest rates permanently low, even near zero. (Permazero as a really feasible economic concept has gained nearly incredible traction in recent years, and it proves the Church was right on usury all along!)

President of St. Louis Fed James Bullard on Permazero:

"The financial crisis of 2007-09 and its aftermath turned monetary economics and policymaking on its head and called into question many of the conventional views held before the crisis. One of the most popular and enduring views in all of monetary economics since the 1970s, and indeed since the 1940s, has been that a nominal interest rate peg is poor monetary policy and that attempts to pursue such a policy would lead to ruin. Yet, post-crisis U.S. monetary policy could be interpreted as exactly that—an interest rate peg—and an extreme one at that, since the policy rate has remained near zero for nearly seven years. The author summarizes some recent academic work on the idea of a stable interest rate peg and what its implications may be for current monetary policy choices. He argues that a stable interest rate peg is a realistic theoretical possibility; that it has some mild empirical support based on a cursory look at the data; and that, should we find ourselves in a persistent state of low nominal interest rates and low inflation, some of our fundamental assumptions about how U.S. monetary policy works may have to be altered."

Your thoughts on the current inversion, dear friends? Is it time to be prudently cautious about what could be in store over the coming next 9 to 18 months, based on historical trends, as the NPR article argues?

[Tales]

I would draw a distinction between zero interest rates because lending generally does not exist, and zero interest rates because the central banks counterfeit money by endlessly printing more money and lending it out in ever more obscene amounts.  The first is the ideal practice and would lead to a society without the modern boom-bust cycle (which is a credit phenomenon).  The latter would be a gigantic disaster and is what all signs indicate the central banks intend to do (as they have done before).

The debt is inflated far in excess of what can ever physically be provided.  If the market were free (which it is not), then a massive deflation would occur and there would be a new Greatest Depression.  Wars and violence would be global as every country is in on this game courtesy of globalization.  But the market is not free and the governments learned in 2008 that everything is on the line - if the monetary system deflates, it is lights out.  Hence TARP, ZIRP, twist, QE1-4, and every other silly acronym that came into existence in the past decade to obfuscate what is going on - mad levels of money printing to prevent the natural deflationary event from occurring.  The stock markets are around all time highs and even that is not good enough to keep this thing from blowing, hence the Fed jawboning about new rate cuts when allegedly everything is going gangbusters good.

This is all a part of the decline from the rapacious effects of usury.  It can never be paid off.  It requires exponentially greater numbers each year.  These numbers either come from real production or from printing money.  Real production cannot possibly fill this chasm, so it is money printing to the moon.

Eventually there will be a monetary reset and hopefully it will be along Christian morality, but it all depends on who is in charge when that day comes.  I do not think it will be anytime soon though - the governments and oligarchs know that this time it is for all the marbles, and they are in this all together globally to keep the financial system from ever going down in any meaningful sense.

[King Wenceslas]

The interest inversion has finally caught up to the reality of the slowing global economy since early last year along with a declining inflation rate. It also shows that not even a US 2.5 % interest rate is bearable by the US and world economies which are debt saturated.

Hopefully the US and world economy will collapse this time around and WWIII will occur which ends the insanity.

Otherwise expect more social insanity will continue to occur like the last ten years of sodomy rights, sodomy marriage, and LGBT+++.