{"id":47855,"date":"2019-08-17T09:50:44","date_gmt":"2019-08-17T14:50:44","guid":{"rendered":"https:\/\/olduvai.ca\/?p=47855"},"modified":"2019-08-17T09:50:47","modified_gmt":"2019-08-17T14:50:47","slug":"major-recession-alarm-sounds","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=47855","title":{"rendered":"Major Recession Alarm Sounds"},"content":{"rendered":"\n
\"Major<\/figure>\n\n\n\n

Major Recession Alarm Sounds<\/a><\/h3>\n\n\n\n

Red, red, in every direction we turn today\u2026 red.<\/p>\n\n\n\n

The Dow Jones shed 800 scarlet points on the day.<\/p>\n\n\n\n

Percentage wise, both S&P and Nasdaq took similar whalings.<\/p>\n\n\n\n

The S&P lost 86 points. And the Nasdaq\u2026 242.<\/p>\n\n\n\n

And so the market paid back all of yesterday\u2019s trade-induced gains \u2014 with heaps of interest.<\/p>\n\n\n\n

Worrying economic data drifting out of China and Germany were partly accountable.<\/p>\n\n\n\n

Chinese industrial production growth has slackened to 4.8% year over year \u2014 its lowest rate since 2002.<\/p>\n\n\n\n

And given China\u2019s nearly infinite data-torturing capacities, we are confident the authentic number is lower yet.<\/p>\n\n\n\n

Meantime, the economic engine of Europe has slipped into reverse. The latest German data revealed second-quarter GDP contracted 0.1%.<\/p>\n\n\n\n

Combine the German and Chinese tales\u2026 and you partially explain today\u2019s frights.<\/p>\n\n\n\n

But today\u2019s primary bugaboo is not China or Germany \u2014 or China and <\/em>Germany.<\/p>\n\n\n\n

Today\u2019s primary bugaboo is rather our old friend the yield curve\u2026<\/p>\n\n\n\n

A telltale portion of the yield curve inverted this morning (details below).<\/p>\n\n\n\n

An inverted yield curve is a nearly perfect fortune teller of recession.<\/p>\n\n\n\n

An inverted yield curve has preceded recession on seven out of seven occasions<\/em> 50 years running.<\/p>\n\n\n\n

Only once did it yell wolf \u2014 in the mid-1960s.<\/p>\n\n\n\n

An inverted yield curve has also foretold every major stock market calamity of the past 40 years.<\/p>\n\n\n\n

Why is the inverted yield curve such a menace?<\/p>\n\n\n\n

As we have reckoned prior:<\/p>\n\n\n\n

The yield curve is simply the difference between short- and long-term interest rates.<\/em><\/p>\n\n\n\n

Long-term rates normally run higher than short-term rates. It reflects the structure of time in a healthy market\u2026<\/em><\/p>\n\n\n\n

Longer-term bond yields should rise in anticipation of higher growth\u2026 higher inflation\u2026 higher animal spirits.<\/em><\/p>\n\n\n\n

Inflation eats away at money tied up in bonds\u2026 as a moth eats away at a cardigan.<\/em><\/p>\n\n\n\n

Bond investors therefore demand greater compensation to hold a [longer-term] Treasury over a [short-term] Treasury.<\/em><\/p>\n\n\n\n

 \u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Major Recession Alarm Sounds Red, red, in every direction we turn today\u2026 red. The Dow Jones shed 800 scarlet points on the day. Percentage wise, both S&P and Nasdaq took similar whalings. The S&P lost 86 points. And the Nasdaq\u2026 242. And so the market paid back all of yesterday\u2019s trade-induced gains \u2014 with heaps […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[11023,391,1264,20707],"class_list":["post-47855","post","type-post","status-publish","format-standard","hentry","category-economics","tag-daily-reckoning","tag-growth","tag-recession","tag-yield-curve-inversion"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/47855","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=47855"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/47855\/revisions"}],"predecessor-version":[{"id":47856,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/47855\/revisions\/47856"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=47855"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=47855"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=47855"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}