Re: Recess!
that was a great paper. thanks for posting it.
to be fair though, i didn't say the yield curve doesn't apply. it contains a ton of great information and is determined by the market rather than forcasters.
i only wanted to caution that times are quite different (as apparantly many have said they were in previous YC inversion --> recession episodes). what would be great is if there was a "degree of difference in the US/Global economy" indicator that we could use in addition to the forcasting methodology. i'm sure everybody always claims "well the economy is very different, YC inversion means less" (as i am now), but without some metric of "how different" those claims are pretty meaningless.
anyways, the main point here is that there are huge downside risks to growth and the YC inversion definitely adds fuel to that fire.
more fuel comes today when jobless claims and durable goods orders show further weakening in the economy. i'd say the chance of a recession is high, but definitely not certain.
the yield curve does contain a ton of useful information and it is logical as well. i do think the predictive power has diminished (as the clevland fed article goes into), but you can never say "it just doesn't apply" due to a) the logic of an inversion, and b) its historic predictive power.
Barron
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