I was originally skeptical of a recession occurring. And even if one did occur, it wouldn't be drastic.
So what, we're in recession. Suburb Sam, Trophy Wife Trisha and his Bevy of Suburbanite Princesses would have to make do in their palacial estate and 3 SUV's and VW Cabrio convertibles without a home equity loan to finance their family European trip for two years as GDP contracted 1.3%, and Trisha might have to shop at Wal-Mart and get a job!!!
Oh, the horrors.
But as time has gone on and I've seen just how much rot there is in the banking sector, not to mention the bevy of data coming out from different sectors, I'm pretty convinced a recession is on its way.
And then I found this;
It's one of those lessons you learn long ago. "Recessions always follow economic phenomenon X."
They don't know why.
Professors could really never give a good reason.
It just so happens recessions would always follow certain things and inverted yield curves were one of them. Sort of like various superstitious weather predictions found in Poor Richard's Almanac
There are theories that inverted yield curves foretell a recession as the long term future prospects of the economy are so low that demand for long term capital is also low, thereby driving down demand and therefore long term interest rate for loanable dollars.
Or that short term demand for immediate money to make a quick buck to feed a bubble drives up short term interest rates above long term interest rates, only until that bubble pops. But certainly this is not happening (note the heavy sarcasm).
Whatever the case, inverted yield curves tend to precede recessions. And when you combine it with charts like this;
it's getting harder and harder to ignore these "economic superstitions."
I wonder what Ben Franklin would be predicting.