We Are Doomed, Yield Curve Edition

The New York Times has a piece this morning about the ever-fascinating yield curve, which tracks the difference between long-term and short-term treasury bond yields. Normally the long-term yield is higher to compensate investors for the risk of the economy eventually going sour. But what if you think things are about to get sour really soon? Then you’ll bid down the price of short-term bonds, which increases their yield, and pretty soon long-term yield is less than the short-term yield. The yield curve has “inverted,” which suggests that investors are nervous about a recession hitting. Well, guess what?

It hasn’t hit zero yet, and luckily for Republicans it appears to be on track to stay (barely) positive through November. As for why investors are getting nervous, well, the economy has been expanding for eight years and maybe they just figure a recession is due. Alternatively, could it be because there’s a lunatic in the White House and no one knows what the hell he might do next? That would explain why the yield curve was smartening nicely during 2016 when Hillary Clinton looked like a winner and then suddenly turned around right after Trump got elected.

I’m not saying that’s the reason. I’m just asking questions here. A guy can ask questions, can’t he?


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