Yield curve inverts

[realpolitic]

Reccession followed by a short, but unpleasant Depression. What good has come of Bush's preesidency?

There are too many false economies going on. The economy's problems over the last few years:

Internet bubble burst

Corporate theft Worldcom, Enron etc.

Income disparity similiar to the end of the guilded Age & beginning of Great Depression- ie supply side economics - rich producers with lots of bucks, poor consumers

Disarry caused by 9/11

Hundreds of billions spent in Iraq

Record hurricane damage

The only reason there hasn't been a Depression yet is technology expanded the economy as fast as these factors distorted it.

This Depression will be much shorter than the GD, as the:

Aristocracy are already in dire political shape. The oilygarchy will be deposed.

Internet discussions on economics are replacing ones in "smoke filled rooms".

People realise that shipping apples from halfway around the world is silly if you can grow them nearby. "True cost economics" will be discussed even in Congress. The cost of the military guarding oilfields will be factored into the cost of oil. The cost of chemotherapy will be added to the cost of cigarrettes.

Energy saving technologies will be used; biodiesel, maybe even zepplins will come back.

[:) Smiley]

Originally posted by notyoueither
I figure, move the whole province and make it easier on them.

Now that kind of project could employ a better part of the world for several decades.

[Dinner]

Just to clarify an inverted yield curve means that short term treasures have higher yields then long term treasures? That's strange. What causes that?

[pchang]

Yes, you are correct on what an inverted yield curve means. What causes that? Bond traders are betting that the future will be worse than the present.

[notyoueither]

Originally posted by Smiley


Now that kind of project could employ a better part of the world for several decades.

The Newf's will do it on a weekend. Toss a bunch of stuff in the back of the pickup trucks and go. The long part will be the drive across Canada.

[Sikander]

Originally posted by realpolitic
Reccession followed by a short, but unpleasant Depression. What good has come of Bush's preesidency?

There are too many false economies going on. The economy's problems over the last few years:

Internet bubble burst

Corporate theft Worldcom, Enron etc.

Income disparity similiar to the end of the guilded Age & beginning of Great Depression- ie supply side economics - rich producers with lots of bucks, poor consumers

Disarry caused by 9/11

Hundreds of billions spent in Iraq

Record hurricane damage

The only reason there hasn't been a Depression yet is technology expanded the economy as fast as these factors distorted it.

This Depression will be much shorter than the GD, as the:

Aristocracy are already in dire political shape. The oilygarchy will be deposed.

Internet discussions on economics are replacing ones in "smoke filled rooms".

People realise that shipping apples from halfway around the world is silly if you can grow them nearby. "True cost economics" will be discussed even in Congress. The cost of the military guarding oilfields will be factored into the cost of oil. The cost of chemotherapy will be added to the cost of cigarrettes.

Energy saving technologies will be used; biodiesel, maybe even zepplins will come back.

And the winner of the most ironic handle goes to.....

[Imran Siddiqui]

While he's definetly in the running, I'll still give the award to MrFun. It came close this year, though, I'll say that.

[JohnT]

What MrFun post is that, Imran? Any in particular, or just the entire agglomeration of them?

Just thinking about it makes me

[realpolitic]

Lotsa flame from the reich wing again, no substance.

OK guys make a case that Bush hasn't ****ed up the nation.

[Imran Siddiqui]

Originally posted by JohnT
What MrFun post is that, Imran? Any in particular, or just the entire agglomeration of them?

Just thinking about it makes me

The entirety, of course.

[Sikander]

Originally posted by realpolitic
Lotsa flame from the reich wing again, no substance.

OK guys make a case that Bush hasn't ****ed up the nation.

That was your point in the earlier post? Wow, worse than I thought.

[DanS]

Interesting. I don't have much to add, but I've been following it. I guess I would be surprised to see a recession, given the high corporate profits and labor market strength.

[Adam Smith]

Originally posted by Oerdin
Just to clarify an inverted yield curve means that short term treasures have higher yields then long term treasures? That's strange. What causes that?

Quick explanation:
Nominal interset rate = real interest rate + expected inflation
The real interest rate increases as term increases due to greater uncertainty farther into the future.
If expected inflation is pretty much the same through all periods, then you get the standard yield curve with higher rates as term increases.
But if inflation is expected to decline substantially at some time farther in the future, then the expected inflation term may become small or even negative, resulting in lower nominal interest rates farther in the future.

Originally posted by Colon
Every recession was predated by an inverted yield curve, but not every inversion was followed by a recession. The further it inverts the more likely the recession though.

The standard explanation is that the decline in expected inflation is due to reduced demand. I.e., the aggregate demand curve is expected to shift in due to recession, we get lower output, lower inflation. But I wonder if there is a supply side explanation here (and in the other exceptions you mention)? Energy markets are currently tight as they attempt to cope with increased demand in China, India, etc. But a few years in the future, other supplies come on stream, energy prices drop, expected future inflation is less than current inflation, and you get an inverted yield curve. In this case aggregate supply is expected to shift out, and we get higher output and lower prices. Anybody have evidence to confirm or refute this alternative hypothesis?

[Colon™]

Originally posted by Adam Smith
The standard explanation is that the decline in expected inflation is due to reduced demand. I.e., the aggregate demand curve is expected to shift in due to recession, we get lower output, lower inflation. But I wonder if there is a supply side explanation here (and in the other exceptions you mention)? Energy markets are currently tight as they attempt to cope with increased demand in China, India, etc. But a few years in the future, other supplies come on stream, energy prices drop, expected future inflation is less than current inflation, and you get an inverted yield curve. In this case aggregate supply is expected to shift out, and we get higher output and lower prices. Anybody have evidence to confirm or refute this alternative hypothesis?

I'd check up on other leading indicators such as orders of capital goods corresponds with the thesis they're expecting weaker demand. And I believe this in fact did has weakened. CEO confidence in Q3 fell to the lowest point in 3 years: http://www.conference-board.org/econ...pectations.cfm

Demand outstripping supply, or supply failing to catch up with demand are two sides of the same coin really.