Barack Obama once said we were in a summer of recovery. Such a proclamation was followed promptly by roughly zero (0) recovery. Our economy has more or less remained stagnant, and, while on its face it’s looked positive, the employment numbers have indicated a huge number of people have simply given up any hope of finding a job.
And things could go from bad to worse, if this particular forecast is true: Deutsche Bank predicts a 60% likelihood that the United States will fall back into a recession. This comes from the Wall Street Journal:
The so-called yield curve suggests there’s a 60% chance of a U.S. recession occurring in the next 12 months, according to analysts at Deutsche Bank, led by Dominic Konstam. The calculations attach the highest probability to an economic contraction since the financial crisis.
The yield curve, typically measured using the level of long-term rates relative to short-term rates, has gained particular attention this year because of the narrowing difference between the two, often thought to signal an economic slowdown. Some measures are at their flattest since 2007.
The yield curve can be a fairly technical thing to explain, but what is important about it is that it isn’t something that is determined by the government, or by individual companies. It is a measure of the marketplace itself. What the current yield curve shows is what’s called an “inverted yield curve” – that the yield is better in the short term than the long term.
That’s not very good, and the yield curve has historically been pretty accurate at prediction U.S. recessions. The last inverted yield curve was in 2007 – five months before the Great Recession began. The U.S. Treasury’s means of using quick fixes to keep firms happy has created an atmosphere where the near future is more lucrative than long-term planning. This game they’re playing could very well cause the nation even further harm.