FAST FIVE: Yesterday's Perfect Recession Warning May Be Failing You

Published by on

You are presented two options, lend her money for two years at 2% annually or for ten years at the same 2% annual rate.

Given the options, you likely answered that if you were forced to lend in example one, it would be only for two years as lending for ten years produced no additional financial incentive to compensate for the additional eight years of risk.

In example two it is considerably steeper as 10-year “yields” are 4% higher than 2-year yields.

Louis Federal Reserve and Bloomberg The graph highlights that debt is growing faster than GDP, with GDP representing our collective ability to service repay our debt.

Note that about 40% of curves are currently inverted. Have the collective curves already sounded the alarm, but everyone is too focused on a flat 2s/10s curve to hear it.

Categories: ZH