facts for idiots and morons: (your name came up 1st)
Blaming Every Bad Economic Indicator
On The Trade War Just Proves You
Don’t Know What You’re Talking About
The Federalist, by Willis L. Krumholz
Loosely defined, a macro tourist is somebody who knows little to nothing about the global economy, economic data, or the direction of that data. But they run from headline to headline to explain the latest development—kind of like a tourist to France who, seeing the Eifel Tower, thinks he has seen “France,” and knows everything there is to know about “France.”To say the macro tourists were out in full force on August 14 would be an understatement. For the first time since 2006-07, before the financial crisis, the yield (annual return) an investor gets for buying a 10-year Treasury was less than the yield an investor gets for for buying a two-year Treasury. In finance-speak, the “yield curve” was inverted.
The “yield curve” (see chart) simply means the U.S. government’s cost of borrowing at different lengths of debt maturity. In normal times, just like you or I, it costs more for the government to borrow at longer maturities. The 10-year government bond thus “yields” a higher rate to an investor than the two-year government bond.
But when global growth is slowing, longer-term Treasury yields fall. This is because investors are seeking the relative safety of Treasurys—they buy more, bidding up the price, which means the government’s cost of borrowing goes lower. It’s also because slower future growth, where investment opportunities will yield less, means an investor is willing to accept a lower return for holding the Treasury.
Because of what an inverted yield curve says about future growth, and because banks are less willing to lend when the yield curve is inverted (banks make money borrowing at short maturities and lending at longer maturities), it is an ominous signal.
The S&P 500 Index fell by nearly 3 percent, and #TrumpRecession trended on Twitter, a website filled with idiocy. Everyone from California Democrat Ted Lieu to Ben Shapiro to the small but highly visible in the corporate media crowd of Never-Trumpers became experts.
Original Article |
