Time to Panic: Half the World’s Economies Are Headed for Recession


By CCN Markets: Fifty-three percent of countries that offer sovereign debt currently have inverted yield curves, according to one economist. If the percentage gets much higher, there is a strong possibility of a global recession.

Daniel Lacalle, Chief Economist at the Madrid-based investment firm Tressis SV, delivered the news via Twitter:

Why An Inverted Yield Curve Is Really Bad

An inverted yield curve signals a recession because of what it says about investor psychology.

Normally, we expect yields on longer-term bonds to be higher than that of shorter-term bonds. That’s because the longer the time frame, the more risk that interest rates and the economy will change. To compensate for that risk in owning a longer-term bond, the bonds pay a higher interest rate.

Binance Banner  

Consequently, the shorter time time period to a bond’s maturity means less opportunity for circumstances to change, which means less risk, which translates to a lower interest rate.

Inverted Curves Spook the Markets

An inverted yield curve means short-term bonds are paying higher yields than long-term bonds. Short-term bonds are usually represented by two-year Treasury notes, and long-term bonds are usually represented by the 10-year Treasury note.

Investors purchase long-term bonds, which pushes those yields down. They’re willing to take less money over the long term because they do not see inflation as a risk. Inflation would drive interest rates up, meaning investors feel satisfied that their money will be safer in longer-term investments.

This also means investors expect the Federal Reserve to continue to lower interest rates. Consequently, investors want to buy long-term bonds and lock in higher interest rates before the Federal Reserve starts to lower them.

Coinbase Banner  

Inverted Curves Often Forecast Recessions

The reason an inverted yield curve is a frequent signal for a recession is that lower interest rates mean a cooling economy. The Federal Reserve lowers interest rates to encourage people to borrow money so that they can invest in their business or other ventures. That is meant to stimulate the economy.

Although an inverted curve is not always a signal for a recession, Kevin Smith of Crescat Capital points out that one is more likely if the Fed activity lags behind market signals and that “we see much bigger problems from a macro standpoint” in terms of equity prices falling significantly.

Ed Butowsky, Managing Partner at Chapwood Capital Investment Management, agrees that all of these inverting yield curves are a dire sign for the global economy, telling CCN:

“I don’t know how the Fed can’t continue to lower rates, to the point of returning to historic lows. The global economy is doing nothing but re-trenching, and that creates a contagion because of how linked every nation’s economies are to each other. Even China’s growth is half of what it was two years ago.”

This article is protected by copyright laws and is owned by CCN Markets.

Go to Source
Author: Lawrence Meyers


Recommended Crypto Services, Products and Strategies:

The first thing any crypto investor needs is is a reliable and secure Crypto Wallet.  Whether you’re looking for an online wallet, hardware wallet, desktop or mobile wallet, Crypto Renegade provides you with all the Best Crypto Wallets in each category.

FreeBitcoin Banner  

Best Crypto Wallets Banner

When you’re ready to buy more crypto, or exchange your coins for others, Crypto Renegade’s list of the Best Crypto Exchanges has you covered.  The Crypto Exchanges recommended here offer everything from simplicity and convenience to advanced trading platforms and profit sharing. 

Best Crypto Exchanges Banner

If you want to learn more about the methods and tools that can be used to find Great Crypto Projects, then be sure to check out Crypto Renegade’s strategy for How To Find The Best Cryptocurrency.

Crypto Strategy Banner

For those people that don’t have any money to invest right now, or just want to understand the technology a bit more, you’ll definitely want to check out Crypto Renegade’s Free Crypto Strategy and start collecting Free Coins today!

Free Crypto Banner

What do you think about cryptocurrency? Do you have any questions about it? Be sure to leave a comment below.

This site uses Akismet to reduce spam. Learn how your comment data is processed.