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Message Subject Treasuries yield curve just inverted for the first time in more than a decade. *2007*
Poster Handle Fifth-and-a-Half Element
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This market indicator has predicted the past seven recessions.

An inverted yield curve, which has correctly predicted the last seven recessions going back to the late 1960's, occurs when short-term interest rates yield more than longer-term rates. Why is an inverted yield curve so crucial in determining the direction of markets and the economy? Because when bank assets (longer-duration loans) generate less income than bank liabilities (short-term deposits), the incentive to make new loans dries up along with the money supply. And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion.

The last two times the yield curve inverted was in the years 2000 and 2006 before each of the last recessions.

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