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Comment by bostik | Hacker News Reader

For some extra material on the yield curve, I found this via Naked Capitalism: https://wolfstreet.com/2018/07/05/as-the-yield-curve-flatten...

Sure, makes sense. When a very reliable recession indicator starts showing signs of alarm, the logical option is of course to come up with a different indicator.

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An interesting, and quite a bizarre article. Thanks for pointing it out.

It'll be interesting to find out how prevalent this indicator is.

"This new indicator – rather than looking at the spread between longer-term yields of two years and 10 years – is looking at the spread between short-term yields. It’s “based on the spread between the current level of the federal funds rate and the expected federal funds rate several quarters ahead derived from futures market prices.”

- The above is weird, this indicator completely flips the focus from 'long term' outlook, to the 'QoQ' outlook. That too derived from futures market prices.

So if I can spin up some 'projects' (on a large-ish scale) that look like they'll do well for the next 6 months, I can make this graph look great. That's brilliant, we've just avoided a recession for the next 6 months.

This is kind of the same model that corporations work on. But corporations have regulations enforced on them to keep them from running into everyone with a chainsaw (EPA comes to mind).

Per Wikipedia, the last QE ended in September of 2016. That means we’re possibly seeing the market sans those affects. Of course there’s still stimulating factors at play like the US tax cuts. Personally, I’m operating under the assumption of an impending recession to last quite a while. There are many troubling activities underway and planned.

As someone above wrote, we’re still in a weird state where the fed has a huge balance of treasuries that it wants to “normalize”, e.g. sell. I think we’re still sailing in strange waters.

Could you expand on the troubling indicators..?

A hollow economy built on debt with most of the country living paycheck to paycheck with little to no savings, no real wage raises to keep up with inflation since the 90's, doesn't sound like a 'great economy' to me. It may be a wonderful economy for the people at the top though.

https://www.cnbc.com/2017/08/24/most-americans-live-paycheck...

https://www.vox.com/cards/minimum-wage-explained/minimum-wag... (for the minimum wage vs inflation graph)

Stagnant wages and a proliferation of ways to share consumables through the “gig economy”. Just at the ground level, I see lots of new construction but I can’t point to any projects to employ more people. Then there’s the very real meddling with the US international trade posture and associated international agreements.

As mentioned in an upthread comment and the posted article, the Fed outlined concrete reasons for doubting the reliability of the indicator, including QE's suppressive effect on rates. Perhaps try understanding the article you post instead of looking cursorily at the headline and deciding it looks ridiculous.

I'm not saying the Fed is definitely doing the right thing here (and neither are they, since they don't claim to be clairvoyant), but this tendency for people to feel smart by skipping considered critique in favor of "lol this sounds unintutive so it just be dumb amirite guy" is wearisome.

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