Economists Worried that a Global Recession Could be Near
With inflation spiking dramatically, and some worrisome economic indicators popping up, many economists are starting to worry that a global recession could be right around the corner.
According to Fox Business, “One of Wall Street’s favorite indicators of an impending recession is flashing red, sparking fresh concern that the U.S. economy is on track for a downturn this year.”
“The spread between the 5-year and 30-year Treasury yields briefly inverted on Monday for the first time since 2006 on fears that the Federal Reserve’s aggressive approach to tackling the hottest inflation in four decades could lead to a sustained slowdown in growth.”
Many economists are worried about what is to come after seeing these economic trends.
Anu Gaggar of the Commonwealth Financial Network had this to say: “Markets are fixated on the U.S. Treasury yield curve as it is considered an excellent gauge of the economy. If the economy is healthy and growing, longer-term Treasury rates should be higher than shorter-term rates. When the reverse happens, concerns start to mount about the future state of the economy.”
Not every economist is similarly worried about the risk of a recession. Michael Darda of MKM Partners went on Yahoo Finance and had this to say:
“The problem is that those belly-of-the-curve measures are really not reliable. They’ve inverted in the past, you don’t always have a recession afterwards. What you tend to see essentially before every recession is the T-bill yield or the Fed funds rate up above longer-term rates on the curve. And not only did we not see that but those measures have actually been steepening – not flattening, but steepening – this year.”
“The New York Federal Reserve maintains a recession probability model based off of the ten-year yield relative to the T-bill rate, and that model has only about 2% recession risk over the course of the next year.”
Regardless of what happens, the fact that the Federal Reserve takes on such a centralized role in monetary decision-making is what leads to the volatile business cycle that makes such recessions a major concern.
Ron Paul, when he was in Congress and running for President, warned that such central planning was what made the economy unstable.
In order to get rid of recession fears, it would be good to step back and let the natural forces of the market work the way they are supposed to, instead of having the Fed control everything.