tag:blogger.com,1999:blog-1110014885778996459.post7691860742661601209..comments2024-03-29T04:50:03.060-07:00Comments on Idiosyncratic Whisk: What counts as an inverted yield curve?Kevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-1110014885778996459.post-18296543627567205032018-08-15T11:23:19.588-07:002018-08-15T11:23:19.588-07:00I'm not sure what it is that connects inversio...I'm not sure what it is that connects inversion to economic contraction, or whether it is more due to supply or demand.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-52015953276241540302018-08-13T18:20:11.915-07:002018-08-13T18:20:11.915-07:00Okay stray thought:
Suppose in the past the inve...Okay stray thought:<br /><br /> Suppose in the past the inverted yield curve cut bank lending. Borrowing short to land long does not make sense when short rates are higher than long rates.<br /><br /> But today banks sit on top of a mountain of reserves. In the present day perhaps the important spread is that between mortgage rates and IOER.<br /><br /> As long as that stays around 150 basis points or more, perhaps the economy will continue to muddle through. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-83614562973829964362018-08-13T06:29:38.265-07:002018-08-13T06:29:38.265-07:00Interesting post. IOER is "new," not sur...Interesting post. IOER is "new," not sure if important.<br /><br /> Perhaps the Fed is artificially propping up short-term rates, and the artificially inverted yield curve is no longer a telltale clue.<br /><br /> But I think you're right in your policy prescription. In the next recession the Fed will have to move quickly to lower rates quantitative easing and I would even say helicopter drops.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com