Tuesday, December 18, 2018

Treasury Secretary Steven Mnuchin Denies Economic Reality

Treasury Secretary Mnuchin
For a very long time, I have been advising in the EPJ Daily Alert that the yield curve is a very powerful indicator of developing recessions when it turns negative.

Below is the chart that I have run in the ALERT. The dashed lines show the yield curve turning negative. The "R" markers indicate the gray shaded recession periods.

This is what I wrote in today's ALERT:
A further item of note. We are getting very close to an inverted yield curve where short-term rates are higher than long-term rates (See chart below). We are only in the general range of a positive 15 basis points, so depending on what happens to long rates, a 25 basis point hike could turn the yield curve negative or close to it, which would make most commercial bank lending unprofitable and, thus, slow money growth even further.
Yet, Treasury Secretary Mnuchin without rhyme or reason is rejecting this powerful indicator.

Bloomberg reports:
Treasury Secretary Steven Mnuchin dismissed the economic significance of a flattening yield curve that some investors see as potential precursor to a U.S. recession.

“I don’t necessarily believe that the yield curve at this time is an adequate predictor of future economic issues,’’ he said in in a round-table interview Tuesday at Bloomberg’s Washington office.
What a clown.



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