Statue of Alexander Hamilton, the 1st U.S. Treasury Secretary, outside the Treasury Building in Washington, D.C.

The Real Reason An Inverted Yield Curve Is Such A Bad Sign For The U.S. Economy

Also, Just What The Hell Is An Inverted Yield Curve?

Let’s start with that, because we can’t believe how much incredibly lazy reporting we’re seeing on the biggest single day point decline for the Dow Jones Industrial Average in nearly a year: referring to an inverted yield curve as a “reliable sign of an impending recession”, while not explaining what it actually is. As if you don’t need to know more than that, or it’s beyond the intelligence of a normal person to understand.

Anyway, since we think it’s worth the bother to explain and understand it, we’re going to take our own crack at it. (If you already know how it works, you can skip all the “bulleted” paragraphs. Or read through them anyway with a mind to judge us):

• The U.S. federal government is the biggest borrower of money. The Treasury predicts it will borrow nearly one and a quarter trillion dollars this year (although those aren’t final numbers, and it’s consistently revised estimates from earlier this year higher). In fact, about half a trillion dollars of the entire federal budget just goes to paying interest on the money the U.S. federal government already owes. That’s only about $100-billion and change shy of the U.S. defense budget, and edging higher, so that…