• chris1634

Yield Curve Predictions

Hopefully the title has not put you off reading this first effort in a week; Canadian economist Campbell Harvey developed his "yield curve model" at university - 3 recessions ago.

This indication tool has predicted every major recession since the 1960s and relies on US Treasury long-term bonds [or US borrowing] which usually provide higher rates of interest for investors, which are typically investment and pension funds.

For the last 3 months this yield curve has been "inverted" - with short term yields exceeding those for longer terms. For those interested in the technical detail the US Treasury yield curve describes the relationship between treasury interest rates and the maturity of treasury bonds.

These bonds are reputed to be the safest of bonds as they are backed by the Government which can, and frequently does, print more money, seemingly the answer to all problems.

The concern now, and for the last 3 months is that shorter term yields are higher causing the curve to be inverted. Harvey recently wrote a paper for the Canadian Journal of Economics saying US Treasury yield curves have a direct influence on Canadian government bonds yield curves - which became inverted in May for the first time in years.

Another "red flag" is the tariffs the US is now placing on its trading partners.

Harvey - never proven wrong in almost 50 years - says these numbers are indicative of another financial recession.

Politicians tells us constantly that the economy is doing well; Chancellor Hammond in the UK and financial expert Trump in the US. Plus, stock markets are doing well. How can this possibly mean a recession is imminent?

Lets ignore the chasm of debt for now...

Harvey points out that the economy looks like this a year before previous recessions. In 2007 the UK economy was booming, likewise in the US. 2008 arrived and with it a serious reversal resulting in millions losing jobs, homes, savings etc.

THIS is what lead to the financial revolution currently moving into overdrive.

I have regularly referred to the desperate situation in Venezuela, which now looks alarmingly similar to Weimar Germany in the early 1920s. History shows that the hyper-printing of [fiat] money leads to hyper inflation. Currency devaluations lead to the same outcome.

My point? These actions are taken by political leaders/central bankers without asking for our consent, despite the huge implications of these moves. In our centralised system we are merely pawns - unless we are the 1% owning 90% of the wealth.

If you have fiat money, saved in a bank or "managed" on your behalf in the stock markets by "expert" financial advisers you are at great risk. Your money's value will be determined by the actions of others and its safety is a constant concern.

Digital or cryptocurrency - if stored in a digital [vault] wallet can only be accessed by the owner, its value influenced only by demand and can be spent anywhere in the world.

People in Venezuela are buying as much crypto as they can; it is reported foreign governments are too in an effort to ward off the effects of international sanctions.

Please don't wait until the next crash to take action.

#cryptocurrency #blockchain #cryptoaccountants

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