Is A Recession Coming

February 13, 2006 by Chuck | 0 Comments

All businesses change plans when they feel a recession is about to hit.

If you’re selling something that’s a novelty that only sells well if people have lots of extra money and are “euphoric”, a recession could kill your business.

If you’re a real estate investor, it might mean that you’ll consider every purchase in light of the fact that you might be able to buy the same property at much lower at “fire sale” prices in just a few months.

The question that stumps economists is “how do you tell when a recession is coming”.

Economic historian Gary North has this to say about predicting recessions…

The yield curve is a “curve” of interest rates for U.S. Treasury debt certificates.

An inverted yield occurs when the rate for 3-month T-bills is higher than the rate for 20-year T-bonds.

An inverted yield curve normally precedes a recession by six months.

You had better pay attention to the yield curve in the next few weeks. It is getting very close to inverting.

Why should you care? Because this is by far the most accurate predictor of a recession. I used it in 1989 and again in 2000 to predict a recession the following year. I was correct in both cases.

You can see what the curve looks like at his page here.

In Work at Home Blog

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