The Recovery Won’t Die Naturally. It Will Be Killed.

The term “business cycle” makes it sound as if the economy is a big washing machine built to endlessly follow a series of steps: expansion, recession, recovery, rinse, spin. In fact, it’s unlikely developed economies are doomed to recession: Some outside force usually must slow them down.

This is relevant today because people are suddenly worried about a U.S. recession, thanks to the bond market doing that freaky thing where long-term interest rates flip lower than short-term rates. This “inversion” of the “yield curve” has been a solid recession indicator for decades. At the same time, economic numbers still seem fine, making one wonder how this expected downturn might happen.