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Traders work after the closing bell at the New York Stock Exchange (NYSE) on August 12, 2019 at Wall Street in New York City. (Photo: Johannes Eisele/AFP/Getty Images)

'Strongest Recession Signal Yet': Alarm Bells Sound as Key Indicator That Predicted Last Wall Street Crash Goes Negative

If and when a recession comes, said one commentator, "it'll be impossible not to point to a ruinous, needless trade war as a key cause"

Jake Johnson

Warning signs that the U.S. economy could be barreling toward a recession quickly became alarm bells Wednesday after the Treasury bond yield curve—a key indicator that has preceded every major downturn over the past five decades—inverted for the first time since the Wall Street crash of 2007.

As the Washington Post reported, "the yields on short-term U.S. bonds eclipsed those of long-term bonds" on Wednesday, a phenomenon that "suggests investors' faith in the economy is faltering."

Chris Rupkey, chief financial economist at MUFG Union Bank, told the Post that "yield curves are all crying timber that a recession is almost a reality, and investors are tripping over themselves to get out of the way."

CNBC described the inverted yield curve as the "strongest recession signal yet."

Economists and other commentators were quick to place at least some of the blame for worsening market volatility on President Donald Trump's trade war with China, the world's second-largest economy behind the U.S.

Though Trump sparked a brief rally on Tuesday with his decision to delay his planned 10 percent tariffs on Chinese goods until Dec. 15, markets tanked again Wednesday in response to the inverted yield curve, wiping out the previous day's gains and triggering fears that a major recession could be imminent.

"Amazing how many people have spent time trying to project some rationality onto Trump trade policy," tweeted economist and New York Times columnist Paul Krugman. "What looks like raw ignorance and prejudice is, in fact, raw ignorance and prejudice."

Talking Points Memo editor Josh Marshall pointed out that while presidents are often incorrectly blamed or credited with the state of the economy, "it'll be impossible not to point to a ruinous, needless trade war as a key cause" if a recession hits.

As markets slid on Wednesday, others noted the historic pattern of recessionary cycles that have corresponded with massive tax cuts for the wealthiest:

Further intensifying fears of a recession, said economists, is the fact that the Trump administration does not appear willing to take the steps necessary to combat a serious downturn, such as spending money on meaningful government initiatives like an infrastructure program.

"If Trump proposed a serious infrastructure plan, Dems would have a hard time saying no even though it would help him politically. But no such plan has been or will be offered, for a couple of reasons," tweeted Krugman.  "One is that [Senate Majority Leader] Mitch McConnell and his wing of the party oppose any kind of government program, no matter how much good it might do."

"Another," added Krugman, "is that Trump and co. just can't bring themselves to advocate anything that doesn't include scams on behalf of their cronies."


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'No Time to Waste': New Nationwide March For Our Lives Protests Set for June 11

"Together, we rose up four years ago. One million of us demanded change. We built a movement. We voted for new leaders. And the gun deaths increased. Now is the moment we march again."

Brett Wilkins ·


'We Need Fewer Guns in Schools, Not More': Teachers Reject GOP Call for Armed Educators

"Teachers should be teaching, not acting as armed security guards," the president of a leading teachers' union asserted in the wake of the Robb Elementary School massacre in Texas.

Brett Wilkins ·


Faith Leaders, Teachers Mobilize for Protests at NRA's Houston Meeting in Wake of Uvalde Massacre

"Don't look away," said one advocacy group. "Rally against the NRA."

Julia Conley ·


NY Appeals Court Rules Trump and Two of His Kids Must Testify in Financial Fraud Case

"Our investigation will continue undeterred because no one is above the law," said New York Attorney General Letitia James.

Kenny Stancil ·


After Racist Massacre in Buffalo, Senate GOP Blocks Domestic Terrorism Bill

"There are a lot of MAGA Republicans for whom no amount of gun violence... will ever, ever convince them to take any action," said Senate Majority Leader Chuck Schumer.

Jake Johnson ·

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