Category Archives: Economics

The yield curve

The yield curve is, in fact, an important economic indicator. As such, it is included as one of 10 components of the U.S. leading indicators published each month by the Conference Board. In fact, most recessions have been preceded by inverted yield curves. But inverted yield curves have often not been followed by recessions, so using the yield curve as an economic forecasting tool can be hazardous.

 

High oil prices

Oil is a supply side shock creating higher prices for goods due to higher cost of manufacturing and shipping. The higher price for gas for consumers is inflationary by itself.

Yes, we are very vulnerable to high oil prices, but less so than in previous times. Nevertheless a shock could be devastating to our economy. We went from under a dollar in 1998 to over $3 in 2006. Ouch is what my wallet says. My SUV doesn’t look so good to me now! 😉

State schools run at a loss

Education is increasing because of demand. When I grew up, not everyone was expected to go to college, now it’s a given. State schools run at a loss made up by tax payers. They simply don’t charge enough tuition to cover their costs. But when tax revenues are short, they have to make decisions on where to make changes. Remember colleges are funded by states, not the feds. Although there is some federal money for education, it’s not anywhere close to being a factor when compared to military spending. And none of this really leads to inflation.