Posts by Olav Dirkmaat

The Fed Ignores the Yield Curve (But the Yield Curve Is Warning for a Recession)

In our latest Q3 report on the US economy, we signaled that the yield curve was flattening. The spread between long-term and short-term yields is perhaps one of the best indicators of a recession; whenever the yield curve inverts (which means short-term yields exceed long-term yields), a recession follows. Ever since our publication, the yield curve continued to flatten even further, getting dangerously close to inverting. “This Time Is Different” There is a saying that the four most dangerous words in finance are “this time is different.” Yield curve spreads are now at their lowest point since 2007, moments before the Great Recession began. Lately, however, the financial press began picking up this worrying trend. In articles published by Bloomberg and Financial Times, various commentators argued that the yield curve, despite its impressive historical track record, will not predict an economic downturn this time around. Not just reporters were keeping…

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Trump’s Tax Reform Dissected

Two weeks ago, the Trump administration presented a detailed version of one of Trump’s most important election promises: a tax reform. What are the consequences of Trump’s recent tax proposal for the US budget deficit and public debt?

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How OPEC Became Irrelevant: Traditional Oil Producing Countries Still Fail to Face the New Reality

The large traditional oil-producing countries — both OPEC and non-OPEC — are still catching up with the new reality. After deciding to extend the production cuts — agreed upon half a year ago — for another nine months, oil prices plunged below $50/barrel. Not quite the effect these oil giants were hoping for, but nothing out of the ordinary. After all, the fact is that supply and demand dynamics in the oil market have changed for good.

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Beyond the Bitcoin Hype: Limitations of Bitcoin and Blockchain Technology

A lot has been written about the benefits of cryptocurrencies such as Bitcoin and blockchain technology. Blockchain technology will no doubt revolutionize the world. It should be no coincidence that one of our recent guests to Universidad Francisco Marroquín, Nick Szabo, has labeled blockchain technology “the Napster of finance.” While recognizing the value of cryptocurrencies and blockchain technology,

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This Is What Businesses Are Doing with Record Corporate Debt

Last year, non-financial companies issued $674.3 billion in corporate debt, a new record high. Low interest rates are wrecking the allocation of capital: the increase in debt is not used to invest, but rather to distribute cash to shareholders. However, there is one important caveat to this whole scheme that will threaten the U.S. economy.

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