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recession fears
August 14, 2019

Many economists are pessimistic about the state of the global economy, as the 10-year Treasury note broke below the 2-year rate for the first time in more than a decade in the U.S. and plunging global interest rates may be signaling a looming worldwide recession. Several of those economists provided The Washington Post with their takes on what's going on.

"It seems very fragile at the moment," Torsten Slok, chief economist at Deutsche Bank Securities, told the Post. "We're walking on a tightrope."

Outside of the U.S., the Post reports, 43 percent of bonds are trading at a negative interest rate, which is one of the major reasons for the worried outlook. Those yields have complicated central banks' management of the economy, but raising rates wouldn't necessarily be a quick fix. "If interest rates keep going down, the banks will be under pressure," economist Ashoka Mody, a former International Monetary Fund official said. "If they go up, governments will be under pressure. They're caught in a bit of a pincer."

While negative rates don't spell immediate doom, the longterm outlook is somewhat bleak if the situation remains in its current state. "You can survive, quote-unquote, or can live with negative yields for quite some time," economist Claudio Borio, the head of the monetary and economic department at BIS, said. "Indefinitely? It would be very odd to think about that being possible. There would be distortions in the economy. You will have resources in the wrong sectors, in the wrong firms, and therefore productivity and growth will suffer. On top of that, you're likely to have quite a lot of debt out there, which will make it harder for policymakers to raise rates without creating some tensions and problems." Read more at The Washington Post. Tim O'Donnell

June 3, 2019

The escalating trade war between Beijing and Washington has increased fears of a potential global recession.

In May, President Trump moved to increase tariffs on $200 billion worth of Chinese imports, raising the cap from 10 percent to 25 percent. He also threatened levies on all Chinese goods. If that happens and China retaliates, a global recession could hit within three quarters, Chetan Ahya, global head of economics at Morgan Stanley told CNBC. Things look to be getting worse between China and the U.S. — the two traded barbs all weekend over matters related to trade, technology, and security. Both sides remain quite open to re-opening talks, however, and the hope is that Trump will meet with China's President Xi Jinping later in June at the Group of 20 Summit in Osaka, Japan, in an attempt to ease the tensions.

The trans-Pacific battle between the U.S. and China is not the only thing driving recession fears, however. Trump's recent tariff threats against Mexico have also played a role, causing stock markets to take a hit across the globe, CNBC reports.

In terms of the U.S., specifically, a recession is almost a sure thing, Agence France Presse reports. Nearly every respondent to the quarterly survey from the National Association for Business Economics predicted growth would slow in 2019. The risks are reportedly low in the near term, but are expected to rise rapidly in 2020. The odds for a recession by the end of next year, as reported by the survey, have doubled in the last three months to 60 percent, mostly as a result of the U.S.'s increased focus on protectionist trade policies. Tim O'Donnell

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