The yield curve inversion model

This chart is the steepness of the yield curve.  The curve is upward sloping, long term debt costs more that  short term debt. When the curve onverts, then folks are scrambling to cover short term bills, they have a cash shortage, they are near bankruptcy.  This happens at the line zero drawn on the chart.  One can run amodel that estimates the cycles in that curve, and so estimate the likelihood that it will drop below zero soon.

Npow, in this chart I have the yields of the three month, the one year, and the two year.  None of these have been bouncing around lately, they are mostly flat.  So, they are bound and the statistics in ghe chart above are not bell shaped, and the prediction  will be way off.

The curve is flat, at the short term, for the same reason the money velocity is dropping; the economy is in a contracted state, as seen by the dollar. A  mild recession would be an inversion from six to ten year, on the curve.