Interest Rates and the Godot Recession

Economists love referencing the play “Waiting for Godot”.  If you’re not familiar, it is a French play in which two people engage in discussions about a variety of things while they wait for their friend Godot.  Not to be a spoiler, but Godot never arrives.  

It’s a great, if overused reference that the Wall Street Journal used this week in relation to the most anticipated recession of all time.  To their point, it does feel a bit like “free beer tomorrow” or waiting for Godot and there is one really fascinating reason why.  

The Federal Reserve controls the front end of the yield curve, long term interest rates are largely controlled by market forces.  What this means is that each negative headline means that the long end of the curve falls.  In turn, lower long-term rates are stimulative to the economy.  

Source: Wall Street Journal