The recovery won’t die naturally. It will be killed.

Bloomberg Opinion Today

Today's Agenda

The next recession will be made in China.
Cutting interest rates may be pushing on a string.
Netanyahu just showed who really runs Israel.
Coal's losing steam even in India.

Choose Your Recession Adventure

The term "business cycle" makes it sound as if the economy is a big washing machine built to endlessly follow a series of steps: expansion, recession, recovery, rinse, spin. In fact, it's unlikely developed economies are doomed to recession: Some outside force usually must slow them down.

This is relevant today because people are suddenly worried about a U.S. recession, thanks to the bond market doing that freaky thing where long-term interest rates flip lower than short-term rates. This "inversion" of the "yield curve" has been a solid recession indicator for decades. At the same time, economic numbers still seem fine, making one wonder how this expected downturn might happen.

The obvious answer is President Donald Trump's trade war with China (and sometimes Europe, Canada and Mexico). But Noah Smith writes the cause may be more complex than that: The trade war is accelerating a process that's been ongoing for a while now, in which the global-trade paradigm of the past few decades — China makes, the world takes — is collapsing and turning into something new.

This shift will be neither quick nor painless. It could also make trouble for the investors rushing into Treasury debt, warns Conor Sen. Either we come out of this with globalization on the rebound, lifting economic growth and interest rates, or markets will be less correlated after the next recession ends, making Treasuries an iffier bet. Be safe out there.

Central Bankers Pushing on a String

Whatever the cause of the downturn, the Fed has already started cutting its own target interest rates to soften the blow. Other central bankers around the world are doing the same. And with rates so low to begin with, we're already talking about doing wild stuff like having the ECB buy stocks. Such promises didn't help markets much yesterday, notes Robert Burgess, suggesting investors fear central bankers are "pushing on a string" – meaning cutting rates has no impact.

One worrisome sign of this is in the U.S. mortgage market, notes Justin Fox. Rates are drilling back toward the Earth's core, but refinancing hasn't really picked up much. That's mainly because rates have been pretty low for much of the past decade. There aren't many mortgages left that need much refinancing.

Tellingly, stocks rallied today partly on hopes Germany might actually spend money on its economy. When monetary policy fails, fiscal policy must come to the rescue.

Further Interest-Rate Reading: The inverted British yield curve is a much poorer signal than the American one. – Marcus Ashworth

Netanyahu Bows to Trump

The on-again, off-again visit of U.S. Representatives Ilhan Omar and Rashida Tlaib to Israel is now officially off again (pending further notice). Israel had suggested it would let Tlaib visit her grandmother in the West Bank, but she objected to the terms and said she wouldn't go. Zev Chafets points out Benjamin Netanyahu had been prepared to let both Omar and Tlaib into the country, which probably would have been better for everybody involved. But Trump put his foot down, and Netanyahu's re-election campaign depends on showing undying fealty to Trump, so here we are.

Telltale Charts

India is supposed to be the promised land for coal for the next decade, but there are many signs the fuel's economics are collapsing even there, writes David Fickling.