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Why This Recession Will Be Different (and How to Keep It Mild)

How Washington could bungle the recovery

The new threat of COVID-19 has thrust new cadres of experts into the public eye, mostly from the health world. Now that we’re heading into a sharp and sudden economic downturn, with ballooning unemployment and a stock market down almost 20 percent, attention is turning to a new kind of expert: recession wizzes.

Duke University’s Campbell Harvey, an economist best known for discovering a crucial bellwether of coming recessions, has suddenly found himself much in demand. Since late March, Harvey has been asked to speak multiple times to virtual audiences; 1,000 people tuned in Saturday night to hear what he thinks will happen as COVID-19 shutters the global economy.

Harvey’s recession bona fides date back to 1986, when, as an economics student at the University of Chicago, he found that a rare market phenomenon when long-term interest rates fall below short-term rates—the so-called “inverted yield curve”—had occurred just before every U.S. recession since the end of World War II. Since then, the theory has borne out, as the yield curve has inverted before all three subsequent American recessions.

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