This is a test from the National Recession Alert System

Is the economic alarm real this time? [Bloomberg]( This is Bloomberg Opinion Today, a swift dis-inversion of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - The economy is not looking [too hot](. - [Ireland]( still needs to learn a lot. - The US [government]( is tied in a knot. - A London landlord hit [the jackpot](. If I Hear “Recession” One More Time, I Swear ... Yesterday, every mobile phone in America started screaming at [2:18 pm EDT]( as part of a test of the [National Emergency Alert System]( — you know, the official government warning of impending disaster, natural or otherwise. Even though I knew it was coming, the sudden crescendo of BEEEEEEP BEEEEEP BEEEEEEEEP scared the bejesus out of me. Maybe because it was a [little early](. Or maybe because, when I looked at my text it seemed … different from everyone else’s: At first, I figured it must have been some sort of glitch in the system. But then I woke up this morning and saw the headlines: [The US May No Longer Avoid a Recession](. [Long Bonds’ Historic 46% Meltdown Rivals Burst of Dot-Com Bubble](. [Fed’s Bid to Avoid Recession Tested by Yields Nearing 20-Year Highs](. Clearly, FEMA sent me this alert because I’m [the chosen one](; the Harry Potter of High Finance! And I need to warn you of the evils that will soon descend on Wall Street. The thing is, I’m probably the wrong ambassador for such a task. I was an English major! The bonds I learned about in school were the ones between Jane Eyre and Mr. Rochester. Plus, to me, the signals still seem very mixed. Just this morning, our executive editor Robert Burgess pointed out that the [MSCI All Country World Index]( is up 18% in the last year and economists have consistently [raised]( their estimates for GDP growth this year. How did we go overnight from a 100% chance of a soft landing to a 100% chance of economic apocalypse? Before we batten down the hatches, I think we should try and muddle through this mess together, using charts as a guide. Starting with the scarier predictions, we have John Authers: “For 15 months now, the yield curve has been inverted. In English, that means 10-year Treasury bonds have been yielding less than two-year bonds, even though investors normally require an extra yield for the extra risk for investing over long periods,” he [writes](. In other words, our recession warning bells have been ding-a-ding-linging nonstop for more than a year now: “The spike in bond yields over the last few weeks, however, has been accompanied by a swift dis-inversion,” John explains. Whenever the yield curve begins to let up, a downturn is almost certainly on the horizon. To add to the horror, John says this variety of dis-inversion — a bear steepening — is arguably more dangerous because the price of long-dated bonds are falling. “That combination of conditions happens very rarely,” he says. And when it does, we’re basically dunking ourselves in recession bathwater. It will be nearly impossible to escape from this economic hole unscathed. On the other hand, if you zoom out on that chart, you’ll see that “for the last 40 years, interest rates have gone pretty much one way: down,” Allison Schrager [writes](. Only in the last 18 months have rates have crept up. She argues that “reality is catching up with the bond market — and with the myths that have grown up around it.” One of the biggest myths is that bonds are boring, beige financial instruments where people park cash and forget about it. But they might not be the “safest option” for investors anymore. Adding to the concern, Conor Sen [says]( rising benchmark interest rates — which feed into mortgage, credit card and auto loan rates — are the new pain gauge for consumers. “Inflation is falling yet mortgage rates are climbing — this wasn't supposed to happen,” he writes. Households are staring at 30-year mortgage rates above 7.5%, even though market expectations of future inflation hover around 2.3%. That gap hasn’t been that wide since the 1990s. “Without any obvious catalyst for longer-term interest rates to fall, those upset about rising borrowing costs may be stuck in a sort of political and economic purgatory for some time,” he argues. There’s still a solid chance that economists are overreacting, though. “For more [than a year now](, there’s been no shortage of [economists declaring]( that the US consumer was [nearly tapped]( out,” Karl Smith [writes](, noting that time and time again, [Americans]( have [proved those forecasts]( dead wrong. Even if recession comes, nobody knows what it will look like. Maybe your mind jumps to [Kit Kittredge]( (the American Girl Doll of the Great Depression) or photos of people standing outside of [Lehman Brothers]( after the collapse. But not all recessions are bad like that. In fact, some of them might go completely unnoticed. As Robert has [written]( before, economists continue to look clueless “because they are still applying rules from the pre-pandemic playbook that are no longer relevant.” Just last week, the government made [huge revisions]( to its consumer savings data, showing that people have not been spending beyond their means, depleting their savings or turning to credit cards in desperation. Keep in mind that this is the same data that that economists have been using to predict a recession: So while my personal FEMA alert may have looked bad initially, there’s clearly more nuance to this situation that what can be communicated in a single text message. Remember that the next time someone starts ringing the recession alarm bells. Bonus Bond Reading: Corporate treasurers in Europe are accepting that [higher interest rates]( are here to stay. — Marcus Ashworth The Second Coming If you had asked me yesterday what a “Double Irish” was, I’d have guessed that it was a drink with copious amounts of Baileys. But after reading Lionel Laurent’s [column]( today, I can tell you that it’s a now-defunct [tax shelter]( that once allowed Google to cut its annual tax bill by about $2.5 billion. It is the “Double Irish” that enabled Ireland to go from one of Europe’s poorest countries to one of its richest. Over the years, Lionel says, the home of Guinness beer has become Europe’s glorified tech bro. “The country is fairly young, with a median age of 38.8. It’s rich, with a gross domestic product per capita close to Luxembourg’s. And it’s hooked on Big Tech, with Apple and Microsoft among the multinationals [accounting]( for one-third of [total employment]( in terms of pay and more than half of its corporate tax take,” he explains. But like Loro Piana-[wearing]( tech bros, the nation is far from perfect. It has a housing crisis, a shoddy transport network and the highest greenhouse-gas emissions per capita in the EU. An estimated $1.2 trillion in US profits [shifted]( through Irish tax treatments between 1998 and 2018, but that good fortune will soon dry up. Thanks to a new global minimum corporate tax rate of 15% (which will be implemented in 2024), Ireland will no longer be able to ride the coattails of deep-pocketed US firms. Lionel says the country needs to figure out how to create productive, long-term investments that enhance the real economy — not foreign multinationals. Read [the whole thing](. The Dems Did Democracy No Favors, Either We talked yesterday about how recently deposed House Speaker Kevin McCarthy brought about his own [self-destruction](. To be fair, though, it wasn’t all on him. Part of the blame falls on Democrats, too, [writes]( Mike Bloomberg, the founder and majority owner of Bloomberg LP. Although McCarthy failed to reach across the aisle ahead of the vote, Democratic Minority Leader Hakeem Jeffries could have extended an olive branch himself. “Jeffries’ decision to let McCarthy hang himself may have allowed Democrats to feel good in the moment,” he writes, “but Democrats now face the prospect of a speaker who will likely be to McCarthy’s right, and who will likely draw from his political demise the worst possible lesson: that the extremists must be heeded.” The eight radical Republicans who ousted McCarthy were angry at him for actually governing — gasp! — like a reasonable person. He cooperated with Democrats to keep the government open and paid a political price. It’s clear that those “extremists in Congress would rather torpedo the government than run it. And in voting out McCarthy, Jeffries and House Democrats are helping them do it,” Mike argues. The result is that Congress is sinking deeper and deeper into a pit of dysfunction, with no relief in sight. Read the whole thing for free [here](. Bonus Political Reading: The House Democratic agenda may be fraught, but the GOP program is [an undeliverable fantasy](. — Francis Wilkinson Telltale Charts Haha can you imagine signing a 18-year lease on an apartment and then spending seven years of your rent to break it? Yeah, me neither. But it’s a thing for companies that break their office lease agreements, apparently: “Meta shocked property observers last week by agreeing to pay £149 million ($180 million) — seven years’ rent — to escape the remaining 18 years of a London lease it signed in 2021. If swallowing that was more cost effective than Meta’s original plan to sublet the site, things must surely be dire for the London office market,” Chris Hughes [writes](. Surprisingly, though, investors seemed to care more about how much money just got added to British Land’s coffers than the bad vibes of the news. One of the uglier knock-on effects of the gridlock in Washington is aid to Ukraine — which seems to be getting pushed further and further down the government’s to-do list. If the funding does indeed dry up, things will start to get ugly, “given how [reliant]( Ukraine is on arms and ammunition delivered by the Pentagon,” Hal Brands [writes](. Even if other countries try to step in to fill the funding gap, there aren’t enough military supplies for Kyiv to make it to 2025. “At best, then, a US pullback will leave Ukraine in a brutal stalemate on its own territory. At worst, it will cause a gradual erosion that would force Kyiv to seek peace on unfavorable terms,” he says. Further Reading Elon Musk needs to stop incentivizing [violent content]( on X. — Dave Lee (free read!) The Nobel Peace Prize is tarnished. Here’s [how to save it](. — Bobby Ghosh FTX might have found [some money]( to pay people back. — Matt Levine China can’t blame everything on [wayward billionaires](. — Minxin Pei [Thailand’s leader]( is on a collision course with the central bank. — Daniel Moss ICYMI President Biden is building [a border wall](. The NYC [subway gunman]( got a life sentence. X ads are getting [flamed]( by community notes. Kickers Jimmy Butler’s [emo hair]( is smart PR. [Cannibalism]( used to be a funeral thing. Gen Z is making rock concerts [low ABV](. It’s a [good time]( to go get a passport. The “sharable” [speech]( is annoying. Notes: Please send the fluke crudo, the trio of croquettes, the single large shrimp and feedback to Jessica Karl at jkarl9@bloomberg.net. [Sign up here]( and follow us on [Threads](, [TikTok](, [Twitter](, [Instagram]( and [Facebook](. 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