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Will there be another global economic recession by the end of 2015?

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PREDICTED CHANCE

TODAY

Yes

(closed)

Predicted: 7.91%

Actual: 7.91%

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Question ends

December 31, 2015 @ 08:59pm PST

Predictions Made

18

Most by: GeneH (4 predictions)

Discussion

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xtc283   •   Mon Jun 15 2015 at 02:29am PDT

TO KRH and RWSwansen’s points, this market will be cancelled (once I figure out how that gets done) and reopened with a new title…something like, “Will the the US yield curve invert and remain inverted for at least 30 days before the end of 2015?”

KRH   •   Sun Jun 14 2015 at 10:45pm PDT

I agree with rwswansen that the question and resolution criteria are too far apart. I recommend the question be cancelled and restarted with new wording.

From wikipedia
The International Monetary Fund defines a global recession as “a decline in annual per‑capita real World GDP (purchasing power parity weighted), backed up by a decline or worsening for one or more of the seven other global macroeconomic indicators: Industrial production, trade, capital flows, oil consumption, unemployment rate, per‑capita investment, and per‑capita consumption”.12

According to this definition, since World War II there were only four global recessions (in 1975, 1982, 1991 and 2009), all of them only lasting a year (although the 1991 recession would have lasted until 1993 if the IMF had used normal exchange rate weighted per‑capita real World GDP rather than the purchasing power parity weighted per‑capita real World GDP).12 The 2009 global recession, also known as the Great Recession, was by far the worst of the four postwar recessions, both in terms of the number of countries affected and the decline in real World GDP per capita.12

Before April 2009, the IMF argued that a global annual real GDP growth rate of 3.0 percent or less was “equivalent to a global recession”.34 By this measure, there were six global recessions since 1970: 1974–75,5 1980–83,5 1990–93,6 1998,6 2001–02,6 and 2008–09.7

BeteNoire   •   Sun Jun 14 2015 at 07:05am PDT

So, the question really is will the the US yield curve (30yr – 30 day) invert and remain inverted for 30 days or more before the end of 2015. That’s a long way from your original question. I would have bet the same way, but I think if anyone objects you should cancel and restart the question.

xtc283   •   Sun Jun 14 2015 at 07:32am PDT

Agreed. My newbie fumbling has created the potential for confusion. Let the crowd speak now before we get too far into the rest of the year.

GeneH   •   Sun Jun 14 2015 at 06:15am PDT

Good Judgment Project used the IMF’s World Economic Outlook to do an over/under for World GDP growth rate for the past year—-an actual vs IMF projection. A nice objective way to ask and answer a question.

Not sure if it is helpful in the context of the way you phrased the question, but might help you in determining the outcome. Thanks!

http://www.imf.org/external/pubs/ft/weo/2015/01/

xtc283   •   Sun Jun 14 2015 at 06:19am PDT

Thanks, GeneHayward. I’m curious what the IMF did but don’t want to update the decision criteria at this point.

xtc283   •   Sun Jun 14 2015 at 04:17am PDT

WStritt—Excellent points. Thank you for these clarifications. Clearly, I could have thought my question through a bit more before posting…actually, quite a bit more. My bad — but I’m new to both prediction markets and Inkling. That’s the way it goes. In this comment, I would like to clarify and confirm a few of the issues you’ve raised…chief among them, I want to make an explicit statement of the decision criteria for naming winners in this market.

To your point and for the past 100 years, the US economy has been the driving force behind global recessions. I want to confirm that this is the implicit assumption motivating my choice of wording.

Next, the Yield Curve is an heuristic and the 6-8 month lead is not a fixed range. Given that, I don’t see a need to reset the end date for this market from its current “Dec 31, 2015.”

Moreover, it is not even widely agreed upon that the YC is a reliable leading indicator for impending recessions. For instance, the 1991 mini-recession (two months duration based on NBER criteria) was not preceded by YC inversion. One could argue, however, that 1991 was a “real” recession in academic, NBER terms only and one that the markets responded to only briefly, if at all.

Irrespective of these caveats, the YC is the index I have chosen as the benchmark for this market. Therefore, debates over its validity would not be helpful. If you don’t agree, start your own market or don’t purchase stock.

Then, there’s your point about the NBER’s declarations of an “official” recession as a lagging indicator by 11+ months. While a fair question, I never intended to use the NBER to evaluate this question. So, that’s off the table.

This raises the question of what the quantitative criteria to evaluate outcomes in this market are. Here’s the clarification:

The US YC is the benchmark index. It will be calculated using US Treasury data posted here:

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

The calculation will be based on the 30 year bond rate minus the 3 month T-bill rate. If that value goes below zero, then that will initialize the count towards “inversion.” Therefore, if the YC inverts at any time before the end of 2015 and stays inverted for more than 30 days, that is my definition of “recession.” This inversion doesn’t have to be of constant duration, in other words, “inversion” is defined as occurring within a minimum 30 day window. If there is fluctuation above and below zero, then the 30 day window would start with the first inverted date and end with the last inverted date in 2015. The metric would reset to zero or “no inversion” if more than 30 days elapse without a single inverted day. So, to the nitpickers, if there are only two inverted dates within a 30 day window, that would mean, yes, “inversion” is occurring and there is an impending recession.

Of course, this conflates the usage of “global” vs “US” and “impending” vs “actual” recession but the criteria should be clear even though the wording in the market title is not. As already noted, for the purposes of this market, US=Global. Moreover, “official” or confirmed recessions have been changed to “inversion,” which is more like an “impending” recession.

Please push back and raise further clarifying questions or concerns that I haven’t made explicit. I would like to make this market as transparent as possible.

Also, please note these clarifications — and the new decision criteria — when placing your bets.

Finally, having opened the market only one day ago, I hope it’s not too late to establish these criteria. The site moderators are the judges of that.

BeteNoire   •   Sat Jun 13 2015 at 04:10pm PDT

what is your data source to judge?

Rationales

"Statistically both Europe and the U.S. have already had an exceptionally long recovery. "

urbantwilight bought at 13.76%
June 13, 2015 @ 07:44pm PDT

"The Yield Curve isn't even close to inverting"

xtc283 sold at 31.01%
June 13, 2015 @ 02:35pm PDT

historical trend

Click on possible answers in the right column to hide/show them on the graph. You can also hover over any line to see current value at that time. Graphs will begin to show data one hour after the question has been open. The Historical Trend chart does not display all prices ever reached since it is only updated at discrete time intervals, (hourly/daily/weekly, depending on the date range).
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