The Great Global Yield Curve Inversion - It is a world problem

The inverted yield curve is not just a US issue. It is global issue with most countries having some form of inversion. There are two common signals from this inversion. One, there will be a global recession. Whether the US, Europe, Asia, every curve is saying that future nominal rates will decline and there will be an economic slowdown. Past research on international yield curve shows the same relationship between inversion and growth as found in the US. The international data is consistent with the expectations of many economists. Two, an inverted curve tells us about global monetary conditions. In spite of all the quantitative easing, the inverted curves suggest that monetary conditions are tightening. This view is in contradiction with adjusted monetary growth. Granted the Fed has reduced its balance sheet and the ECB ended their QE program last December, but the amount of high-powered money has not declined. 

The greatest inversions are with lower-rated countries that are trying to stabilize currencies through tightening monetary conditions. This is not the case with most of the countries studied.

This global inversion is also suggestive of tight dollar conditions and these conditions are affecting global banking. The dollar has not fallen since the talk of rate declines and US short rates are at the high-end of any rank ordering. The Fed actions may not be for the US which in isolation may not need a rate cut. Rather, the rate cut is to relieve global dollar pressure. Central bank thinking in a rational expectations world is that if inversion suggests a slowdown then our job is to reverse inversion to stop the future slowdown from being realized. 
Central bankers to avert the expected impact from an inversion will manipulate short-rates lower.