Onward and Upward

Interest rates continue their climb… and long rates have risen by enough in recent weeks (today they’re roughly at their highest levels since mid-2002) to shut down discussion of the “inverted yield curve”, at least temporarily.

This raises a good question: is it more contractionary for the economy (or less expanionary, depending on how you want to look at it) to have a flat yield curve with interest rates of 4.5%, as we did 6 weeks ago… or for the yield curve to not be inverted but to have top long-term rates of 4.9%, as we have today?