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On Caroline Baum's claim that the upward-sloping yield curve means that we should be optimistic http://www.bloomberg.com/news/2011-05-26/recession-forecasts-yield-curve-says-no-way-commentary-by-caroline-baum.html :

Paul Krugman http://krugman.blogs.nytimes.com/2011/05/30/the-unkillable-yield-curve-fallacy-wonkis h : "[T]he long-term rate is a prediction of future short-term rates. If investors expect the economy to contract, they also expect the Fed to cut rates.... If they expect the economy to expand, they expect the Fed to raise rates, making the yield curve positively sloped. But here’s the thing: the Fed can’t cut rates from here, because they’re already zero. It can, however, raise rates. So the long-term rate has to be above the short-term rate..."

The normal relationship between the slope of the yield curve and expectations of growth simply breaks down when interest rates are very low.

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