Credit in the next recession — two counterintuitive calls

Registered 2026-07-11 in the repository of “The Compound Trap.” Both claims resolve at the next officially dated U.S. recession; they carry forward if none occurs before April 2031.

The compound-trap paper registers two claims about U.S. credit at the next recession, both cutting against common intuition.

First: the credit-to-GDP ratio will be higher two quarters after the recession’s peak than at the peak itself. Intuition says recessions are credit crunches, so the ratio should fall. But the ratio rises in recessions partly because the economy — the denominator — shrinks faster than credit does. That denominator effect is one of the measurement traps the paper dissects, and the prediction puts it on the record in advance, with a narrow inconclusive band (±0.10 percentage points) defined so a hair’s-width result cannot be claimed as a win.

Second: total bank credit will not contract more than 3% from its pre-recession peak through two quarters past the recession’s trough — despite policy responses and headlines suggesting credit crunches. This is the primary falsification exposure: a genuine deep credit contraction would break it plainly.

Both claims resolve on named public data series, with the measurement windows fixed in advance.

This page reports registered research predictions. It is education, not advice: nothing here is a forecast service or an investment signal.