Financial Signals in the US Macro Economy  The chart below tells a striking story about prosperity and economic health.  In every financial crash (gray bars), civilian unemployment rises dramatically (green curve).  Insecurity causes an increase in % of disposable income saved (red curve), but this is short-term, typically lasting two years before declining again as employment recovers.

Overlaid on this is the behavior of the Federal Reserve in controlling the money supply and cost of money by adjusting the federal funds rate (blue curve).  This in turn sets the interest rate a commercial bank will offer on savings account deposits.

Notice prior to each crash is a strong spike in the funds rate.  This is the Fed's attempt, by raising the cost of money, to sharply decelerate an overheating economy.  The point is that while the specific trigger point of the crash may be somewhat arbitrary, the circumstances creating the conditions for the crash are not.

The crash that follows brings uncontrolled, severe deceleration to the economy as unemployment jumps.  With this comes economic contraction as spending is curtailed and personal saving rate rises.  In response, the Fed drops the funds rate drastically, loosening the flow of money as stimulus to counter the shock.

This can be seen in the graph, looking at the three curves, and observing how they move in the approach to- and recovery following each crash.

Judged against the past 60 years, the trailing six suggest we are in new territory.  The federal funds rate has been flat lining just above 0% for an unprecedented 6 years.  Though employment has recovered from 10% in 2008 to 5% in 2016, the personal savings rate continued to climb for the first half of the recovery and has only recently held firm at 5% in the second half of the recovery, but has not been shown movement down to pre-2008 2.5% level.

The dotted curves show that conditions appear to be ripening.  Under the prolonged loose monetary policy, investments have not suffered.  Indeed, the Dow Jones is at an all-time high (orange curve), consumer sentiment has been rising steadily toward past highs (blue dots), and home price annual growth rates have been on the upward march for the past few years (purple dots).

The question is whether a sharp rise in the federal funds rate will auger or itself trigger the next crash.  A tipping point may well be November's election...

References:

[1] Three Signals (Chart A): Funds rate, Savings rate, Unemployment;
Assad Ebrahim;
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=3MlN

[2] Seven Signals (Chart B): Funds rate, Savings rate, Unemployment, Consumer Sentiment, US Home Prices, Home Price Annual Growth Rate, Dow Jones Industrial Average;
Assad Ebrahim; Federal Reserve Economic Database (FRED)
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=3MpD

[3] Federal Funds Rate & Libor (Wikipedia)
https://en.wikipedia.org/wiki/Federal_funds_rate

[4] The Big Crashes
www.theglobeandmail.com/globe-investor/from-1929-to-today-the-biggest-stock-market-crashes-in-history/article4621659/

[5] Negative Funds Rates are already here (EU, Japan, Switzerland, Denmark, Sweden)
http://money.cnn.com/2016/02/11/news/economy/negative-interest-rates-janet-yellen/