That's a lovely animation. Worth the price of admission right there.

So here's the thing. Ever heard of Heisenberg's Uncertainty Principle? We don't need to get into the technicalities of it; basically it boils down to the better you know a particle's momentum, the worse you know it's position and vice versa. This is seriously fucked up from a classical mechanics standpoint because what it proves, mathematically, is that "observation" (non-interfering interaction) changes the result.

You can not draw a straight line from physics to economics no matter how hard some economists would like to. What you can do is note that it's a vast interdependent system and that interacting with it changes things. The bigger your interaction, the bigger the change. You can also note that fundamentally, economics is a person selling something to another person times every person with money or product and that it can't help but be shaped by sentiment.

The yield curve is a function of the ratio of two numbers. One number is the interest rate on a long-term contract. The other number is the interest rate on a short-term contract. Those interest rates reflect the agreed-upon price that lenders and borrowers interact at. Short term contracts reflect agility and uncertainty; long term contracts reflect stability and dependability. CRUCIAL ASPECT: I want to make money with my money, so I have to lend it out. In order for me to get any interest on it, someone has to borrow it so I'm looking to lend. The question is for how much and how long.

Let's say rates are at 4%. If I'm willing to lock my rates for ten years at 4% I think that rates aren't going to be hella higher for the next ten years. If I think they're going to climb to 5% or 6% I'd rather have stuff in short-term because then I can re-sell my money to make more money in three years. But if I think they're going to fall to 3% I wanna lock up as much as I can at 4%. And remember, compounding is king: $100 for 10 years at 4% is $148 but $100 for 15 years at 3% is $155.

What you're seeing when the curve inverts is a consensus projection that rates are going to fall. A consensus that rates are going to fall is a consensus, fundamentally, that the central banks are going to lower interest rates. A consensus that the central banks are going to lower interest rates is a prediction that the economy is going to need interference in order to function properly.

It's fair to say that an observation of the yield curve is an observation of sentiment. Sentiment, really, is what makes markets - the desire to play the ponies. Pointing at Bernanke is legit - he makes much in his book about how everything he says is parsed and reparsed for trade signals which is a tacit admission that the world's economy is dependent on what a bunch of dudes want it to be.