by Sam Foster
Barak Obama has set a new record. He's surpassed 1980 and Jimmy Carter for the highest Misery Index evah:
John Williams, over at Shadow Stats, compiles economic data for inflation and unemployment the way it used to be calculated pre-1990. Based on that data, the CPI inflation rate is over 10%, and the unemployment rate is over 15% (see charts). The Misery Index is the sum of the current inflation rate and the unemployment rate. If it were to be calculated using the older methods, the Index would now be over 25, a record high. It surpasses the old index high of 21.98, which occurred in June 1980, when Jimmy Carter was president. Most believe the height of the Index along with the Iranian hostage crisis is what caused Carter to lose his re-election bid.
I suppose that statistic demands another round of golf for Bam. But, recalling the stagflation of Carter also highlights the tale of two Fed Chairman.
When the misery index as but a mere 21.98 on the misery index was combated by then Paul Volker by raising interest rates...a lot:
The image of farmers blockading Washington D.C. with tractors is hard to imagine now, but those were tough times. The reason Volcker raised interest rates so aggressively was that inflation went wild in the late 1970s. For example, inflation hit 11.3% in 1979, 13.5% in 1980 and 10.3% in 1981 before Volcker’s harsh medicine began to kick in and inflation moderated to 6.2% in 1982.
As inflation ratcheted higher, so did home mortgages rates. Thirty-year fixed rate mortgages went up to nearly 13% in November 1979 and did not fall under 12% again until November 1985. The peak rate for mortgages was 18.45% in October 1981. 18.45%!
Now that the misery index is at 25 and just off the heels of QE2 and dozens of months of near zero interest rates, any chance Bernanke will go Volker?
Non-voters this year, Lockhart and Pianalto argued that while hiked commodities and energy prices have pushed short-run U.S. consumer prices higher, impact may be brief. Pianalto does not expect inflation to remain above 2% beyond this year. She said recovery may continue to be slow at 3% annualized pace in the next few years. Given that rate, unemployment may decrease to 5.5% to 6% in 5 years. Pianalto and Lockhart’s views seem to be in line with that of the policy-setting panel compared with Kocherlakota’s. He is among some who favor higher rates.
Last month, Federal Reserve Chairman Ben Bernanke said that with the view of the labor front, the central bank has no reason to rush policy tightening. In case inflation speeds up to 1.8% within the year, aggressive rate hikes will happen, said Bernanke. Easing via asset buying would be the ideal move should inflation fall relative to 2010, he added.
Hey Ben, golfing is supposed to be Obama's job.