Submitted 19FEB2010
There has been an awful lot of comparisons of the Obama administration with that of Jimmy Carter’s Presidency. Well, that got me thinking…(uptempo music starts while the scene fades out)
(Overpowering announcer voice) Come with us now as The Blogmocracy relives those heady days of yesteryear where Embassies were overrun, the Panama Canal was given away, left wing terror ruled Europe, where the American President complained about ‘national malaise’ and encouraged everyone to turn down the heat and wear a sweater, and where American ‘street cred’ in the international community was lower than John Travolta’s neck line in ‘Saturday Night Fever’…Yes, Blogmocrats, come with us as we journey back to the days of the ‘Misery Index’. (End scene)
The Misery Index, indeed! This lovely little metric has been more or less forgotten about since Reagan knocked it out of the park some 20 plus years ago. But here at the Blogmocracy, we have the unblinking, all seeing eye. Its in the toolkit for WordPress. 🙂
The Misery Index was first the simple equation of Unemployment + Inflation first coined by Arthur Melvin Okun . This is easy enough to grasp, but it does not paint the complete picture. Robert Barro expanded the Index to Unemployment + Inflation + Gross Domestic Product Change+ Bank Rate. This rounded out the Index and made it more accurate to reality. The difference between these two is that the Okun Misery Index is the like the informal English you use with your friends, the Barro Misery Index is the formal English you use in something like a job interview, both will get your point across. Definitions for the above terms are at the end, if you want to refresh your Econ 101.
While I don’t believe the Main Stream Media will troop out our Misery Index while President Obama is still in the White House, it is interesting to look at this historic comparison of Presidents by Prof Barro himself:
So, unemployment can be defined as the percentage of persons on unemployment compensation expressed as a percentage of total workforce. Yes, I know the real unemployment is 17% but the number used is 10%. This uses the official, Department of Labor announced rate, sorry that’s how it works.
Inflation: The inflation rate is the percentage rate of change of a price index over time. Since I am a monetarist like Milton Friedman,who stated that: “Inflation is always and everywhere a monetary phenomenon.” , I believe that inflation is too many dollars moving too quickly while chasing too few goods. Or that government action or inaction is at the root of inflation.
Gross Domestic Product is private consumption + gross investment + government spending + (exports-imports) or GDP= C + Inv + G + (exports-imports)
Bank Rate (discount rate) is the interest rate that central banks charge on the loans and advances it extends to commercial banks and other financial companies. Changes in this rate are often used as a tool to control money supply. This bank rate is the basis of the interest rate you pay on loans, its bank rate + profit margin interest and risk = the rate you pay.
Tags: Economy
