Misery Index about to soar in CA, US

Misery IndexFeb. 22, 2013

By Chriss Street

The  “Misery Index” is inflation plus the unemployment rate. For example, today the U.S. unemployment rate is 7.9 percent and inflation is 1.7 percent. So the “Misery Index” (rounding off) is 10 points.

Anything above 10 points is considered a tough time for the economy.

This measure of national pain peaked at 21 points in 1980, the last year of the disastrous administration of President Jimmy Carter, then trended lower under the next four presidents: Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush.

But the downward trend was broken in President Obama’s first administration due to $5.3 trillion of deficit spending$3 trillion in expanded bank lending and $1.3 trillion in Quantitative Easing by the Federal Reserve Board as economic stimulus; and rising commodity inflation.

However, a major counter-trend was housing, as home prices crashed beginning in 2007. Because housing actually dropped in price over the last four years, the Consumer Price Index measure of inflation has been substantially understated. That has been especially the case in California, the epicenter of the housing crash.

Misery rising

With housing now leading energy, food and health care inflation, consumer purchasing power is shrinking and employers will be laying off workers as sales drop.  The Misery Index during President Obama’s first term rose only to 10 points. And in California, with an unemployment rate 2 percentage points above the national average, the Misery Index rose to 12 points.

But with deficit-spending continuing and a recession looming, the Misery Index is about to soar.

President Administration Carter Reagan Bush I Clinton Bush II Obama CA 2013
Misery Index  percent 16 percent 12 percent 11 percent 8 percent 8 percent 10 percent 12 percent

The last time America engaged in this type of government “stimulus” followed President Lyndon Baines Johnson’s 1964 declaration of the War on Poverty.  What began with the passage of the Medicare expansion of Social Security and the Elementary and Secondary Education Act morphed over the next 16 years through the Johnson, Nixon, Ford and Carter administrations into a smorgasbord of bloated social spending for powerful political and corporate cronies.

The resulting build-up of inflationary pressures and job destruction drove the Misery Index from an average of 7 points under Johnson to 16 points under Carter.  The Industrial Heartland of Midwest America was transformed into the Rust Belt. The inflation, especially to home prices, sparked the 1978 tax revolt in California when voters enacted Proposition 13, limiting property tax increases to a maximum of 2 percent a year.

The tax revolt continued in 1980 as disillusioned voters swept Ronald Reagan into office with a tough-love mandate that steadily drove down inflation over the next 28 years.

President Obama successfully advocated for a huge expansion of deficit spending on education and healthcare as an economic stimulus.  The Congressional Budget Office projects that, when he leaves office in 2017, over his eight years in office his administration will have engaged in $7.5 trillion in deficit-spending and the national debt will almost have doubled.

Obama’s formula of deficit spending and money printing stimulus is being copied by governments around the world.  The McKinsey Global Instiutute Commodity Price Index for food, raw material, metals and energy prices has risen over the last four years to historic highs, and continues to climb. 

During the same period in the United States, the price of a gallon of gasoline rose by 132 percent and has continued to rise for the last 33 days in a row.  Over the last two years, the accelerating costs of food rose by 8.1 percent.

Raging inflation has not been reported by the media, because the Consumer Price Index over-weights the cost of housing as 41 percent of the Index.  The Obama Administration’s Misery Index is only up to 10 points, because housing costs actually fell by 3 percent.

New housing bubble

But cheap money from the Federal Reserve is beginning to fuel a new housing bubble.  The year-end CoreLogic Residential Property Report found: “December marked 10 consecutive months of year-over-year home price improvements, and the strongest growth since the height of the last housing boom more than six years ago.” CoreLogic predicts home price will rise by 8.6 percent this year.

That’s great for California homeowners happy to see lost equity be restored. But it’s not so happy for new homeowners or renters.

The last Federal Reserve Board Open Market Committee minutes demonstrate that several members are concerned that if the Fed had to push up interest rates by selling some of its bonds to stop inflation, there might be “significant capital losses” that “distort financial markets.”

Few Americans are aware that the Fed’s massive bond purchases not only drove interest rates down, but also pushed up the value of the Fed’s bond holdings.  The U.S. Treasury made an “$88.9 billion  Portfolio Profit” last year from the Fed.

If the Fed needs to push up interest rates by selling bonds, the U.S. Treasury will suffer hundreds of billions of dollars of “Portfolio Losses” and the financial market will panic.

With inflation about to force the Fed to raise rates, the Misery Index is about to soar well above 10 points. And it will be even higher in high-unemployment California.

CHRISS STREET & PAUL PRESTON
Present “The American Exceptionalism Radio Talk Show”
Streaming Live Monday through Friday at 7-10 PM
Click here to listen: 
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13 comments

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  1. us citizen
    us citizen 22 February, 2013, 15:08

    But but but, the prez sayssssss the ecomony is GREAT! Surely he doesnt lie….

    Reply this comment
  2. Ted Steele, Navigator
    Ted Steele, Navigator 22 February, 2013, 15:41

    The Prez does not say the econ is great. He says there are positive signs bu “we still have work to do”. Please stick with the truth.

    Ted
    Manager

    Reply this comment
    • Rex the Wonder Dog!
      Rex the Wonder Dog! 19 December, 2015, 09:39

      “The Prez …”

      “The Prez” ?

      I swear Steals, you are the most feeble-minded imbecile I have ever seen comment here 🙂

      Reply this comment
  3. us citizen
    us citizen 22 February, 2013, 18:23

    Positive signs…………bahahahahhahahhahahahahhaha You been smoking that funny stuff again……….

    Reply this comment
  4. Donkey
    Donkey 22 February, 2013, 18:39

    This POTUS is a fool, but he will help the RAGWUS fail! 🙂

    Reply this comment
  5. Hondo
    Hondo 23 February, 2013, 13:07

    I’d love to trash Obama over these numbers, but what really do they look at? ‘Misery index’?. They never say what numbers are evaluated and what weight is given to each metric. Its numbers like this that both sides use that are meaningless to us out here in the trenches. Reagan’s numbers are worse than Obama’s and Reagan’s presidency and economy were far better. And I never liked Reagan at all but no way Obama’s amerika is better than Reagan’s
    Hondo…

    Reply this comment
  6. Donkey
    Donkey 24 February, 2013, 08:00

    Hondo is correct!! The 1980’s was a better time and place than the Obummer present. 🙂

    Teddy Steals, can hardly wait for the collapse of the RAGWUS, not long now that Prop 30 has failed. 🙂

    Reply this comment
  7. BobA
    BobA 24 February, 2013, 11:43

    FWIW:

    Just wait until China starts dumping it 1.2 trillion in treasury bonds. We’ll find out real fast what the misery index is really all about.

    By the way: that’s why we’re not going after China in a serious way over their cyber warfare against the US. They can always use that 1.2 trillion as leverage against us if we push the issue beyond just empty threats.

    China is the now the world’s largest economy. Imagine what will happen to the US stock market and the value of the US dollar if that happened? The consequences are frightening.

    Better learn the language of the conquerors while there’s still time: Mandarin Chinese.

    Reply this comment
  8. The Modified Ted Steele Methodologies (tm)
    The Modified Ted Steele Methodologies (tm) 24 February, 2013, 16:36

    LOL the dull-normal Beckian daisy chain rolls on– it’s tea bag heaven out here!!!

    Reply this comment
  9. C.J.
    C.J. 25 February, 2013, 15:22

    Americas’ swarm of locusts, aka Baby Boomers, will strip our nation bare paying for their early retirements, double-dip pensions and lifetime benefits. And we are only two years into this twenty year wave of looting and pillaging.

    The question is not if, but when, this native CAlifornian leaves for good.

    Reply this comment
  10. BobA
    BobA 25 February, 2013, 17:36

    C.J:

    You might want to leave before the tax on gasoline tax goes up and before the next round of tax increases next year. And you might want to go to a midwest state.

    The obama administration is considering a request by the Mexican government to provide with a list of all registered gun owners in states that shares a border with Mexico.

    Most of the Mexican military and police work for the drug cartels and it’s just a matter of time before home invasion crews from Mexico get hold of that list.

    Reply this comment
  11. TaxedNY
    TaxedNY 18 December, 2015, 17:52

    While they point fingers at workers – thousands of elected and appointed officials are double dipping. They retire between terms and then go back and collect full pay and pensions.
    Please click or go to this link and help stop Politicians from “Double dipping” – https://www.change.org/p/govern-cuomo-andrew-cuomo-end-tax-funded-elected-officials-from-collecting-a-full-tax-funded-pension-benfits-while-collecting-full-tax-funded-salary-s?recruiter=388695696&utm_source=share_for_starters&utm_medium=copyLink

    Reply this comment

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