Saturday, May 23, 2009

Update: Comparison Obama-Carter – Misery Index - Fed Warns of Rising Inflation

In an analysis of historical data comparing economic policies and like situations between the Carter and Obama Administration (See below) a pattern had developed that suggested a return to the Carter Misery Index (a combination of high unemployment and inflation). At the time, (April 3, 2009) the missing factor appeared to be inflation, which was relatively stable, however, this week the fed has suggested that general rate of inflation will indeed rise and suggested caution. The statement, made by Charles Plosser, President of the Philadelphia Federal Reserve branch follows:

“The economy may be at greater risk of inflation than the conventional wisdom indicates,” Plosser said in a speech yesterday in New York. “While inflation expectations appear to remain anchored, we should not become sanguine about our credibility. It can be easily lost.”

As the price of gasoline has risen up to 23% in the past year in some urban areas, and staples such as food are predicted to rise by a substantial 9% by year end, a general inflation trend, added to an 25 year high unemployment rate sets the stage for an historically high misery index.

Article from this blog: April 4, 2009

The jobless rate in the country has increasesd to 8.5 percent with 633,000 additional jobs lost in March. This rate is just .5 percent below the Carter unemployment rate of 9% in 1979.

Add inflation and the Misery Index (combination of unemployment and inflation) may rise above Carter's 20% sooner than anticipated.

Inflation rose dramatically after Carter approved a 4 billion dollar job creation (stimulus) package (email for full article). (Adjusted for inflation, that job stimulus package would cost approximately$14,448,797,250.86.) Interest rates on new home loans rose to an average of 14% by 1979, causing a "housing slump". Bloated budgets, stimulus, auto bailouts (yes it has happenned before), and bank bailouts, all contributed to the "misery".

Should the current administration fail to reign in government spending, and roll-back the stimulus (as suggested by certain Republican's), one thing is certain: History will repeat itself.

1 comment:

Chuck said...

I don't think it's an "if" anymore. This is Carter redux

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