Friday, December 5, 2008

Revisiting the Misery Index

The Misery Index was invented long ago, when inflation was measured in double digits and job losses were double, in relation to the size of the workforce, what they are today. The index is simply the sum of the unemployment rate and the inflation rate. Today the index is below the levels of all the recessions in the past 40 years, with the exception of the last (mild) recession. That's not to say this isn't a painful recession, just that we've seen lots worse in the past. That doesn't stop the hype, though, and it hasn't stopped the market from expecting this recession to quickly develop into a depression accompanied by massive deflation.

It will take some pretty awful, terribly catastrophic news to push this market down further. And that's a reason to be optimistic despite all the gloomy news.

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