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Scott Grannis/Calafia Beach Pundit
The misery index – a measure of inflation plus unemployment rates – hit the highest level in nearly three decades last week.
That’s definitely bad news for our pocketbooks, but many of us have experienced much deeper misery.
It turns out we’re still quite a ways from the misery Americans suffered in the mid-1970s and early 1980s, when the index topped out at or near 20, with unemployment of nearly 8 percent and inflation of 12 percent. Last week’s reading was nearly 13, including the 9.1 percent unemployment rate and 3.9 percent year-over-year inflation.
Scott Grannis, a blogger and former chief economist for Western Asset Management, notes that our misery this time around is mostly due to high unemployment —which is hovering around 9 percent — although inflation has also recently been on the rise.
Back in the 1970s and 1980s, we were bedeviled by both high unemployment and extremely high inflation, which anyone who tried to buy a house in those years probably remembers well (if not fondly).
Scott Grannis/Calafia Beach Pundit
Of course, that particular trip down memory lane is probably little comfort to the many of us grappling with the current weak economic conditions, and especially to the 14 million people who are unemployed.
Related:
Feeling pinched by higher bills, less money? You’re not alone
Older Americans’ challenge: Not time to recover from recession
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What I remember:
+ Buying a CD that paid 16.5% in 1980 or 1981, and a week later the bank offered 17.5%!
+ Not getting a raise for eight years in Pittsburgh in the eighties, but glad I had a job, because every steel mill around Pittsburgh shutdown by 1983, and there steelworkers committed suicide every day for years.
+ Getting a mortgage in 1983 for 13.5%, and everyone asking me how I did it. In early eighties, hardly anyone bought a house, because mortgage rates approached 20%, and you had to almost always have 20% down!
Now like then the jerks who got us in this mess are still getting off scott free, I lived thru the 20% era but the house I bought was the loan amount plus 20% , a 4% loan with APR is now double what was borrowed, so how were we worse off then? I have lost my job & found another one , making less, but I am now employed because I was on a mission to find a job for whatever I could make , & not what I made before, Quit being miserable & depressed , be like our ancestors who endured more than we ever have to build this country, Also quit listening to those talking heads & politicians ,they are the morons who got us here to begin with!!
I remember getting my first job with benefits in 1971, and the co. advertised to hire six more people, and I couldn't get into work because the 900 applicants that showed up wound for three blocks and blocked the street!
In 1973, when gasoline could only be bought at night, at gas stations whose lights were out, because of the Arab oil boycott. And the lines of cars were blocks long at 2 am. The gas had gone from 33 cents to 75 cents in a couple months, if you could find it at all.
Yo KC,
But in those days the speed limit was 55 MPH throughout the country. Things have really improved. Now you can drive as fast as 70 MPH in some states.
What's an Arab boycott? Is it like an Arab Spring?
Remember switching license plates from car to car for those odd and even gas days ! People were literally killing each other in the gas lines. Remember people who would wait in line for you for money ?
I had a guy who would sell me gas for my business vehicles, but I had to bring them in at 3AM and fill up in the dark because if he turned the lights on there would be a mob !
People did not care as much about fuel economy in cars, they wanted the car with the biggest tank capacity ! Vans and Pickups with dual tanks were in high demand !
T. Bill Rate....actually you can drive much faster than 70 in many places, but 55 saves a lot of fuel and maybe should be reinstituted. If you go 55 now you would get rolled over by everyone on the road. Speed makes a big difference in fuel economy and also in accident injuries. How about if the whole country goes on a real economy kick, turn off some lights, slow down, turn off commercial display and some parking lights earlier, etc. Why have we abandoned energy conservation as a tool to save money and cut imported oil ?
Okay MM,
You forgot to add turning off the heater and radio in your car to save money and conserve energy.
Actually, America's petro carbon useage peaked in 2006 and has been on a decline ever since with no forecast of any increases on the horizon. Moreover, North America is more or less self sufficient in hydro carbons. Big US, UK, and Dutch Oil Companies import OPEC crude as a cost reduction and to stabilize supply in the North American Region. So, conserve all you want America, you will still need foreign oil for the reasons stated above.
Also, MM, I hope you aren't one of those people that believes if America reduces their demand for oil, that prices will go down at the pump. The emerging economies of the future, Brazil, Russia, India, China, and Korea (BRICK countries) have insatiable demand for new oil and will cause prices to climb further. Welcome to the new normal of the 21st century.
If you still want to shake America's dependence on foreign petrol, then I'm on your side. You should consider asking your local politician what his plans are to switch the US to hydrogen fuel for automobiles? Hydrogen has the virtues of being free, infinite supply, and 100% clean. The only problem with this is that Big Oil will lob your local politician's head off. There is no strategy for hydrogen at Big Oil as hydrogen requires no refineries or pipelines (it's simply produced at the retail filling stations).
If you still feel Big Oil can get America out of all it's economic woes, then by all means support Rick Perry. Yahoo! ride 'em cowboy.
Actually, it was the Arab Oil Embargo. A Boycott is when a nation refuses to buy products. An Embargo is when a nation refused to sell its products. OPEC (mostly Arab nations) refused to sell oil to the US after the Yom Kippur war.
Yeah, and the technology has improved so much it costs less to drill today and the price has increased 5 fold - WHY?
This article ignores the fact that inflation is not calculated the same way as it was in the 1980s. Shadowstats has a chart where they calculated the inflation rate using the same method used in the 1980s and apply it through 2011, which results in a current inflation rate of about 12% -- this puts the actual misery index for 2011 over 20%
I'm amazed that this basic fact that is known to almost all people who pay attention to the market was complete ignored.
You want miserable?
Ask your parents or grandparents about the 1930's.
Totally agree -- my parents grew up during the Depression, fought in WWII and then then came home to post-war inflation. They told storeis about hard times that you can't imagine today. While things are not good now -- it's a heck of a lot better than it was in the 1930-40s. While things were bad in the 1970s-80s, I was confident that it would turn around. Now, I'm not so sure. People now are spoiled, feel entitled to a certain lifestyle and expect the government to foot the bill for their dreams. And the future doesn't look great -- India and China are educating their young people to be engineers, scientists, etc. -- we're training our young people to flip burgers and fight wars so we can keep buying cheap imported goods.
I always think about the poor souls who did time in muddy trenches during WWI, raised their kids during the Depression, and then had to send their sons off to WWII.
Now that's misery.
Hey Out To Lunch,
I don't feel so miserable anymore. Thanks for the morale boost.
I just buried my son who died in Iraq and sent my daughter off for a year of R&R in Afganistan with the US Army. I burned my house down last week to collect the the home owner's insurance after my unemployment insurance ended.
I guess you could say I'm just giddy compared to the poor souls 100 years ago.
Way to go T. Bill. You turned that frown upside down!
People, we've only just begun! I'm afraid that if we don't elect a real leader (I'm pulling for Ron Paul.) things will only get worse. America needs to get it's financial house in order, and we need to do it yesterday! I have not seen any other candidate talk quite so seriously about the issues that face this nation today. Those who give our problems lip service only will only make matters worse.
Ron Paul 2012
I think I must agree with you - Ron Paul sometimes seems to be the only grown up in the room. That alone means it will be difficult for him to break through.
I hate to say it, but it may require a 3rd party run for Dr Paul to win. And in this environment, I think he would, as the media could no longer ignore him.
Back in the late 70's and early 80's, at least you were getting 10%-13% on CD's - close to the inflation rate. Of course, those with pensions with 3% COLA max's lost half their value by the time Reagan raised taxes and things began to return to normal.
In the 70's and 80's there was a Middle Class. Manufacturing jobs and all that surround those industries were here in the USA. Life was hard at times but not impossible. When you graduated from college, it did not take long to obtain employment with a decent wage. When you were willing to work hard at anything, it usually paid off. Much different times now and way too much uncertainty about the future!
I and my business suffered greatly from the Jimmy Carter effect. In the end I had to close my business and walk away from our home because my customers, who were building contractors couldn't build as interest rates climbed above 20%. Reagan came on the scene too late to save my equipment repair business. I and family moved to Alaska and put it all back together during the pipeline boom years. The Prez we have now is worse than ten Jimmy Carters. May God help us if we must suffer four more years of Obama.
How is it this president's fault except for doing nothing?
I remember the 70's and they sucked compared to today...I'm sick of the whining from the 99%...most of them are like that because of their own actions...not mine or the so called rich oppressors...
What's bad, is that there is so much more income disparity today, as opposed to back then. At least you could buy a house and a decent car with a job at K-Mart. These days, if you work retail, you're lucky if you can afford a cardboard box. Not to worry, Rick. The riots will come soon enough if the Fed continues with their stupid policies.
Remember the very first "You Deserve A Break Today" commercial for Macdonalds showed MIDDLE AGED MEN seemingly earning a living wage working there? See below!
http://m.youtube.com/index?desktop_uri=%2F&gl=US#/watch?v=XKR1ScQUpcA
T Bill rate is not very astute about technical maters! I remember reading Scientific American mag. about the "Hydrogen Economy", probably written by some Harvard P.Hd in social sciences. Hydrogen from seawater takes tremendous electrical power. It is virtually non-storable due to the low mole wt. and is not good for pipelines due to hydrogen embrittalment and difficulty of compressing. It would have to be used in fuel cells. I'm sure everyone's eyes are glazed over by now. Try again.
Blue For Sail,
I think you spent too much time at sea and drank too much salt water which caused your eyes to glaze over. However, you are right about the storage issues with hydrogen, but this is being addressed by technology of fuel cells which is being invented elsewhere. For sure, fuel cell technology will not get endowments from Big Oil Companies.
As I mentioned, hydrogen manufacturing will be done at the point of sale, actually behind the gas station. Pipelines will be very short. This is the experiment being funded by the Scandinavian countries who have such gas stations in operation.
The future of hydrogen depends on some leaps in technology as well as a reallignment (building new infrastructure) of national energy policy. At the moment, technology in America has stalled and any building of new infrastructure is on hold due to the national budget crisis. So, the US will need to wait for other countries to invent the technology required and then rent it from them. This is the iTunes (iCloud)approach. When the US budget crisis ends, then America can chip away at building the infrastructure for hydrogen fuel. If all goes well, this should happen before the turn of the century, maybe sooner.
No graph can describe how horrible it is today. I lived through the other downturns and we had hope an opportunity, today they have taken that away from us too.
the funny thing is that if the graph was put together correctly, the misery index would be higher than it has ever been. With our current inflation rate of 12% (this rate accounts for changes in the calculation of inflation that have occured in the past 3 decades) and unemployment rate of 9.1%, we are at 21.1, higher than the 8+12 = 20 that the article says is the peak.
Prior to Regan in 1983 the real costs of home ownership were used to calculate the cost of shelter. This all changed a few years into Ronald Reagan's first term and, for the purposes of calculating "inflation", had the effect of relegating housing cost increases to mild single-digit numbers forever after. Part of the way that Ronald Reagan "fought" inflation was by using the economic equivalent of an accounting trick.
This article should be called "Allison Linn: You don't know inflation rate calculation history"!
The biggest difference between the 70's and today is that back then we ALL had to wait in line to buy 10 gallons of gas, jobs were scarce and home ownership was out of almost everyone's reach. At $2.50 an hour for wages, life was tough, BUT no one had credit cards, they didn't qualify for over-priced homes, so almost everyone rented. So there weren't foreclosed homes on every block. Today, everyone has over spent, over bought and not saved enough. So more people live on the edge. Lose your job today? lose everything else. Income on savings today? Nonexistent. Oh, and unemployment benefits back then lasted for 24 weeks and not 24 months as it does today. We lived within our means and sometimes it was "mean" living, but we survived.
Fundamental change you can believe in. Believe it comrades. Brought to you by 3 years of inept, socialist agendas.
The republicans have killed us since then. As bad as it was then in '69 my brother was able to go out and buy a 3 year old vett and he didn't have any education beyond High School.
Now due to the lack of decent enrty level jobs a 20 year old working on their own can't even affort to leave home. The average entry level pay isn't factored into this index which makes is less then worthless, it's missleading.
The Beev-2396805 wrote: "Fundamental change you can believe in. Believe it comrades. Brought to you by 3 years of inept, socialist agendas." +++++ Please don't fall to that propaganda. Obama is, in many ways, to the RIGHT of Ronald Reagan, who raised corporate taxes by $300B and closed loopholes, raises FICA taxes, and after lowering them too much, raised taxes on the wealthy. By the end of Reagan's term, an idea for private participation in universal healthcare was being circulated which became a GOP plank in the 90's and matched the way Obama brought it about. If you're against "socialism" then you must be against public schools, public fire departments, public libraries, public roads, street lights, etc. If you're not against those things, what is NOT in the Constitution sense "to promote the general welfare" that Obama promotes? Or are you just for freeing the banks to do what they did to us in 2008?
As a teenager in the 70s it took 2.25 hours of work to fill my ride up $6. Now it takes 3.5 hours to do the same thing $60. This is based on take home pay.
I could eat, fill up my ride, cigs, alcohol, and a concert on a days pay at $3 an hour. Now it takes more than a days pay at $20 an hour to do the same thing.
All the whining does not help. Yes, it is bad but we have a chance for real change - November 2012 - vote, and depending on what you vote for you may whine or shut up because you voted for it.
The region of the country you are in will make a big difference in how you view now vs the late 70s/early 80s. In the center of the country, it was tougher back then with farmland diving in value and taking everything with it. Now, it seems to be tougher in the coasts and the Rust Belt.
The scary thing about now is the great level of debt and that so much industrial capacity has been sent overseas.
at least investment made money back then. Create wealth then-preserve wealth now.