The New Normal Economic Reality
Many economists with great credentials are now saying the US is entering a new period of economic reality. I’d tell you who they are, but that might imply they agree with my conclusions which is not my objective. I respect these individuals and their opinions, but my conclusions are my own and should not be interpreted as representing anyone’s opinion but mine. Nevertheless, I must at least state their projected economic reality.
“The New Normal” economic reality that I hear projected is for the USA to experience a significant period of years with lower GDP growth, higher unemployment rates, and potentially higher inflation rates than we have experienced over the last 20-30 years. Think about the 1970s in the US. Maybe this next period will be similar, somewhat less severe, or potentially more severe in terms of overall economic statistics compared to the late 1970s and early 1980s. If you haven’t heard of the misery index, the sum of the unemployment and inflation rates, you will hear about it more and more in the future in my opinion, and not just from me. When Jimmy Carter won the election in 1976, this index was over 13%. When Jimmy Carter lost to Ronald Reagan in the 1980 election, the misery index was almost 22%. The economists I’ve been following recently have not mentioned the misery index yet, but if unemployment continues up as expected by almost everyone for at least 6+ more months and inflation goes up, quite possible with the current quantitative easing (aka printing money) the Federal Reserve is engaged in, I believe economists and the media will again start talking about the misery index.
Currently the misery index is less than 13% even though unemployment is now 9.4%. It may take a while before the misery index hits 13% or beyond, that’s a good thing, but I believe the USA will see 13% and higher in the misery index, perhaps before the 2012 elections.