The Mess That Greenspan Made - Part 416

Low Misery Index Often Precedes Busts

The Misery Index over time from this item at Bloomberg puts our current condition into proper perspective and, based on estimates from the 1920s during the so-called “Coolidge Prosperity” when the misery index averaged about 6, one can draw parallels to the years leading up to the most recent bust. At some point, historians will likely begin calling the last decade the era of  “Bush Prosperity” that, as was the case 80 years prior, led to disaster.

One thing is certain about the chart above – the government needs to revise its calculation of the unemployment numbers like it did the inflation numbers in the 1980s and 1990s if it ever wants to get the misery index back down to “prosperity” levels.

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The Best of the Bozeman Police Reports

Culled from the Police Reports page of the Bozeman Daily Chronicle come the best of the Bozeman police reports from the last week along with some items from the Sheriff’s Office.

Yes, more peacocks… This batch of reports includes the July 4th holiday and, surprisingly, there were no serious fireworks related entries, just the usual calls into the police station by hundreds of citizens who think their neighbors fireworks display is too loud or too bright. As you might imagine, fireworks are very popular in this part of the country and supplies are plentiful (though not cheap) and you can purchase displays that go hundreds of feet into the air. It sounded like one of our neighbors had a rocket launcher, the low frequency thump being heard regularly during the three nights that fireworks may be legally used here. Note that if you plan to set off fireworks illegally, try to hang onto your wallet…

  • Over the weekend, the Bozeman Police Department recoded 637 calls, 54 of which were fireworks complaints. Most of these complaints were noise-related and were unfounded, Lt. Rich McLane said Tuesday.
  • People were reportedly setting off fireworks at the Black Bull Run Golf Club on Love Lane early Monday morning. A wallet was left on the course, and the owner was found and cited.
  • A string of firecrackers was thrown onto a man’s porch around 11:30 p.m.
  • A man on South Black Avenue thought his neighbor was taking apart his fence and using the wood to build something else.
  • Around 11:30 p.m., an officer checked on a car with an open door and the light on inside. Two people were inside reading and said they planned to sleep in the car because their house was too hot.


The Ugly U.S. Labor Market

Though it’s cousin “fugly” has yet to make an appearance, “ugly” seems to be the operative word for those writing headlines associated with this morning’s labor report:

Ugly Jobs Report Shows US Payrolls Add 18K, Unemployment 9.2%
Unemployment Report July 8… UGLY!!!
June Jobs Report: the Ugly, the Ugly and the Ugly
Diving Down into the Jobs Report: Ugly, Ugly, Ugly
US Jobs: How many ways to say ugly?

Even uglier (or so it would seem) is the long-term trend in long-term unemployment as charted by Reuters in this story over at FT Alphaville:

In an informal survey, the phrase “unmitigated disaster” ranked a close second to ugly – for both this morning’s June payrolls and the dismal multi-decade trend shown above.

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You just knew that, at some point in the budget debate, policy makers would turn to a different version of the inflation calculation in order to accomplish what is quite difficult to accomplish otherwise – cut spending and raise taxes. Recall that the chained CPI has been around for almost a decade now and it purports to better track the shift in consumer buying patterns, for example, when seniors can no longer afford hamburger and turn to dog food.

This story at the WSJ Real Time Economics blog has all the particulars:

One proposal in the budget talks that is getting a serious look would switch the government’s way of measuring inflation and delivering a big impact on tax, spending, and entitlement programs. How big? It could save roughly $300 billion over 10 years.

The idea of using this different measure of inflation, known as a “chained” Consumer Price Index, has won support from numerous deficit-reduction commissions as well as many liberal and conservative economists.

To be sure, it’s complicated stuff. But it’s seen as a central way of reducing the deficit because it simultaneously cuts spending growth and increases tax revenues. And many also like it because much of its impact doesn’t come from “cuts” in spending. Rather, it would reduce the “growth” of spending pegged to inflation. And it would affect the way tax brackets and deductions adjust for inflation, so it could appear less like a tax increase than simply raising tax rates.

The main Consumer Price Index is a measure of the average price change of a fixed basket of goods and services purchased by the average urban household; that doesn’t reflect the reality that when, for instance, the price of pork goes up and the price of beef doesn’t, consumers tend to shift from pork to beef. To account for this, and to better track the actual changes in the cost of the living, the Bureau of Labor Statistics has been publishing the chained CPI since 2002. The chained CPI generally increases more slowly than the main CPI measure.

You’d think that this is already a done deal in the ongoing budget debate.

Seriously, what’s not to like about a change such as this for politicians who need to go to the electorate next year and ask for their vote. Do you really think seniors are going to go, “Hey, I just plotted the old and new inflation numbers and the new one is consistently about 8/10ths of a percentage point lower. That’s going to cost me $90 this year”.

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