Okay fine. It’s getting old already. All the negativity in the market, that is.
Who wants to make a bet that this is NOT the worst economic crisis since the days of the Great Depression?
Deal?
I’m in!
The US Unemployment Rate is soon to be over 7% when the numbers come out later this week. In the hardest hit areas of the country (like MI, OH, CA) we’re looking at over 10% unemployment. However, the good news is that we can still afford the cost of living! Imagine losing your job and, at THE SAME TIME, the little remaining cash you have sitting in the bank is losing value. You want to save your money to weather the storm, but you know that unless you spend your money NOW, it will be worth less next week, or next month or next year. THAT is misery: when you have no income coming in to buy food (and cell phone minutes) and the little money that you still have in your checking account buys only half or a quarter of the food (and cell phone minutes) that it bought last year.
There’s a nifty measurement for this called the “Misery Index”. Essentially, the Misery Index is the rate of unemployment (the percentage of workers who have no jobs) PLUS the rate of inflation (the rate at which money loses its purchasing power).
Currently, the misery index in the US is approx. 10% (approx. 7% unemployment + 2%-3% annual inflation).
In a worse case scenario, let’s pretend the unemployment rate goes up to 10% or 12% all across the country (not just in MI, OH, CA). In that case, the misery index would be about 13% – 15%.
Now for comparisons, here’s a nice chart that illustrates the Misery Index over the last 60 years:
Misery Index
As you can see, the last time the Misery Index reached over 10% was NOT the Great Depression! It was in 1992 – just 17 years ago. The last time the Misery Index reached over 15% was in 1982 – just 27 years ago. In fact, the Misery Index hit a high of over 20% during the recession of the early 1980s. In other words, we were twice as miserable in the early 1980s as we are today!
Oh, and in case you were wondering, we made it through the 1980′s just fine…at least those of us who have made the switch to iPods from cassette tapes…
Thank you Gibran, you are so right on! I am electing not to participate by listening to all this negative news…the media just loves this. They are fueling the frenzy. I am going to share your chart those whom can benefit and will listen. This too shall pass.
Hi Gibran,
Perpective is so vitally important, I was recently listening to a conference call on Mortgage Coach and one of the things that was mentioned was, when is this recession going to be over and the fast response by the speaker was when you decide it’s over. In 1981 Todd Duncan wore a button that said
rumor has it we’re in a recession, I’m not participating.
This is the type of attitude and belief that everyone needs to have, as we can see Todd is still around 28 years later after going through probably 4 up’s and downs in our industry.
Thank you for your comittment to sharing the right perspective.