Friday, July 2, 2010

The Weary Worry Index

I dubbed our current state of affairs as "The" Weary Economy". Officially the recession started 12/2007 and NBER has not declared whether this is a double dip recession or a single continuous recession. Either way it is getting old talking about the economy, jobs, government spending etc.

In the 70's the term stagflation was invented (in a speech by a British politician) to describe the previously unknown situation where there could be simultaneous unemployment and inflation. This phenomenon then was quantified by and economist with index called the Misery Index. I'm not sure he thought ahead about deflation and it's impact on the index.

So I think I should create a term and index for this economy (after all I have a degree in Economics).

The Weary Worry Index - Construct a complete list of your worries (i.e. Terrorism, Taxes, Immigration, Social Security, Health Care, etc.) Identify any worry that started since 12/2007. Compute the % of total worries. Subtract this amount from the drop in your 401K since 12/2007.

Now you can compare the Weary Worry index to the Misery Index - if greater --- then move directly from recession to depression.

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