Updating The Misery Index (Global Version)

Via Floyd Norris, we get this updated version of the Misery Index, applied internationally. Its the work of Pierre Cailleteau, an economist/sovereign risk analyst at Moody’s.

“The index adds together a country’s budget deficit, as a percentage of gross domestic product, and its unemployment rate. It captures the current conundrum for many countries: their economies need stimulus, but their budgets may not be able to afford it.

The unfortunate leader in that misery index among the countries cited by Moody’s is Spain, with an index of 30, thanks to an unemployment rate of 20 percent and a deficit of 10 percent of G.D.P. The figures are Moody’s estimates for 2010.”

The original Misery Index was much simpler: Developed by Arthur Okun, an economist and adviser to President Lyndon Johnson in the 1960’s. Okun merely added the unemployment rate to the inflation rate. The theory was that any combination of rising inflation and increasing unemployment reflected a nation’s worsening economic performance.

Not coincidentally, the reporting of both Employment and Inflation have slowly been altered since the Misery Index was created. The gradual erosion of data accuracy, the softening of various metrics, and — WTF let’s just say it — the systematic under-reporting of both Employment and Inflation is the net result.

Hence, if you cannot make the economy less miserable, you can at least make the components appear less miserable.

Anyway, here’s a look at the new global version:

click for larger graphic

chart courtesy of NYT

These Days, Countries in Misery Have Lots of Company
NYT, December 18, 2009

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