Misery Index is Back! Guess Who Benefits?

Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

“Things have gotten drastically better if we measure inflation only over the past three months.” — Paul KrugmanThe New York Times, Tuesday, Sept. 13, 2022.


Paul Krugman, the Nobel Prize economist and The New York Times columnist, has blown it again. As soon as the ink dried on his column “Misery Takes a Holiday: Surprise, Good News on Inflation” the government reported that price inflation rose again in August. The Consumer Price Index (CPI) jumped 8.3%, despite a slight decline in gasoline prices.

The Dow plunged 1,250 points.

There was no holiday or good news on inflation. Krugman has been in denial for over a year now. I’m sure another “mea culpa” is coming. I’ll actually see Krugman next week at the World Knowledge Forum in Seoul, Korea, where we are both speaking. I’ll let you know what he says.


In his column, Krugman was referring to “The Misery Index,” where you add up the rise in the CPI and the unemployment rate.

The Misery Index is on the Rise

As you can see from this chart, the Misery Index is rising sharply.


Unemployment Rate+Consumer Price Index for All Urban Consumers. Source: Unemployment Rate+Consumer Price Index for All Urban Consumers: All Items in U.S. City Average | FRED | St. Louis Fed (stlouisfed.org).

Notice that the Misery Index was at a post-WWII all-time high in 1980, an important election year. Ronald Reagan made a big point of this in his presidential campaign, and not surprisingly, he beat Jimmy Carter.

President Reagan then adopted “supply side” economics and the Misery Index went on a real 40-year holiday!

My 1981 Prediction: ‘Reaganomics will work!’

I well remember the year Reagan became president. It was the first year of my newsletter, Forecasts & Strategies, and I sent out a promotion that said on the envelope, “The Financial Shock of 1981.” Readers opened the envelope, and the inside headline was, “Reaganomics will work! Sell all your gold and silver and buy stocks and bonds!”


That was my first “forecast” in Forecasts & Strategies, and it was my best long-term call. The Misery Index gradually declined, and stocks and bonds went on a major bull market that lasted 40 years.

Meanwhile, gold and silver have struggled ever since, especially silver.

It was a victory for “supply-side economics,” which preached sound money, lower taxes, less regulation, and a strong dollar.

The Giants in Supply-Side Economics

Here is a picture of the giants in supply-side economics, taken in 1999, the year Robert Mundell, the father of the euro, won the Nobel Prize in economics.


Credit: Bruce Bartlett. Left to right: Bruce Bartlett, Larry Kudlow, Art Laffer, Wall Street Journal editor Bob Bartley, Valerie Natsios-Mundell and son Nicholas, Republican financier Bill Middendorf, Robert Mundell, columnist Robert Novak and Jude Wanniski, in 1999.

Included in the photograph is Art Laffer, inventor of the Laffer Curve, which argues that tax cuts stimulate productivity in the economy. He has spoken several times at FreedomFest, including this year’s event in Las Vegas.

Who Benefits from the Rise in the Misery Index?

Not all the news is bad. The rise in the Misery Index probably means that the Republicans will do well in the November midterms, especially in the House of Representatives. That means gridlock on Capitol Hill; the Republicans will keep the radical Democrats from wasting more taxpayer money for the next two years.

Wall Street also likes gridlock, and the stock market could do better, once inflation is tamed.

‘The Single Best Book’ in Support of Supply-Side Economics!

Today, one of the top “supply-side economists” is Richard Rahn, chairman of the Institute for Global Economic Growth and a regular columnist for the Washington Times, which I highly recommend reading.

In a recent column, he called my book “The Making of Modern Economics” the “single best book in economics and a delight to read cover-to-cover.”

It includes several chapters on the great supply-side story as well as the Austrian and Chicago schools of free-market economics.

It also has chapters on the enemies of economic freedom, “Marx Madness Plunges Economics into a New Dark Age” and “The Keynes Mutiny: Economics Faces its Greatest Challenge.”

As John Mackey (former CEO of Whole Foods Market) says, “Mark’s book is fun to read on every page. I’ve read it three times!”

C-SPAN Appearance

Last Sunday, C-SPAN Book TV showed my interview with Peter Slen at FreedomFest about my new fourth edition of “The Making of Modern Economics.” It’s only 10 minutes long, and one of my best. Go to https://www.c-span.org/video/?521801-5/the-making-modern-economics to see it.

After watching the interview, you may want to order the book at a sharp discount from its retail price of $54.95. You pay only $35. I autograph each copy and mail it for free within the United States. To order, go to www.skousenbooks.com.

P.S. Join me at the Orlando Money Show, Oct. 30-Nov. 1, Omni Hotel Champions Gate, Florida. Other guests include: Steve Forbes, Ed Yardeni, Bob Carlson, Bryan Perry, Bruce Johnstone, Terry Savage and Keith Fitz-Gerald. For more information, go to Skousen.MoneyShow.com and use code 057734 for special subscriber pricing.

Good investing, AEIOU,

Mark Skousen

You Blew It!

‘Most Young People Should Not Save for Retirement’ — Say Again? 

“Maintaining as steady a standard of living as possible therefore requires spending all income while young and only starting to save for retirement during middle age.” — American Enterprise Institute (AEI) paper

Last month, I was astonished to read an academic paper in the “Journal of Retirement” by four economists at the American Enterprise Institute (AEI), famous for their market-friendly views.

It was called “The Life-Cycle Model Implies that Most Young People Should Not Save for Retirement.” Click here to read it.

These academics are encouraging young people to live up to the quote in the Maxims of Wall Street (pg. 21):

“Two of the hardest things to do is save when you’re young and spend when you’re old.”

Using what they call “realistic” assumptions, they argue that “high-income workers tend to experience wage growth over their careers,” which requires them to maintain “steady a standard of living as possible” in their early work years.

They suggest that workers only start saving and investing in their middle years, and everything will be just dandy.

Seriously? I expect this advice from Keynesians, but not free-market economists.

Have they ever looked at this chart showing the difference between an early saver and someone who waits 20 years later to start saving?

As Georgette Jasen wrote in the Wall Street Journal: “The important thing is to start saving early, even if it’s just a small amount. Albert Einstein has been quoted as calling compound interest ‘the most powerful force in the universe.’”

She recommends investing right away with your first job with a 401k plan or Roth IRA. You will be surprised how much money you can accumulate by investing in quality stocks and bonds. I call it the “Automatic Investment Plan.”

Now granted, it’s tough for young people to save when the government is taking 15% off the top for Social Security and other FICA taxes.

But it still can be done.

I know a number of smart investors who started saving early and lived within their means, and they are multi-millionaires today. They would be in bad straits if they had followed the advice of these academics.

If you have any doubt, I urge you to read pp. 21-31 of “The Maxims of Wall Street,” plus the story of the “Rich Man who Made Money While He Sleeps,” pp. 187-190. To buy a copy, go to www.skousenbooks.com.

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Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

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