A Depression Index
Tim Kane

To make the situation clear, I thought it would be useful to combine the three indicators of economic and policy capacity into a simple depression index. I define the depression index as equal to the monthly average fed funds rate plus the surplus(deficit) as a percentage of GDP minus the rate of unemployment.

This spring, unemployment is spiking and both policies are being exhausted to stop it. The effect is a depression index that is not only the worst on record, but twice as low as ever before. The depression index is now negative 23.1. A metaphor for the index is something that measures the heat of a fire and how much water the firefighters have to douse it. Our fire is raging, and the water buckets are empty.

Click the link to view the graph. All these bailouts/stimulus packages sure are ‘keeping the party’ going, aren’t they?

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