Posted by
Andrews on Monday, March 02, 2009 1:08:48 PM
Were the press mentioning how the stock market has tanked since Obama started enacting his economic policy, doubtless they would have latched on to the fact that the Dow is now at its lowest since 1996. And, to be fair, some in the economic press have done so. However, that actually only gives part of the picture.
You see, the Dow is a monetary measure, and, like all monetary measures, is distorted upward by our constant inflation. Though many don't seem to notice, there has been a constant, not all that slow, escalation of prices, for the past 20 years. Actually ever since Nixon took us completely off gold, but as there was something of a slowdown in the 80's after the 81-82 recession, I think mainly of the faster rises of the Clinton-Bush years.
All of which means, that a present Dow of 7000 is really about 5350 in 1996 cash, so we are well below the 1996 Dow. I haven't had the time to sit down and figure out the values of reach year, but it would be quite informative to see a chart of the Dow indexed by the CPI or some other inflation index to see, in constant value dollars, how much of our growth is real and how much is monetary illusion.
Perhaps such a graph is out there. If anyone knows of such a chart, let me know. Otherwise, perhaps I will take the time one day and graph the high and low of each month from say 1970 to the present, adjusted by the CPI. It isn't perfect, as the CPI isn't a pure inflationary measure, but it still will be closer than our purely monetary index.