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Inflation v. Growth: a Picture is Worth 1,000 words

Jul 07, 2011
They say inflation isn’t a problem, or that little exists in "the market" today. They couldn’t be more wrong.
The difference between Nominal GDP and Real GDP is inflation. Nominal GDP is measured in current dollars, and Real GDP is measured in a prior year’s dollars (in this case 2005 dollars.)  Below is a chart comparing stock market activity to GDP from year ended 12/31/2002 through 6/20/2011 – basically the last recessionary bottom to now. 
            This chart clearly shows the presence of inflation in the economy -- and in the stock market. Inflation accounts for approximately 3,000 Dow points since 2002 (85% of its gain), which coincides, not ironically, with reckless government spending and the addition of over $2 trillion of new currency injected into the economy by the Fed.  That’s why commodity prices have also risen so sharply. 
            That's inflation, not growth. 

            Here's what growth looks like. 


            15-51 portfolio construction: It is the road to financial independence.

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COMMENTS (2 Comments)

You really found a way to make this whole pcroess easier.
Cami 3:46 PM Jan 15th
Was totally stuck until I read this, now back up and rnniung.
Digger 3:15 PM Jan 15th



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