“Nations are not ruined by one act of violence, but gradually and in an almost imperceptible manner by the depreciation of their circulating currency, through excessive quantity.” – Nicolaus Copernicus
The chart below shows the nominal returns of the stock market since 2000. Both the Dow and S&P have surpassed their 2000 highs. Sounds good until you take into account inflation. Even using the bullshit CPI numbers shows stock markets well below their 2000 levels. Using a true rate of inflation would show the Dow and S&P being down 25% to 50% from their 2000 levels. Meanwhile gold has done quite well on an inflation adjusted basis. But back to your regularly scheduled CNBC stock pumping. Another new high today. Right?
Adjusting the stock market indices for inflation paints a somber picture, one not generally reported. In real terms, the Dow is down 7.1% from its 2000 high; the S&P 500 is down 23.3% and the NASDAQ is down 51.6%. Things could be worse: the Nikkei is down 63.6% in nominal terms from its early 1990 highs.
As for gold, despite the recent setback it remains up 370% in nominal terms and up 270% in inflation-adjusted terms. Since August 1971, when President Nixon took the world off of the gold standard, gold is up about 520% in inflation-adjusted terms. The S&P 500? It is up roughly 175% in the same time period in inflation-adjusted terms. And that includes the long years when gold underperformed.