Skip to main content

Is the stock market actually growing? (The illusion of the USD)

By December 12, 2021October 26th, 2022No Comments

There’s a famous saying that “what gets measured gets managed”. There should be an equivalent saying for how you measure something makes all the difference. If you’re trying to lose body fat to become healthier but you also are a bodybuilder, is measuring your weight loss in pounds the most effective metric? Does it tell the real story?

I would argue no. It fails to take into account how much muscle you’re building as well. The most effective measurement would be body fat percentage total. This way we can get an accurate picture of how much total fat you’re losing, and not conflate it with building muscle.

You can make the same argument for the stock market. Does measuring stock market growth in USD give us the most accurate picture of the growth of our economy? Or does it in fact just show the decreasing or debasement of the US dollar instead? Something to ponder.

If you look at the chart above you can see the US Stock market measured with two separate metrics. The green line represents the value of the Dow Jones in US dollars and the blue line measures it in gold grams. As you can see the two different measurements tell two completely different stories. According to the denomination in gold, the Dow Jones has actually lost value over the last two decades as opposed to the perceived growth in dollars. Something to ponder.