However, as a metric of the overall health of the economy, stock market performance is, at best, a misleading and unreliable indicator. Strictly speaking, stock prices indicate nothing more than the price people are willing to pay for partial ownership claims in businesses. With a stable money supply—a fantasy scenario in the modern world—stock market gains would reflect increased levels of savings and productivity and would indeed be indicative of economic growth.

But for inflationary economies, which have become the global norm, newly created money bids up these prices, without—or in excess of—actual savings. In one sense, this is not unlike the effect money supply inflation has on every other marketable good, and the fallacy of viewing inflation-driven price hikes as economically desirable is not as absurd as it might immediately appear. In the 1930s, it was precisely this line of thinking that drove New Deal policymakers. Thinking price increases could somehow spur the economy to new heights, New Dealers curtailed production, burned crops, and slaughtered livestock to prop up farm prices as a solution to the Great Depression, even while millions of Americans struggled to feed their families.



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