Friday 1 October 2010

Dow Jones and pro-Fed Propaganda - Will it ever end?

Today I had a bit of a strange moment - I actually spent time looking through news on the economy coming out of the main-stream media. Among the piles of useless rabble I found somewhat of a trend. This past September was being totally hyped up as a great economic success and miracle (see here for Wall Street Journal article). Apparently the Dow Jones index last month beat a 71-year record high (since 1939) and rose by 7.7%! I didn't find this very surprising; the Dow has been on the rise for a while now due to inflationary policies of the US government. How do I know that? Well, there are two possible options for the 7.7% Dow Jones growth. Either, as the media claims, the stocks gained value, or, as I claim, the US Dollar actually lost value (due to simple rules of supply and demand). If either of those processes occurred the result would be the same, but could be mistakenly interpreted as the other. Now how could I verify my claim? I didn't want to point out the rise in price of gold and silver (and other precious metals and mining stocks) because main-stream economists are for some reason labeling this price growth as a 'bubble'. So I thought, why not try to prove my point by looking into price changes in other commodities? There cannot be a bubble in every single item on earth, like food, clothing, or furniture! And surely enough my findings were quite conclusive and in my favour. I checked common goods and non-precious metals with the following results (can also be found here):

Commodity - Percentage Value Rise in September 2010
Copper - 10%
Rice - 10%
Cotton - 17%

The Dow Jones was also outperformed by such mighty forces as orange juice and beans! From this data we can clearly deduce that it was not in fact the Dow which gained value, but the Dollar that lost value. In fact, the Dow gained less that these other commodities showing that the stock market is much weaker than the market in virtually any actual commodity. I expect this means that the US Dollar actually lost up to 10% of its entire net value in September alone (although not being an economist I don't want to be quoted on that figure)! Now that's what I call inflation! Of course it will take a while for all this to filter through into actual prices on shelves, but it will eventually hit. And who will be blamed for it? The businessmen and their greedy overpricing and profiteering...

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