I know people who play the stock market, and get really excited when it goes up a hundred points. Its like they just hit the lottery. But what’s the real story? Its not what you think.

The Dow Jones Industrial Average (DJIA) is the total value of the prices of the 30 individual stocks which were selected for inclusion in the Dow, and then adjusted for stock splits and dividends so that it remains consistent. It is supposed to be an indicator of the value of the 30 companies which make it up.

Lets go back in time to January 7, of 2000. At that time, the Dow Jones Industrial Average closed at 11,522. At the same time, gold closed at $282 per ounce.

Today, the DJIA is about 12,200; gold is trading at close to $1500

Let’s see how the DJIA performed in relation to gold.

Gold is not worth more today than it was in the year 2000, it just costs more because of the inflation of the US dollar. Gold is the true historical money, and its price is a gauge against which other currencies are measured. Its price is not controlled by any one government, is freely traded, and cannot be inflated like paper currencies can. Also gold responds faster to economic conditions than the prices of other commodities.

Back to the DJIA: If we divide the price of the DJIA in the year 2000 by the price of gold at the same time, we find out that it cost over 40 ounces of gold to equal the Dow. Do the same math for today, and we find the DJIA is only worth 8 ounces of gold. IE: The Dow is only worth 20% of what it was in the year 2000. An analysis using any other commodity will show that the DJIA is worth less today than 10 years ago, whether it is the price of food, refrigerators, autos, dental work, etc.

It can be concluded then that the stock market has been an absolutely sure way to lose wealth in the current economic climate. Notice I said wealth, as money and wealth are not the same thing. Wealth is what you can buy with money, so if your money will buy less wealth today, you will be less wealthy even though you have more money. The government relies on the fact that the average American does not know the difference between money and wealth.

Suppose you had $1 a year ago, and could buy 1 can of soup for the $1. Today, you have $2, but a can of soup costs $3. You have more money, but less wealth. This is the fraud that the US government and the Federal Reserve perpetrates on the citizenry by continually engaging in deficit spending^* , so that people do not realize the true direction the country is taking.

The stock market is a reflection of the economic health of this country.

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* Deficit Spending, or continually borrowing to maintain our socialistic lifestyle increases the money supply but does not increase wealth production, thereby decreasing the value of the currency. In the end, we all lose.