Taking stock of Wall Street’s boom (1)

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If the US econ­o­my was per­form­ing as well as the US stock­mar­ket, even Wal­mart work­ers would be break­ing out the cham­pagne.

Since 2009, the S&P has risen over 250 per cent in nom­i­nal terms, and almost 230 per cent in infla­tion adjust­ed terms. In nom­i­nal fig­ures, it is at its high­est val­ue ever, though when you adjust for infla­tion, it is still 10 per cent below its peak in 2000 (see Fig­ure 1).

The $64 ques­tion is: will it keep on going up?

Fig­ure 1: The S&P 500 before and after infla­tion
Graph for Taking stock of Wall Street's boom

There are good rea­sons for the stock­mar­ket index ris­ing over time in infla­tion-adjust­ed terms. These include sound ones like the rein­vest­ment of earn­ings (think Berk­shire Hath­away),  but also mis­lead­ing ones like sur­vivor bias.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.