Another way of looking at how inflation has affected the value of the DJIA is by "deflating" it. To deflate the DJIA, I first indexed CPI and CinC to 1.00 for January 1920. The DJIA is then divided by one of these indexed measurements of inflation for each week since January of 1920.
Deflating the DJIA by the Department of Labor's CPI, we see that the highs of 2000 actually were a bit higher than the highs of 2007. In purchasing power terms, I think this is the reality of it. Still, capital gains were due on these inflationary 3000 Dow points of profits all the same. Can you believe it, the politicians managed to tax investors on their loss of purchasing power! Washington loves their Federal Reserve and income tax.
clipped from: www.gold-eagle.com 