DOW BREAKS 19,000!!! An Inquiry Into the Dow Jones Industrial Average.

I was excited when the Dow hit 19,000. I thought that meant a great move for the economy and a tangible result of the election of Trump. They call it the “Trump Bump.” But then I asked a question. What exactly is the Dow Jones Industrial Average? That was a few days ago. That question sent me on the most amazing journey as each website and author raised more questions, which lead to more websites, which lead to even more questions. The hardest part has been deciding what not to write about. Suffice it to say that the standard economic and financial news we all get and rely on is woefully inadequate, and people don’t even question it. Listen or watch any newscast and hear something like “the Dow closed up 25 points.” 25 points — from where? It’s a number given in a vacuum. What is the pattern short and long term? The other thing I’ve never understood is when the market drops, some obscure reason is given as immediate justification. “The markets tanked today due to the price of Belgium chocolate collapsing,” for example. Do they know for sure that reason is why the market dropped? Is it a guess? Does the media feel they have to say — something — regardless of whether it is right or not? No one questions these stories, they just come out and are repeated across the media spectrum. How was the connection made? I don’t believe any of these instant connections right away because there is no way to prove them right or wrong. But I do think national and world events effect the Dow. I just wish the connections, either direct or indirect, would be better investigated and explained.

Being this skeptical is what got me on this financial journey of inquiry. Here is what I do believe. The real Dow Jones Industrial Average is not 19,152 as last reported when I started investigating, it’s actually 766. To see how I got there, keep reading.  *** I have a lot of websites for further reading.  Some allow you to go directly to them and some you will have to copy and paste.  I have no control over which is which.  There is a ton of useful information beyond the scope of this article in all the reference websites.

The Dow Jones Average was created by Charles H. Dow and Edward Jones. Charles Dow was editor of the Wall Street Journal. The Dow was first published on May 26th, 1896. The Index followed 12 companies on the New York Stock Exchange (NYSE), which I also call the market, and reported the average price of one of their shares. The companies in the Dow covered the largest areas of the economy so as to be most representative of the market. The Dow was a way to report the overall health of the market to investors. It was a way to give truthful and unbiased information to everyone, at a time when such information was hard to come by. The Dow at first did not cover railroads and transportation, but did represent such industries as sugar, cotton, oil, mining, coal, iron, leather, rubber, and the big company still with the Dow from the beginning, General Electric. By 1929 the Index had grown to 30 companies. Here are two sites for more reading:

Happy 115th Birthday, Dow Jones Industrial Average!

For a complete history of the Dow Industrial Average since it’s beginning, with a history of national events juxtaposed to the market events, see this:

Let’s go deeper. The Dow is reported worldwide. It is one of the most common pieces of financial news you will hear. Everyone has heard of it. The New York Stock Exchange trades some 2,400 companies, many of which are foreign companies. Which companies are picked for the Average, makes a difference as to the value of the Dow. Also, the Dow has to account for stock splits, where shares are for example split two for one, where the number of shares are doubled and the price of a share drops by half. This is so more people can afford the new shares, but the current shareholders keep all their value because they now have twice the number of shares, just at half the price. So the Dow has a scaled average to account for all these factors, and that’s what allows the Dow to rise over time and reflect the total number of shares, while still keeping an average price, so no matter what the companies do with their stocks individually it doesn’t affect the Dow.

Trent Hamm who authored, “The Meaning of the Dow Jones Industrial Average” writes that the Dow is not an indication of the economy, nor is it an indication of the stock market. So what can we learn from the Dow? Hamm writes that the Dow is a predictor, nothing more, but nothing less. And it predicts economic activity over the next year or so. It’s not a reflection of what is happening right now because people buy and sell stocks based on what they think will happen in the future. So the Dow will react not to present news, but before future news shows a pattern. This is why I question the immediate announcement of something in the news directly affecting the Dow, although sometimes it looks pretty obvious. Back to predicting. If one sector of the economy has a problem the whole Dow might drop. With the slightest slowing of the economy, the Dow could drop. And as we just saw with the election, with no measurable uptick in the economy by any government release of figures, but simply the election of Trump, the market soared over 19,000. That is anticipation of a good business climate in the future and is a perfect example of Hamm’s theories.
For more reading see this:

The Meaning of the Dow Jones Industrial Average

The Dow Jones Industrial Average was created during the late ‘1800s.’ Economically the decade was marked by the Panic of 1893. The Reading Railroad went into receivership. Then hundreds of banks and other businesses dependent on them and other railroads also went under. The Stock Market tanked. Foreign investors sold American stocks in return for American funds backed by gold. Gold was leaving the Treasury at a dangerous level and President Cleveland borrowed $65 million from J.P. Morgan and the Rothschild Bank in England to restore our gold reserves and maintain the gold standard for our currency. Further research revealed that the Federal Reserve, a consortium of private banks now in control of our currency through the Federal Reserve Act, includes both J.P. Morgan and Rothschild of England as Federal Reserve member banks. Did this start with the bank bailout of the Treasury? Don’t know. But it is interesting to think about. The key to understanding the times that created the Dow Jones Average is that the depression that started in 1893 was over by 1897. President Cleveland going with conventional wisdom believed that natural business cycles would restore the economy. So the government did — nothing. And the depression lasted only four years. In 1896 the Dow was first published, possibly in response to the market depression, as a way for investors to get reliable information to predict just such volatile market moves in the future, either up or down, and to try and predict such rapid economic changes as crashes, depression and recovery, all within as little as four years. More sources:

Fast forward to 1913. The Independent Institute reports that our per capita output then was the world’s highest. We were leaders in industry and agriculture. Technology was advancing all the time including auto, sewerage, water, electricity, growth in cities, public transit and more. Real income per capita was growing at 2% per year, and real output was at 4% per year on average. There was no federal income tax, no central bank, and a whole lot fewer federal agencies. Robert Higgs who wrote the article, “The Final Days of the Old Regime in the United States,” said that never had such a large population enjoyed so much prosperity and freedom. And here is the good part. The dollar was tied to the gold standard, the value of the dollar was fixed, so any wealth gains were real, that’s why I talked about real output above. The value of the dollar had remained virtually the same since our founding. So if the market prices went up, it’s because the stock had more value. If prices went down, it might be because there was more efficiency in production or other ways to lower the cost, or other products were more competitive. It was not related to the value of the dollar because that wasn’t changing. However, the powers that be could not let such a wonderful situation continue, and so in 1913 we got the Federal Income Tax, and the Federal Reserve Act, and nothing has been the same since. Further reading is here:

1913—The Final Days of the Old Regime in the United States

During this time, the Dow went from 40.94 in 1896 to 79.51 in 1913. That represents a gain of 38.57 points over 17 years. Not bad. Peter Ferrara writes in Forbes, “Why the Gold Standard is the Foundation for Restoring Booming Economic Growth,” that if we had simply stayed on the gold standard and not passed the Federal Reserve Act, at 4% real growth, our income and standard of living would double every 17 years. After 34 years, per capita Gross Domestic Product, (GDP), would be 8 times larger. Our prosperity as a nation now would be light years from where we are, and I think there would most likely be no national debt, no inflation, and our dollar would be the strongest currency on the planet. But that’s not what happened. More reading:

I use 1913 as the benchmark year for when we lost our money to private banks, and with it all the potential prosperity we could have had if we had simply kept the economic system as it was in 1912. But the government/banking cartel had to give reasons that the public would accept to change from all that prosperity, because it certainly wasn’t in the public interest. The Federal Reserve Act was sold as a way to stabilize the economy, prevent the boom and bust cycles like the Panic of 1893, and to eliminate the possibility of inflation. It has done just the opposite. The worst crime against this great nation is the creation and maintenance of inflation, for the benefit of government and the private banks that make up the Federal Reserve, which is neither federal, nor a reserve. We are taught that inflation is rising prices. That’s not true. Inflation is the inflating of the money supply, or the amount of dollars (Federal Reserve Notes) in circulation, without a corresponding increase in wealth or economic growth, because unlike a gold standard, when money was increased only when gold reserves were increased, and the price of a dollar was fixed and redeemable in gold, or silver, the government through the Federal Reserve can now print as many notes as they want because the dollar isn’t tied to anything. Therefore the only value our money has is the value people think it has, because it is just paper, (ok cotton), and not redeemable for anything like real gold or silver. This currency manipulation is all being done for government/bank advantage, not ours. And they use accounting gimmicks like “quantitative easing” (printing money but hiding it behind previously authorized debt and trading securities for cash) to disguise their actions. Remember all those votes to increase the Debt Ceiling. Wonder if there is a connection now? So if the money is paper and functions on a belief system, what is the Dow based on when priced with those same paper dollars? More reading.

Think of the economy as a large pizza. That pizza has 100 slices representing all the money in circulation. The Fed now decides to double the amount of dollars in circulation, so they cut the pizza into 200 slices. Is the pie any bigger? No. But now it takes two slices of pizza to equal the same nutritional value that one slice used to give. Sure you can say you now have double the pieces of pizza, but each slice is only half the size of a previous slice, which was worth twice as much as the new slice. The more slices, the more each slice is devalued. And that, is the essence of inflation. More dollars, worth less, without any corresponding growth or increase in wealth. So what is wealth? Real wealth is raw materials, agricultural products, technology and information, coming together with skilled labor and work to create greater finished products worth more than the original raw materials in the ground or not grown yet on the farm. The additional value created by materials plus work equals wealth. So for the overall economy, a growing population taking materials and creating greater products and necessary services through work increase wealth and make the economy grow. In other words, we all make a bigger pizza. Keep the number of pizza slices the same as you make a bigger pizza and each slice now has more value and is stronger. Cut even more slices and you are inflating the number of slices again without creating any value. Make sense? Now let’s relate growth to money. Your dollar increases in value and buys more if the money supply of dollars remains constant and the economy grows and provides more goods and services. Since the dollar is more valuable, it has more purchasing power, and prices can fall. The lower price with a stronger dollar now has the same value using fewer dollars, as the higher price with a weaker dollar which used to require more dollars. Economists call such price lowering “deflation” like it’s some kind of horrible thing. But for the citizenry it is great. Our dollars buy more stuff. It’s not great for the government or the Federal Reserve, which is why they perpetually engineer an ever decreasing value to the dollar, regardless of economic growth, transferring all that wealth from us, to them. Our dollar does rise and fall against other currencies, but again, that is another article.

So how does this apply to the Dow Jones Industrial Average? The Dow is based on the average share price of the companies in the index scaled over time. But what is that price based on? Dollars! If the government/Fed has systematically lowered the value of the dollar over time, allowed the supply of dollars to increase over time, and allowed the Dow to be reported at the inflated dollar value, rather than true dollar value, then every report of the Dow on the news is a severe distortion. It’s a number just as inflated as the dollars that make up the average price of the Dow. Except that millions of investors are betting their money on that number. Since 1913, when the government starting imposing inflation on the dollar, the dollar has lost 96% of its value. That’s right, your dollar today is worth only 4 cents of what it was in 1913. And it’s not even a dollar, it’s a Federal Reserve Note. So you could say that 96% of the wealth of this nation has been stolen by our government, through inflation, to pay off a private consortium of banks which hide behind the title of Federal Reserve, and with it, 96% of the potential that this wealth could have brought every American. Remember the example above if we had kept our 1912 economic system. So, if the dollar that we use to measure the Dow has been reduced by 96%, and the average price of shares on the Dow is measured in dollars, then the value of the Dow also has to be reduced 96% to be accurate, and be reported in un-inflated dollars (notes). That is why instead of the Dow being 19,152, it is actually 4% of that, or 766. That is the real Dow Jones Industrial Average today. That is the number you should be basing your economic and market predictions on. That is the number that should be reported in the media. It’s not.

As I am terrible at math, my friends Richard Brookner and Chris Gringr have helped out with some numbers. So to sum up. The Dow in 1913 was 79.51. The close for this article is 19,152. Corrected for inflation that gets you 766. It’s been 103 years since 1913. The dollar has devalued 96%. The average rate of inflation during all those years is 3.18%. However, the rate of return over those years, also known as the Compound Annual Growth Rate, is only 2.22%. Without inflation the growth rate would have been 5.47% on average. What jumps out to me is the inflation rate is almost a full point over the rate of return. Which means no matter how much you invest, your dollars will always be shrinking in value faster than the rate of return. So if you are always going to lose money in the long run, why would anyone invest in the Stock Market? If inflation is always greater than investment, then you can never get ahead. I need to go over all this with an economist.

From the song 16 Tons by Merle Travis

You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store

Do you remember the old company towns? This is where one corporation held all the jobs and owned all the houses, and ran all the businesses in town. Like a mining town for example. Workers weren’t paid in money, they were paid in scrip, which could only be redeemed at the company stores. The way everyone was held prisoner was that the company would always maintain a higher cost of living than was possible from working for the company. That way entire families would always be ever increasing their debt to the company. They could never break free; they could never leave. The longer they lived there, the more in debt to the company they would become. What if, are you ready — what if the purpose of the Federal Reserve is to make the entire U.S. population debtors to the Federal Reserve, just like a company town? What if the whole system is designed that no matter how hard you work, your money will always lose value faster than it can accumulate wealth through investing? Obviously many wealthy investors, companies and banks do very well in the Stock Market. So they aren’t going to be in any national company town. But for millions of middle class working families, that may be exactly where they are. How are all those 401K plans looking corrected for inflation? This also deserves more investigation.
More reading:

I could not do better than this article by Tim McMahon from the website, so let me simply present this discussion of his creation, the “inflation adjusted stock price.” This will detail why it is so important to understand inflation, how it is measured with the Consumer Price Index (CPI-U), and its effect on the Dow, on investing, and how the Dow can rise in points, the value of the Dow can be unchanged, the actual asset value can decrease, and investors can still lose a substantial amount of their investments.

Let’s make it more complicated as inflation isn’t the only problem when it comes to the Dow. Daniel R. Amerman on his own website has an article, “Deadly Dow 36,000 & the Secret History of a 70% Market Loss.” This discussion is way beyond the scope of my article, but is critical for you to read if you want to know in advance what is happening with the Dow as it rises, and what are all the factors underlying it that are not being reported. Let me summarize. Amerman details the greatest threats to long term and retirement investors. The three wealth destroyers are monetary inflation, what we simply call inflation, then asset deflation, and then inflation taxes. Asset deflation is the reduction in value of the asset. The market price of your investment could be rising, but the actual value of the stock is lowering due to a variety of factors, but you can’t see it because it’s hidden by inflation. That is asset deflation. The third component is inflation taxes. The government doesn’t care about correcting the Dow, or stock prices for inflation, or asset deflation. They tax you at the full amount of the Dow, or the market price uncorrected for your shares or investments when sold. You are being taxed on the paper gain, effectively on non-existent income, because the IRS does not recognize any losses due to inflation or asset deflation. You are taxed on money you never made, and that over the whole market is a huge government windfall of taxes based on non-existent money that was never really made, even though it appears so when the transactions are uncorrected. Most investors know nothing about any of this. I’m still trying to figure it out. For a full discussion please see this:

My search also carried me to the folks declaring war against the New World Order. The Market has analysis from all perspectives. From the site I found six reasons why the whole picture of the financial markets is distorted by government policy, on purpose, and it has globalist implications. Here is what I found from their site:

The United States government has six interrelated motivations for destroying the value of the dollar:
Creating money out of thin air on a massive basis is all that stands between the current state of hidden depression, and overt depression with unemployment levels potentially rivaling those seen in the Great Depression of the 1930s.
It is the most effective way to not just pay down current crushing debt levels using devalued dollars, but also to deal with the rapidly approaching massive generational crisis of paying for Boomer retirement promises.
It creates a lucratively profitable $500 billion a year hidden tax for the benefit of the US government — a tax which is not understood by voters or debated in elections.
It creates a second and quite different form of hidden taxation by way of generating artificial market highs, which while non-existent in inflation-adjusted terms, do create artificial investment profits that are fully taxable and highly profitable for the US government.
It is the weapon of choice being used to wage currency war and reboot US economic growth; and
It is an essential component of political survival and enhanced power for incumbent politicians.

None of this would have made any sense to me before I had started investigating the Dow. But now the above summary is pretty much everything I found on my own, and I have so many more questions. For more details on the above list, and to wade into a whole new world of financial and global political analysis, read here:

Why The NWO Is Devaluing The Dollar: Theft!

I just found some late information on an alternate source of financial information called Shadowstats.  It turns out the government has changed the way they measure inflation, and also unemployment, to make the figures look so much better for the government.  So let me present this calculation the way inflation used to be measured, and you will see rather than there being virtually no inflation, your dollars are losing money at a rather rapid rate.  Please check out this information and use it for your planning.

What started as a simple expression of wonder that the Dow would rise because of an election, has taken me, and you, on a journey through history, culture, economics, fraud, conspiracy, finance, misinformation, politics, and more. Seeking truth is simply a matter of asking the right questions and following through, despite all the opposition who think you crazy for asking. Assumptions unfortunately are more powerful than truth. Which is why most people are ruled by their assumptions, rather than a desire to seek truth, which is why they don’t ask questions, because no need for asking questions exists. Are you ruled by your assumptions, which take on the false value of truth, or do you seek truth despite the assumptions that are forced upon you? That is what happens when you ask a simple question like what exactly is the Dow Jones Industrial Average, rather than just listening to the reported value every night.

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