My Favorite Chart on Earth

All very interesting but the author fails to discuss the survivor bias inherent in the Dow Jones Index (or any other index, for that matter). This is the results of the companies that survived. A lot of companies have dissappeared over this time, both through poor performance or going bankrupt. In fact, GE is the only company that has remained on the index since it's inception.<p>So unless you're buying index funds that track the DJIA, the chart loses it use. Because when we look at this, we see that the stock market always goes up with time. But what we are looking at is the fact that the 30 largest/most successful companies in the USA keep pace with inflation. Which is hardly a shock.<p>Note that I'm not arguing some of the authors points, I'm just encouraging an open mind when viewing graphics like this - you've got to know what you're looking for.

Of course Korea and First Gulf War are not here, since they would ruin the author's argument. Cue the chorus of people arguing why Korea and First Gulf are "different."

Note that the chart uses a logarithmic y-axis, so it is most useful for relative comparisons. Don't try to get absolute data from it as our brains aren't built for doing exponential graph transformations.

I love how economists make all sorts or ridiculous claims by looking at the historical stock market. Two or three data points is not a trend, if you have 3 users and they all register, that doesn't mean your conversion rate is 100%.<p>Sometimes we forget that 100 years of data is nothing compared to human history and does not signify anything about the future.

Large version of chart, here: <a href="http://www.thereformedbroker.com/wp-content/uploads/2011/01/My-Favorite-Chart-on-Earth.jpg" rel="nofollow">http://www.thereformedbroker.com/wp-content/uploads/2011/01/...</a>

Out of six or seven wars, he picks the ones that make his case. This guy (and anyone tempted to draw any conclusions from this chart) should read A Random Walk Down Wall Street.<p><a href="http://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street" rel="nofollow">http://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street</a>

I wonder how the graph will continue if we add one possible scenario.<p>That the war on terror will last for decades to come, escalating conflicts in other locations, say Pakistan or somewhere in the gulf (again)<p>World wide war without end.. The assertion that the war in Afghanistan is winding down, doesn't strike me as accurate.<p>In addition the period after the second world war, was marked by a US economic dominance, as Europe was in ruins and the soviet block stifled economic development in almost half the globe for several decades including the Vietnam period until glasnost started to get a footing (in that curious uptick around 1988 perhaps), right till the fall of the Berlin wall.<p>Things are different now. slightly.

Some similar charts here, such as S&#38;P Composite since 1871, adjusted for inflation (much more useful in my opinion):<p><a href="http://dshort.com/articles/SP-Composite-pe-ratios.html" rel="nofollow">http://dshort.com/articles/SP-Composite-pe-ratios.html</a>

In war time, the economy appears to stall, since the growth is concentrated in war-related products which do not influence indicators like the consumer price index. After the war ends, the industry goes back to normal and the CPI `catches up', making it look like the war boosted economic growth.<p>That's how we explained it when I studied economics, at least IIRC.<p>Edit: just noticed the website name. "The Christian Science Monitor". I feel slightly cheated.

This suggests that we are in for a long period of inflation.

The graph is titled (roughly) "500% rises follow inflation". It could just as easily be titled "500% rises are followed by inflation" from the same data.