The Dow Jones Industrial Average closed at 15,570 on Friday. Why is it so high? Are the corporations indeed worth that much more than they were 2 years ago? That depends on how you measure ‘worth’. To measure anything, you need a yardstick of some sort. A yardstick is a static measure – 36 inches has been the same 36 inches over the years. We measure the ‘worth’ of a company in dollars. Unfortunately, the dollar is not a static measurement.

If I purchased an item in 1913 for $100, what would it cost today? The government’s inflation calculator says it would cost nearly $2400! But this BLS CPIinflation calculator uses the Consumer Price Index (CPI) calculated by the federal Bureau of Labor Statistics (BLS), and this index is basically calculated in ways to mask the true inflation. For example, the ‘basket of goods’ on which prices were tracked in the Core CPI (used until 2012) excluded food and energy because these prices were ‘too volatile’. There are many different CP indices, but there’s a problem with all of them.

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