Public Debt, Inflation and the Stock Market

Posted in Economic Indicators


When the U.S. government runs substantial deficits, some experts proclaim the dollar’s inevitable inflationary debasement and bad times for stocks. Other experts say that deficits are no cause for alarm, because government spending stimulates the economy, and the country can bear more debt. Who is right? Using annual (end of fiscal year) level of the U.S. public debtinterest expense on the debtU.S. Gross Domestic Product (GDP)Dow Jones Industrial Average (DJIA) return and inflation rate data over the period June 1929 through September 2015 (about 86 years), we find that: (more…)

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