>>>>>Surely you don't really think what you saw in Eastern Europe is applicable. The U.S. stock market is not going to fall to zero. It goes up, it goes down. It does not disappear.
>>>>
>>>>It doesn't, it just gets expressed in weaker currency. Three years ago, when Dow Jones was at 13000, someone calculated that it should be at 16000 just to break even with 1999 - adjusted for inflation. But somehow this adjustment gets forgotten.
>>>
>>>Agreed especially if seen from foreign currency based eyes<g>. But dividends are computed into the Dow (they are in the DAX) so there is a correcting factor.
>>
>>It's not exactly right. If a stock gains, say, 14% over a year, but the inflation is 9%, the net result is just 4.6% increase (I think I don't need to explain why is it not 5%).
>
>It is not quite true. Actually, we have two scenarios here:
>1) Non-adjusted to inflation: a person investing in a stock and getting 14% comparing with a person not investing in a stock and getting 0%.
>2) Adjusted to inflation: a person investing in a stock and getting 5% (or 4.6 if you like it) comparing with a person not investing in a stock and getting -9% (or -9.4% ??).

Loses 8.26% of the value - the value of their money is multiplied by 1/1.09.

>Looking at these 2 scenarios I don't see much difference.

Because there isn't any - with inflation, everybody loses (except the guy who creates money).

This was about the correcting factor - that the dividends being computed into the value of stock somehow offsetting inflation - that's actually only partial. We can say that that the gain makes your inflationary loss smaller, or that the inflation actually makes your gain smaller.