Economy 101 Question.

[Che]

Dow Jones is up around 70s today, and i noticed that the dollar is losing its value in around 0.44%, which means gold is up. It seems that whenever Dow is up, the dollar goes down, and vice versa. I'm not saying this phenomena occurs everytime, but usually, that's what happens. That's what happened in the collapse of 2008. Even th Dow lost 4000 points, the dollar increased its value.

So my question is, for all those people calling for "coming hyperinflation, collapse of the dollar", I'm thinking that the Dow will still be all-time high, except we wouldn't have any purchasing value. Am i wrong? probably..

[Epic]

Dow Jones is up around 70s today, and i noticed that the dollar is losing its value in around 0.44%, which means gold is up. It seems that whenever Dow is up, the dollar goes down, and vice versa. I'm not saying this phenomena occurs everytime, but usually, that's what happens. That's what happened in the collapse of 2008. Even th Dow lost 4000 points, the dollar increased its value.

So my question is, for all those people calling for "coming hyperinflation, collapse of the dollar", I'm thinking that the Dow will still be all-time high, except we wouldn't have any purchasing value. Am i wrong? probably..

No you're right

[treyfu]

This relationship will begin to weaken more and more, though, as people stop fleeing to the dollar as a safe haven when there's a sell off. We saw an example of this decoupling this past Friday, 10/2, when the Dow was down, the dollar was down, and gold was up.

[dannno]

No you're right

I'd say he's on the right track..

The DOW could go way up, way down, or stay about the same.. But the purchasing power of both the DOW and the dollar will drop significantly regardless.

But the scenario the OP is calling for is very possible.

[mtj458]

The relationship between the dollar and the stock market is mostly short term. As stocks go up, people dump treasuries and buy stocks, making the dollar fall. When stocks go down, people sell them and buy treasuries, making the dollar rise. This has little to do with the real strength of the dollar and over the long run the trend will start to break apart if there is a hyper-inflationary environment.

Also if you look at a chart of the DOW over the last 100 years, you'll see a pretty strong correlation with the stock prices rising and the dollar falling. The dow has risen by over 100 times but most of that gain is because the dollar lost so much value.

[Elwar]

I noticed that as well...I remember buying a lot of gold, against my financial adviser's advice...he'd call me when the DOW was up and say...look at the market going up! But I'd just point to the dollar compared to the Euro in freefall...

If an ounce of gold costs $1k and the DOW is at $10k...if the dollar were to drop in value so that an ounce of gold costs $2k...then it would not be surprising that the DOW would be at $20k. And there would be dancing in the streets about how great the economy is...

[hugolp]

It has been like this since the beggining of the crisis more or less.