Inflation and Price/Earnings Since 1880

Copies of this graphic can be purchased at Zazzle

Inflation is when prices go up. However, inflation's relationship to stock prices can be a little more complex. In this graph, I am revisiting historical data I used several years ago in a series of historical graphs looking at the stock market (see GDP per Capita vs US Stock Prices and Real Growth in Stock Returns Dividends Reinvested).

I graphed the price/earnings ratio back to 1880 and highlighted the years that inflation was high and when there was deflation. The P/E is calculated from trailing 10-year earnings. The low inflation years (5% or less) had the highest P/E while the high inflation years has the lowest P/Es. Deflation years had P/Es near the average.

S&P data from Robert Shiller and CPI data from MeasuringWorth. Graphic was created using OmniGraphSketcher.

Nominal vs Real 3-Month Interest Rate: 1934-2010

An update of my Nominal vs Real 3-Month Interest Rate graph through 2010.

Data for 3-Month Treasury Bill: Secondary Market Rate (TB3MS) and CPI-U (CPIAUCNS) from Federal Reserve Bank of St. Louis. Recessions dates can be found at NBER

Tax rates and Government Spending

Day 6 of 28 Days of Tax Data From USA Today

There is a lot going on in this interactive graphic:

• The main graph is plotting a single salary (in gray) but it is shown adjusted for inflation from 1940 to 2008.
• The colored areas represent the amount of tax appropriated each year to different parts of the federal budget.
• The smaller graph shows the percent of income paid in federal taxes from 1940 to 2008

I have taken screenshots for three different incomes for comparison: $10,000 $100,000 and $1,000,000. You will notice that the percentage of the tax collected for Social Security is greater for the $10,000 income than for the two higher incomes. This is because the % of taxes collected from the Social Security tax is highest on the $10,000 income.

$10,000

$100,000

$1,000,000

Prices, Inflation and Deflation: Great Depression vs Great Recession

Another infographic comparing the last 18 months to the Great Depression. This time I am focusing on Prices, Inflation and Deflation.

Data from Bureau of Labor Statistics: Consumer Price Index History Table

If you want more see Inflation and Deflation created by WallStats

Inflation in 1933 (explained by MGM Studio)

A 10-minute short film produced by the MGM studio to be played in movie theaters across the country. Pete Smith explains (with graphs!) how FDR's inflationary policies are going to help the economy. Found via FinanceProfessor.com and BusinessInsider.com. Here is the related IMDB article Inflation (1933)

Compare 12 Bear Markets (S&P 500) Aug 1929 - Oct 2008

Screenshot from a New York Times Interactive Graphic How This Bear Market Compares by Amanda Cox, Xaquín G.V. and David Leonhardt that shows the percentage drop in the S&P 500 during the last 12 bear markets. The current market drop is highlighted in red, while the drop after 1929 is highlighted in orange. {Click on the image to take a closer look}

[tags]United States, S&P 500, Bear Markets[/tags]

Flashback-Economy

Here is a site that gives you an snapshot of the economy for the 1960s, 1970s, 1980s and 1990s. For example when I was born:

1971

Federal spending: $210,170,000,000 Federal debt: $408,200,000,000 Inflation: 5.7% Unemployment:  4.9%

Median Household Income:  $9,028

Cost of a new home:  $28,300 Cost of a first-class stamp:  $0.06   ($0.08 as of 5/16/71) Cost of a gallon of regular gas:  $0.36 Cost of a dozen eggs:  $0.53 Cost of a gallon of Milk: $1.18

Nominal vs Real 3-Month Interest Rate: 1934-2008

View Nominal vs Real 3-Month Interest Rate updated to 2010

I have plotted the 3-Month T-bills: Secondary Market rate (green line) vs the inflation adjusted (i.e. Real) 3-Month T-bills rate (orange) from Jan 1934-Sept 2008. The inflation number I used is CPI-U 3-month % change multiplied by 4.

{Click on the image to take a closer look}

Data from Federal Reserve Bank of St. Louis

[tags]United States, Interest Rate[/tags]

Inflation vs Unemployment: McCabe Years

I have plotted the annual inflation (CPI-U) vs unemployment. The green line represents the time Thomas B. McCabe was the Fed Chairman (April 15, 1948 – April 2, 1951). The gray line represent the years 1948-2007.

In traditional economic theory, the Phillips curve describes the inverse relationship between inflation and unemployment, i.e. when inflation is high, unemployment is low. This was true in the United States in the 60s but not other time periods

{Click on the image to take a closer look}

Data from Bureau of Labor Statistics

[tags]United States, Inflation, Unemployment[/tags]

Inflation vs Unemployment: Martin Years

I have plotted the annual inflation (CPI-U) vs unemployment. The green line represents the time William Martin was the Fed Chairman (April 2, 1951 – February 1, 1970). The gray line represent the years 1948-2007. In traditional economic theory, the Phillips curve describes the inverse relationship between inflation and unemployment, i.e. when inflation is high, unemployment is low. This was true in the United States in the 60s but not other time periods

{Click on the image to take a closer look}

Data from Bureau of Labor Statistics

[tags]United States, Inflation, Unemployment[/tags]