August 3, 2008
The Price of Pessimism
By Perry Willis

From an excellent article by W. Michael Cox, the senior vice president and chief economist at the Federal Reserve Bank of Dallas, and Richard Alm, the bank's senior economics writer . . .

"In the early 1980s, the U.S. economy had big problems, including slow growth and high inflation. A rational response for pessimists might have been to put their money into the safe havens of gold or Treasury bills. A $10,000 initial investment in gold would now be worth $22,525; the same amount in T-Bills would be worth $37,778 (Fig. 14). Early 1980s optimists might have bet on U.S. economic progress by investing in the Dow stocks. Their initial $10,000 would now be worth $288,163—even after the financial market troubles of recent months."

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