The Monetary
Debasement Model
S&P 500 long-term returns are “essentially monetary debasement.” Strip out M2, the appreciation is “almost flat.” The thesis is wrong on both counts.
“66 years of S&P 500 data shows the market’s entire long-term return is essentially monetary debasement. Strip out US M2 growth, and the real appreciation is almost flat. That reframes everything about passive investing. The ‘buy and hold forever’ thesis assumes you’re being rewarded for owning productive assets. But when you index the S&P 500 against US money supply growth…”
Three testable assertions are embedded in this post. First: that the S&P 500’s long-run nominal return is primarily explained by M2 money supply growth. Second: that when adjusted for M2, the real appreciation is “almost flat.” Third: that this finding reframes the case for passive equity investing.
No source is given for the data. No methodology is stated. No chart is shown. The post ends on a graphic that reads “Game Over.” The Lab tested all three claims against primary data.
Primary sources.
No adjustments. No editorial selection.
The Lab’s methodology for this investigation: take the longest available monthly series for both the S&P 500 and US M2 money supply, merge them on a common date axis, index both to 100 at the first shared observation, and compute the ratio. No smoothing. No cherry-picked start date. No selected time window.
ie_data.xls · Robert J. Shiller, Yale University
Monthly · Jan 1871 – May 2026
1,865 observations total
Price index only · Dividends excluded
M2 Money Stock · Seasonally adjusted
Monthly · Jan 1959 – Mar 2026
807 observations
Billions of USD
Both indexed to 100 at first shared date
Monthly frequency throughout
No resampling required
No smoothing applied
The post claims “66 years of data”
FRED cannot deliver this in one download
Shiller dataset required — non-obvious
The post cites no source at all
The data sourcing problem is itself a forensic finding. The originator claims “66 years of S&P 500 data” — a precise figure. FRED, the most commonly used public data source for US economic series, holds approximately 10 years of S&P 500 price history for download. Getting a clean 67-year monthly series requires the Shiller Yale dataset: a non-obvious primary source that requires manual acquisition, date-format parsing (Shiller encodes dates as decimal years, e.g. 1959.01), and careful column mapping. The post cites no source. No methodology. No data file.
What the data
actually shows.
Jan 1959 → Mar 2026
Jan 1959 → Mar 2026
“Almost Flat”
Before Dividends
The S&P ÷ M2 ratio did compress sharply from 1959 to the mid-1970s — a period when M2 expanded rapidly while equities stagnated through stagflation. The ratio then recovered through the 1980s and 1990s bull market, peaking at the dot-com bubble in 2000. It fell back through the 2000s and 2008 crisis, recovered from 2010, and has been climbing steeply since 2020. The current ratio is near its all-time high.
A selective start date — say, 1970 to 1982 — would make the post’s claim look stronger. The originator does not state their start date, their data source, or their methodology. The claim “66 years” is precise, but the precision is unverifiable because no source is cited. The Lab used the full available series from 1959 with no editorial selection.
All five conditions
fail.
The denominator
was chosen. Not derived.
The originator’s brand is “Outperforming Bitcoin Since 2018.” 2018 was the year after Bitcoin’s December 2017 all-time high of $19,700. Bitcoin fell 84% through 2018 to approximately $3,200. Anyone who bought after the crash and held through the 2021 ATH ($69,000) and the 2025 ATH ($109,000) did not outperform Bitcoin. They were Bitcoin. That is called holding.
The same logic applies to the S&P post. Pick your denominator. Pick your start date. Get the number that serves the narrative. M2 grows over time. Dividing any long-run return series by M2 will compress it. The analytical move the post makes — choosing M2 as the deflator, then presenting the compressed number as a revelation — is structurally identical to choosing 2018 as the start date for a Bitcoin performance claim.
Both are denominator manipulations. Both are undisclosed. Both serve a sales funnel.
The correct deflator for assessing whether passive investors are rewarded in real terms is CPI — the Consumer Price Index, which measures changes in the cost of living. M2 measures money creation. The two are related but not identical. Using M2 as the deflator for equity returns is a methodological choice that produces a more dramatic result than CPI — and that choice is not explained, justified, or even acknowledged in the post.
The CPI-adjusted result — which the post never mentions — is +951% before dividends. That is the number a passive investor actually cares about: did their purchasing power increase? The answer is yes, by a factor of approximately ten over 67 years, before the dividend yield that compounds on top.
Thesis Failed.
On every count.
The claim that S&P 500 long-run returns are “essentially monetary debasement” and that real appreciation is “almost flat” when adjusted for M2 is numerically wrong. S&P ÷ M2 over 67 years is +51%. Not almost flat.
The claim that this “reframes everything about passive investing” ignores the correct real-return metric: CPI-adjusted price return is +951% before dividends. Total real return including dividends has compounded at approximately 6% per annum since 1959. That is not illusion. That is one of the most robust long-run data series in financial economics.
The directional observation — that money supply expansion inflates nominal asset prices — is legitimate and worth discussing. It is a well-documented phenomenon in monetary economics. The post uses it to reach a conclusion it cannot support: that the equity premium is therefore fictional. The equity premium is not fictional. It is smaller than its nominal appearance, and that is the honest version of this argument.
The post has no data source, no methodology, no chart, and an undisclosed commercial agenda. It took under 30 minutes of work with publicly available primary data to disprove it.
Following publication, E Conrad (Capital Markets Economist, 50-year academic and business career) raised an important structural point in the comments: the S&P 500 index has an inherent survivorship bias by construction. Companies that decline in market capitalisation are removed from the index; companies that grow are added. The index is permanently rebalanced toward its own best performers.
This is a legitimate and well-documented observation in financial economics. Its implication for this investigation cuts against the original post’s argument — not with it. If the S&P’s long-run return series has a structural upward bias built into its construction methodology, then the M2-adjusted return of +51% is, if anything, a conservative floor on the equity premium. A randomly selected basket of stocks held for 67 years without index rebalancing would have produced a lower return. The index’s construction is a feature that benefits passive investors — not a flaw that inflates the comparison. The post’s conclusion is weakened further, not strengthened, by this addendum.
