Apologists for the Obama administration claim the economy is recovering based on the Dow Jones Industrial Average reaching record levels.

Which is ironic, to say the least, given that the standard Democrat/liberal/progressive line is that business is (1) a necessary evil at best that (2) must be taxed and regulated by the smarter people in Washington and the state capital nearest you. It also fails to grasp the fact that, as readers of this blog know, publicly traded companies total all of 0.1 percent of U.S. companies.

Jerry Bader passes on the Daily Reckoning‘s comparison of the DJIA’s 2007 high and today:

On the day the Dow logged its first of seven straight new highs, ZeroHedge trotted out a kind of financial “The Way We Were” — comparing today’s economic conditions to that of October, 2007, when the Dow set its previous record high:

• Dow Jones Industrial Average: Then 14164.5; Now 14164.5
• Regular Gas Price: Then $2.75; Now $3.73
• GDP Growth: Then +2.5%; Now +1.6%
• Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
• Americans On Food Stamps: Then 26.9 million; Now 47.69 million
• Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
• US Debt as a Percentage of GDP: Then 38%; Now 74.2%
• US Deficit (LTM): Then $97 billion; Now $975.6 billion
• Total US Debt Outstanding: Then $9 trillion; Now $16.4 trillion
• Labor Force Participation Rate: Then 65.8%; Now 63.6%
• Consumer Confidence: Then 99.5; Now 69.6
• S&P Rating of the US: Then AAA; Now AA+
• Gold: Then $748; Now $1583

In other words, the Dow made a new record high despite the economy’s performance, not because of it.

Why?

Your editor has no idea what the market knows or sees; he only knows that he doesn’t see it. What your editor does see is a stock market that the masses adore, residing in an economy that the masses abhor.

So maybe it is not hope that is driving the stock market to record highs, but despair. Maybe stocks are rallying because investors are afraid to do anything else with their capital — maybe they are afraid to risk their capital in an economy that features zero interest rates, stifling regulatory regimes and capricious tax laws.

Bottom line; the Dow’s record-setting performance tells us nothing about “why.” The stock market is silent on this point. Perhaps it is too terrified to speak. …

One thing we know; the rallying stock market stands in stark contrast to the bear market in economic vitality. We also know that bull markets are unfolding in all the wrong places. Unemployment, government debt, food stamp participation, “No knock” SWAT raids and “No trial” drone strikes are all in bull market mode.

The fact that the Dow, priced in gold, remains very far away from a record, suggests that Chairman Bernanke is working overtime. His dollar-printing escapades have played a very big hand in the Dow’s record-setting climb. By devaluing the dollar, in other words, Bernanke “inflated” the Dow price.

The second and last paragraphs are the “why,” I believe. The ordinary investor should be in the stock market as a long-term investment, and not make decisions based on what one stock, or the entire market, does over one particular short period of time. The aforementioned “zero interest rates, stifling regulatory regimes and capricious tax laws” may indeed make the stock market seem like a safe short-term investment too in comparison to other potential investments.

Sheldon Richman of the Future of Freedom Foundation adds:

The Federal Reserve is working hard to keep key interest rates close to zero. The Fed has bought hundreds of billions of dollars in long-term government securities (“Operation Twist”) in order to lower the return from such investments. This drives money seeking a bigger return into the stock market and commodities. If this explains the run-up in stock prices, it sounds more like a bubble than a marker of returning economic growth.

The government and its central bank, in fact, have done virtually everything wrong if their intention was to put the economy on a sustainable path to prosperity. …

This is a dangerous path. By definition, such artificially induced frenzies cannot be sustained. When officials get nervous and pull back, the bubbles will burst and the economy will be back in recession. Even if employment gains are made during the apparent recovery, they will be short-lived, and the unemployment rate will turn up again. This government policy, therefore, is a cruel hoax on workers who were harmed by the earlier recession, who have struggled to get back on track, and who are now being set up for a reprise of their misery.

The architects of this shameful program are would-be social engineers who think they can design something as complex as a modern industrial economy. Such conceit should be obvious to all. Simply put, it is impossible for politicians, bureaucrats, and economic advisers to acquire the knowledge they would need to possess in order to accomplish what they say they want to accomplish. The knowledge most vital for smooth-running markets is not aggregate statistical data available to government agencies. Rather, it consists in the subjective preferences of consumers, the expectations of producers, and the radically decentralized and dispersed information about resources, technologies, and techniques. The market’s price system captures and conveys this information in a way that government operatives could never dream of. In fact, compared to the collective wisdom of the market process, politicians, bureaucrats, and economic advisers are dismal ignoramuses.

Others have used words like “corporatist” to describe the Obama administration’s attitude toward business — in favor of big corporations like Government Motors — I mean “General Motors” — and opposed to small businesses that employ most Americans. A rising stock market in the midst of a crappy economy would be evidence of that.

But this stock market “record” means less than it appears because of devaluation of the dollar, which shows up in share prices, on which the DJIA, S&P 500 and other stock indexes are based. Today’s $1 is equivalent to 1963’s 13 cents. Even in an era of historically low inflation, $1 in 1988 is equivalent to $1.99 today, which means the dollar’s value has dropped in half since I entered the workforce.

This chart demonstrates that the real Dow high was back in 2000, correctly measured for inflation. That was back in the days when the budget was somewhat balanced and the dollar was much stronger than today. As Fred the Intelligent Bear puts it, “It is amazing what massive government spending and quantitative easing can do to boost the stock market.”

If you’re making investment decisions based on what you think is a recovering, growing economy, you may come to regret those decisions.