Would the aggregate stock market rise with fixed money supply?
Before I start the question I am really getting to, let me post what I am not talking about
1) Yes, some stocks would go higher as they become better and better, while other stocks would go down because they have a bad business model
2) I know there would probably never be a fixed money supply. There definitely is not with paper money, but even with gold as money, as the aggregate prices fell over time due to innovation and efficiency, the increase in the relative value of gold would make it more profitable to mine until it hit an equilibrium at a higher supply
3) I know the stock market and economy don't have to be the same thing. Overall lower prices and increased velocity is good regardless of what the stock market did
4) Assume a fixed p/e and a fixed global outlook. Obviously day to day, month to month, fluctuations would happen regardless. P/e will change, drought and war would hurt prices, etc. I am talking about over the very long term (25+ years)
So my question is, would the AGGREGATE MARKET rise in value over time? Over time, prices of everything fall due to efficiency with a fixed money supply. Input prices fall, but so do output prices. So profits should stay the same. More goods will be produced, society would be better off....but would the overall level of earnings stay the same? (Assuming a fixed P/E)
Thanks in advance