正文
1) I agree the Fed has not been adding liquidity, and have said as much.
2) While it is not patently false, I believe this viewpoint misleading:
Mysecond objection is that the stock market is not some balloon intowhich money “flows into” or “out of.” Every purchase is matched by asale. Every sale is matched by a purchase. Stock prices move becausethe buyer is more eager than the seller or vice versa. A purchasedoesn't put money “into” the market, nor does a sale take money “out.”
Iwould call this a stop-action or endogenous view of money and themarkets. Yes, if I sell stock in the amount of $1,000, someone is onthe other aside of the transaction paying $1,000. However, I now havecash (money), but the buyer has not.
A significant decline inshare market appreciation and capitalization, caused by selling on ascale of what transpired earlier this decade, moves the price of shareassets lower and as a consequence translates to money accumulating inplaces other than the stock market.
To say that investors cashed-out would be corect.
Iguarantee that a test of the total of demand deposits at commercialbanks against the valuation of the major equity indices will revealthat money has occasionally "departed the stock market."
This isamong the reasons I believe the Fed is not always completely against amajor share market decline. Until, that is, political pressure isbrought to bear. Money moving from investments to consumer purchasescan assist in propping an otherwise slowing economy, which is exactlywhat happened several years ago.
2) While it is not patently false, I believe this viewpoint misleading:
Mysecond objection is that the stock market is not some balloon intowhich money “flows into” or “out of.” Every purchase is matched by asale. Every sale is matched by a purchase. Stock prices move becausethe buyer is more eager than the seller or vice versa. A purchasedoesn't put money “into” the market, nor does a sale take money “out.”
Iwould call this a stop-action or endogenous view of money and themarkets. Yes, if I sell stock in the amount of $1,000, someone is onthe other aside of the transaction paying $1,000. However, I now havecash (money), but the buyer has not.
A significant decline inshare market appreciation and capitalization, caused by selling on ascale of what transpired earlier this decade, moves the price of shareassets lower and as a consequence translates to money accumulating inplaces other than the stock market.
To say that investors cashed-out would be corect.
Iguarantee that a test of the total of demand deposits at commercialbanks against the valuation of the major equity indices will revealthat money has occasionally "departed the stock market."
This isamong the reasons I believe the Fed is not always completely against amajor share market decline. Until, that is, political pressure isbrought to bear. Money moving from investments to consumer purchasescan assist in propping an otherwise slowing economy, which is exactlywhat happened several years ago.
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