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You can't just put it into the market. There are two sides to every transaction. You give money, they give stock, they get money, you get stock. When more mone
by ItsMonkk 6y ago
You can't just put it into the market. There are two sides to every transaction. You give money, they give stock, they get money, you get stock.
When more money enters the economy than stuff is created, the price that the person willing to sell/price you are willing to buy that stock for goes up.
- jkhdigital 6y agoThank you for saying this, because it is incredibly easy to overlook. However, we must also remember that dollars are effectively debt—banks create them by loaning money. So while it is true that dollars cannot be “parked” in assets since there are two sides to every transaction, if the seller goes on to pay down debt with the proceeds then the money in circulation will decrease.
- epr 6y ago> However, we must also remember that dollars are effectively debt They are debt in the most literal sense possible. They are listed as liabilities in the fed's balance sheet. The "note" in "Federal Reserve Note" written on every dollar bill is referring to the legal definition. It's a promise to pay.
- swixi 6y agoThat's a good point about transactions. But are stock purchases included in the velocity calculation? From what I can find [1,2], money velocity is a ratio of nominal GDP to (either M1 or M2) money supply, and neither of these includes stocks or bonds. [1] https://fred.stlouisfed.org/categories/32242 https://fred.stlouisfed.org/categories/32242 [2] https://www.newyorkfed.org/aboutthefed/fedpoint/fed49.html https://www.newyorkfed.org/aboutthefed/fedpoint/fed49.html