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I don't agree. The market is not the origin of money and it is not a closed system. I can invest my $100 anywhere, if I put it into the stock market that money
by errantmind 5y ago
I don't agree.
The market is not the origin of money and it is not a closed system. I can invest my $100 anywhere, if I put it into the stock market that money 'flows' in, in a sense of psychological valuation. Yes, someone else receives the money in exchange for a share but that doesn't mean they are putting it back into the market.
The key idea is how people think about buying or selling. If I buy a stock for $100 I obviously think it is worth that or more. If the value of the stock crashes, at that moment in time I am out the difference should I sell at the new value.
Also, the market shouldn't be anthropomorphized nor averaged. Ultimately it is a bunch of individuals buying and selling and their exposure has practical consequences, especially when it is concentrated along different dimensions, like retail vs. non-retail. A 'rich' individual buying $1 billion worth of a stock is not the same as 1,000,000 'poor' individuals buying $1000 of a stock.
- tedsanders 5y agoWhen the market crashes 20% just as much money flows in as flows out. When the market climbs 20% just as much money flows out as flows in. If you disagree, we must be using the same words to mean different concepts.
- Ekaros 5y agoIf we think about amount of money circulating in just stock market. That is not in other economy. Would it not be possible for money to flow into that pool? And increase in this would lead to increased prices. That is same money is being traded around and some new money flows into that amount? Ofc, this is somewhat linked to valuations, but market could crash and it wouldn't decrease. Unless some people take money out of this circulation.
- errantmind 5y agoI think nkmnz has the correct answer above. That is the meaning of inflows. Given that, my initial comment was invalid.