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I think that just furthers the point- there isn't enough 'money' in M2 to 'pay' for all the stocks in the stock market. Yet there that value sits and real estat

by mrkstu 4y ago

I think that just furthers the point- there isn't enough 'money' in M2 to 'pay' for all the stocks in the stock market. Yet there that value sits and real estate is another 20+ trillion in land value. In other words the actual 'money' is a transactional grease for the wheels of commerce- notational/bookkeeping mechanism. The sale of Apple (the largest value stock in America) as a whole probably couldn't be accomplished in cash only, but even if it was, it'd be mostly notational numbers in an account somewhere and wouldn't 'flood the market' with dollars and crash the value of the currency.

whatshisface 4y ago
A change in preferences from holding dollar reserves to holding stocks could change the value of the USD, that's what I am saying.
- mrkstu 4y ago
  Change in preferring the Yen or the Euro, maybe, but I've never read/seen anything that would reinforce the idea that the dollar would be weakened by preference for holding other assets whose values are ultimately figured by their worth _in dollars_.
- deleted 4y ago
  [deleted]
- notahacker 4y ago
  Except that you've got a Federal Reserve actively ensuring that there aren't too many (or too few) dollars in circulation for the level of interest rate they want to maintain. They do it by buying and selling bonds rather than stocks, but the principle is the same. So we don't have to worry about shifts in portfolio preferences leading to an unexpected oversupply or undersupply of dollars But more people wanting to hold AAPL instead of hold cash absolutely will reduce the amount of AAPL stock your $1k is able to buy, of course
  - whatshisface 4y ago
    Maintaining an interest rate isn't the same as maintaining a fixed rate of CPI growth, especially not in the short run.
    - notahacker 4y ago
      Sure, but we're not talking about fixing the rate of CPI growth (stock prices aren't a constituent part of that and don't have a fixed relationship with it). We're talking about the effect of wealth holders wanting more of their investments in stocks or more of them in cash on the USD. An increase in demand for the liquidity of currency holdings, or an increase in demand for stocks due to perceived improved returns could affect the dollar through knockon effects on availability of credit, but the interest rate for that credit is the price of the bit the Fed fixes.

by mrkstu 4y ago

whatshisface 4y ago

A change in preferences from holding dollar reserves to holding stocks could change the value of the USD, that's what I am saying.

mrkstu 4y ago
Change in preferring the Yen or the Euro, maybe, but I've never read/seen anything that would reinforce the idea that the dollar would be weakened by preference for holding other assets whose values are ultimately figured by their worth _in dollars_.
deleted 4y ago
[deleted]
notahacker 4y ago
Except that you've got a Federal Reserve actively ensuring that there aren't too many (or too few) dollars in circulation for the level of interest rate they want to maintain. They do it by buying and selling bonds rather than stocks, but the principle is the same. So we don't have to worry about shifts in portfolio preferences leading to an unexpected oversupply or undersupply of dollars But more people wanting to hold AAPL instead of hold cash absolutely will reduce the amount of AAPL stock your $1k is able to buy, of course
- whatshisface 4y ago
  Maintaining an interest rate isn't the same as maintaining a fixed rate of CPI growth, especially not in the short run.
  - notahacker 4y ago
    Sure, but we're not talking about fixing the rate of CPI growth (stock prices aren't a constituent part of that and don't have a fixed relationship with it). We're talking about the effect of wealth holders wanting more of their investments in stocks or more of them in cash on the USD. An increase in demand for the liquidity of currency holdings, or an increase in demand for stocks due to perceived improved returns could affect the dollar through knockon effects on availability of credit, but the interest rate for that credit is the price of the bit the Fed fixes.