Say you bought some MSFT at $100 and the market has caused it to decline so that the last sale of MSFT was $60. Those $40 have vanished like so much smoke.
Nope, you lost possession of your Dollars when you bought the stock. You did not have any money right after the purchase - the seller now has $100. You are now in possession of owner certificates for a company, stating you are in possession of 1/100,000,000 of MSFT, which in theory, could be sold for $100.
Later you are in possession of the same share of the company, just that the value has declined. If you sell it back, the original seller has $40 and a MSFT share, and you have $60. There are still $100 and one MSFT share in our economy, just differently distributed.
If you bought a house for $100,000, you would say: "I own a house", not "I own 100,000 in houses". The seller of the would now own your $100,000, while you would own the house.
The total money supply in an economy is only changed by the central bank (The Fed in the US), it is not influenced by asset prices.
Michael |
