Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Tommaso who wrote (88796)	3/18/2001 10:44:43 PM
From: Hawkmoon	Read Replies (1) of 95453

So does the money disappear? Well it depends on how we classify such a scenario. If assets are overvalued, then someone who buys high and sells low has seen value disappear, while the person who bought low and sold high saw an inflation in their value. When assets decline in value to such an extent that their value in monetary terms have decreased by 90%, then we might say that money supply has been reduced and value able to be converted into money has "disappeared". Now obviously the person who lost money by seeing their inflated assets deflate thinks his money supply has disappeared. But what about those who have gone short, borrowing certs and selling high? Have they increased the money supply by doing so? What about mmkrs who have been net short since last year? Since they are using margin to do so, then that would qualify as a debt, and thus part of M3. What the Fed has to do is make sure that enough confidence remains in the financial system to where parties are willing to place economic "bets" on an outcome, as well as preventing counterparties from arriving at the point where they are no longer willing, or able, to meet their financial obligations.

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