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To one who has no expertise whatsoever in this area, your version at least makes sense. This glut theory just seems laughable to me.

On Wall Street isn't the simple answer to Where did the money go? that It was never there.? In the terms that I can understand.

Experience keeps a dear school, but fools will learn in no other. -- Dr Johnson

by melvin (melvingladys at or near yahoo.com) on Thu Oct 9th, 2008 at 12:11:09 PM EST
"On Wall Street isn't the simple answer to Where did the money go? that It was never there? In the terms that I can understand."

I wonder if those here who have the most insight into this phenomenon of "profit-taking" on sales of equities could comment: is this "money" fictitious in fact, or, rather, is it a matter more of whether one has bought real stuff in the nick of time with one's "profits", before they are unmasked as nothing but afflatus?

They tell us here in the US that about $3T has evaporated in the past week or two in the stock market. I doubt it can be that simple, but what do I know. Anyone care to fill me in here?

by MikeM on Thu Oct 9th, 2008 at 11:29:20 PM EST
[ Parent ]
I wrote something about that here. The bulk of the shares are priced at the margin, but that is a fiction. Just because individuals can sell 100 shares of microsoft for $2,230 doesn't mean collectivelly they can sell 1 billion shares for $22.3bn. When the average daily volume is 1/100 of the shares outstanding the market capitalisation of $200bn is a dangerous fiction.

Those $3tn "lost" could not have been realised.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Fri Oct 10th, 2008 at 03:40:48 AM EST
[ Parent ]
That helps a lot, thanks. And Jerome's comment in reply to your piece is vivid: Liquidity is the opposite of porn: you know it when you don't see it. So I guess the money shot here would be the fact that... there isn't any.
So much for mathematical macroeconomics, as you say.
by MikeM on Fri Oct 10th, 2008 at 01:18:24 PM EST
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