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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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