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John Hussman points out (http://www.hussman.net/wmc/wmc060710.htm)
"And when you go to put your “cash on the sidelines” to work, what really happens is that your money market securities (T-bills, commercial paper, etc) now have to be sold to someone else. And at that moment, the cash on the sidelines that you had suddenly becomes somebody else's cash on the sidelines. And that same amount of cash on the sidelines will continue to exist until the borrowers pay it off."
Mish Shedlock (http://globaleconomicanalysis.blogsp...s_archive.html) similarly says:
"The simple reason there is no such thing as "sideline cash" is as follows:
For every buyer there is a seller so the net result will almost always be cash on the sidelines.
Think about it. If there is $1B in sideline cash and that buyer buys, the seller will be sitting on exactly $1B in sideline cash.
There are exceptions to this of course, otherwise sideline cash would be a constant.
Those exceptions are IPOs (it takes real cash to buy an IPO), and corporate profits (profits sit as sideline cash until they are invested for expansions or mergers)."
My dumb question is: Isn't what's relevant the question of demand vs. supply? In other words, when the media says there are "more buyers than sellers", what they are really saying is that there are more would-be buyers than would-be sellers at a given price (ie demand vs supply), because, of course, the number of actual buyers must always equal the number of actual sellers. In the same way, shouldn't the role of cash coming into the system vs. cash going out be viewed as representing demand or supply pressure (with consequences on price movement) rather than something meaningless?
Somewhat academic question but am trying to improve my understanding on what is probably a pretty trivial question for most people on this forum.
Thanks!
"And when you go to put your “cash on the sidelines” to work, what really happens is that your money market securities (T-bills, commercial paper, etc) now have to be sold to someone else. And at that moment, the cash on the sidelines that you had suddenly becomes somebody else's cash on the sidelines. And that same amount of cash on the sidelines will continue to exist until the borrowers pay it off."
Mish Shedlock (http://globaleconomicanalysis.blogsp...s_archive.html) similarly says:
"The simple reason there is no such thing as "sideline cash" is as follows:
For every buyer there is a seller so the net result will almost always be cash on the sidelines.
Think about it. If there is $1B in sideline cash and that buyer buys, the seller will be sitting on exactly $1B in sideline cash.
There are exceptions to this of course, otherwise sideline cash would be a constant.
Those exceptions are IPOs (it takes real cash to buy an IPO), and corporate profits (profits sit as sideline cash until they are invested for expansions or mergers)."
My dumb question is: Isn't what's relevant the question of demand vs. supply? In other words, when the media says there are "more buyers than sellers", what they are really saying is that there are more would-be buyers than would-be sellers at a given price (ie demand vs supply), because, of course, the number of actual buyers must always equal the number of actual sellers. In the same way, shouldn't the role of cash coming into the system vs. cash going out be viewed as representing demand or supply pressure (with consequences on price movement) rather than something meaningless?
Somewhat academic question but am trying to improve my understanding on what is probably a pretty trivial question for most people on this forum.
Thanks!
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