Why did the central banks need to inject money into 'the money supply' as a result of the global drop in share prices? Surely the amount of currency in circulation - ie the sum of all the amounts deposited in banks and cash in people's pockets - is not affected by share prices. Individuals and companies owning shares will not obtain as much by liquidating those assets, but buying/selling shares (or anything else) is a zero sum transaction - the total of commission charges, fees, tax etc and the amount gained by the seller is equal to the amount paid by the buyer.
- posted
15 years ago