Thursday, February 05, 2009

Quick Math

You have $20.
I have $10.

That's $30.

You buy item X for $20.
I still have $10.

There's $30.

Item X drops in value to $10.
I want to buy item X.
I buy it for $10 from you.
You now have $10.

That's $20.

During the whole time after you bought item X, there was $10 in the "sidelines". Once I used my "sideline cash" to buy item X, there was STILL only $10 in the sidelines, but the total value of what was out there was now $20.

Think about this the next time someone talks about "sideline cash" saving the markets. They're fucking morons... or trying to sound optimistic to drive prices higher.

For every $1 spent in the market, someone takes out $1. Sideline cash doesn't enter the market, it passes through it to the other side, resulting in nothing.

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