Key insights
- The author posits that a stock market crash effectively removes currency from circulation, acting as a deflationary force. While a crash does destroy wealth and reduce asset values, it doesn't permanently remove currency. Money shifts from sellers to buyers, impacting velocity and sentiment more than overall supply. The deflationary impact is real but complex, influenced by factors beyond just stock market losses.
When a stock drops in value dramatically and people flash sell their stocks at lower and lower prices isn't currency permanently removed from circulation?
If I buy a stock for 100$ and a crash occurs and I am forced to sell at 50$ because there are no willing buyers, then hasn't 50$ effectively been removed from economic circulation? If a real crash occurs and trillions are wiped out from the global economy is that not an effective removal of trillions in currency? In essence the opposite of money printing?