[groanup]

That's all nice and it sounds the same as when I first heard it 30 years ago. We were talking about definitions of money.

Money stock vs. M1 vs M2. As toddster pointed out when you cash in a CD the money therein reverts from M1 to Money stock. So when you sell a stock the funds go into the measures of money supply also as long as you put the proceeds into a money market fund or checking account of some kind.

[JasonC]

When you sell a stock and get a bigger bank balance the money that is newly yours is indeed part of the money supply. But it was the instant before the transaction too, it just wasn't yours. There is a buyer for every seller, in all trade in existing securities. Even if a company is issuing new stock, money is just moving from your account to the companies account, as stock moves in the opposite direction. And similarly, the other way, if a company buys stock back from you.

The illusion is you think a change in *your* holdings of money, are a change in the amount of money there is. Not so.

Money is the debt of a bank. The money supply increases when banks run up the size of their balance sheets, both the liabilities side (their debts, which are money) and their asset side (their loans and other claims on the rest of us).