No. of Recommendations: 5
There is no new money coming into the market just because one person sells a bond to someone else.
Let's say the person holds a JP MorganChase money market account. And let's say that person transfers $1M in T-bills to cash in a JP Morgan account, because they want to potentially buy something (maybe Berkshire shares) if the market drops suddenly. Now, JPMorganChase is a bank and banks loan money, so they take that $1M, and they use it as [tier 1] capital to lend out $6.6M to other people to invest into things like businesses, real estate, etc. So, let's look at the numbers - the money market fund went down by $1M, the cash account went up by $1M, and a bunch of other people now have $6.6M to invest (along with a $6.6M debt to JPMorganChase).
Another example. Joe bought $1M of Berkshire 15 years ago, so he withdrew $1M from his money market account and paid someone $1M for those shares. Today, those shares are worth about $7M. Joe uses margin against those shares to buy something else (and has an associated margin debit balance at his broker).
Yet another example. The economy swoons and the fed decides to "inject liquidity", so they literally create money out of thin air and buy $9 trillion of treasury bonds, and all that new money begins to flow through the economy.
There's all sorts of new money coming into the market. It's not a zero-sum game. Only options are zero-sum, the sum total of the value to the buyer of an option plus the value to the seller of an option is indeed always zero.
