In some instance it is indeed money created out of thin air buying financial instruments created out thin air, both borrowed into existence while the lenders think they also have simultaneous title to the money/instrument. So long as the borrower continue to service the terms of the loan, it's all okay I suppose.
What happens when the borrower stops servicing the loan and tries to pay it off? Disaster, that's what!
This relates back to the velocity of money I was going on about the other day. All the 'fake' money/stocks created by borrowing cannot be paid off with existing real cash/shares because the amount of 'fakes' far exceeds the amount of real cash/shares. Obviously this is unsustainable because at some point all debt must be paid (at least that's how it used to be), so then government has to create more cash, print more dollars, to offset the falling velocity of money created by the repayment of debt. In the case of borrowed stocks, the government cannot create more (only the issuer can do so), thus all debt can never be paid off as not enough real shares exist. Therefore the only alternative is to keep the game going to fend off chaos in the markets for as long as possible.
All just IMO, of course.
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