Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.