When an ADI invests in a financial instrument issued by another ADI the stock of private money and the stock of central bank money are not affected.

When an Authorized Deposit-taking Institution (ADI) invests in a financial instrument issued by another ADI, it is essentially transferring funds from one institution to another. Here's a step-by-step explanation of why this does not affect the stock of private money or central bank money:

1. The ADI that is investing (ADI 1) will reduce its cash reserves or other assets to purchase the financial instrument. This will be reflected as a decrease in one asset category and an increase in another (investment in the financial instrument) on its balance sheet.

2. The ADI issuing the financial instrument (ADI 2) will receive the funds from ADI 1 and increase its liabilities (the financial instrument) and its assets (cash reserves or other assets).

3. The total amount of private money in the system remains the same because the funds are simply transferred from one ADI to another. There is no creation or destruction of money involved in this transaction.

4. Similarly, the stock of central bank money is not affected because this transaction does not involve the central bank. Central bank money is only affected when banks borrow from or lend to the central bank, or when the central bank buys or sells assets in the open market.

5. Therefore, an investment by an ADI in a financial instrument issued by another ADI is essentially a reshuffling of assets and liabilities within the banking system, without affecting the total stock of private or central bank money.