The Footsie's big money question

Article Abstract:

Deposits held by British non-bank financial institutions have fallen in the six months to Dec 1999, and this could cause concern since it may mean lack of cash to buy stocks. A similar drop in 1991-1993 occurred at a time when stock prices were rising, though stocks appear more expensive in 1999. There is also a high stock price level in relation to non-bank financial deposits, and this occurred before, in 1987, prior to a crash. Cash balances may fall as a result of increased investor confidence, and there is no certainty that stock prices will fall.

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Footsie bets on money supply myth

Article Abstract:

The UK money supply is growing by nearly 10% per annum, measured in terms of M4. The UK equity market sees this as caused by borrowing by companies for takeovers, and sees sales of shares by institutions leading to more investment in shares, so an increase in the money supply pushes up share prices. Institutional investors could invest the cash they gain from selling shares in foreign assets, which would lead to a drop in the value of pound sterling. This in turn could lead to a rise in inflation.

Institutional investments

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When money matters

Article Abstract:

The impact of the British money supply growth on equities is examined in detail, using the M4 measure of money.

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