Where Does The M4 Go?

6th August 09 - Where does the M4 go?

The M4 goes from London to Bristol and beyond, is one answer. Another answer is that is goes downhill when it is supposed to be rising. That is to say, the headline M4 that is the money supply measure. The broad measure of money supply in the UK fell 0.2% in June 09, the biggest decrease for almost five years.

The reason that a drop in money supply is such big news is because of our old friend quantitative easing. The B of E has spent its £125bn on buying in gilts and commercial bonds and still money in circulation goes down. The most obvious evidence is provided by potential buyers of property who still struggle to find funds. Howard Archer, chief UK economist at IHS Global Insight, said that there was little hard evidence of the policy’s (QE) success and that was potentially worrying for recovery prospects.

Both consumer credit and new mortgage lending were below forecast levels and a £414m increase in net lending was the weakest since the B of E started collecting this data in 1993. There is some hope that more cash will flow to end-users soon since mortgage approvals totalled 47,584 in June an increase over the previous month of 7.7% and the highest figure for 15 months. However, Bridget O’Leary, senior economist at the Royal Institution of Chartered Surveyors, said that activity was still weak despite the welcome improvements and net lending for house purchases remained 50% below the long-run average while house deals were still falling through due to a lack of finance.

Overall the consensus is that the QE programme has failed in its fundamental objective of increasing the supply of dosh but should you want to take the M4 to London you will find some stronger banking balance sheets. But you will be wasting your breath to ask for readies.

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