Can someone explain?

[Dave3498]

Not being up in high finance, I would be pleased if someone could explain to me where all the missing money is. With share prices tumbling as the are, I assume it is because people are selling their shares, in which case, what are they doing with the money they get for them? They can't be buying other shares in different companies otherwise the markets would be going up in other areas. They can't be banking it because the banks say they are starved of cash, so are they just buying gold and buying it in the garden, or are they taking the cash and putting it under the bed or what?

 

[vig]

Probably burying their gold on Chris Mc's course. That will explain the digging

 

[thomas1981]

Not to sure on the in's and out's of how the shares world works. But i'm sure theres alot of different factors which affect the price of shares. For example,if a bank are struggling the share price will fall,but,if a larger more secure bank are rumoured to be taking the struggling bank over the share price will shot up. Or if a chief exec makes an announcement the shares could go up or down depending on the announcement being positive or negative. But as i say i'm not to sure. This is just bits i've heard over the last few months.

 

[medwayjon]

A lot of people are actually stashing cash in panic.

The main cash drain however is into offshore accounts which are readily available without fuss and offer secure and private banking.

 

[thomas1981]

True medwayjon. Heard for example irish banks or should i say government will guarantee any amount of cash saved with the bank should that bank go onto liquidation.

 

[markwarne]

Its quite ironic that the first bank / building society to suffer as part of the credit crunch (Northern Rock) is now one of the most popular places for people to put their money. So much so that they are disuading new investors. Now multiply that by the number of banks who could get government backing, and it is conceivable that more money could come out of the ecomony as people look to save more and have it protected.

Banks will get more cash but still hang on to it so they don't get burned again and more money disappears out of the market, hence creating a larger slow down of spending, this being combined with the threat of job losses etc.

It all looks a bit grim, but at least we have golf to lift our moods.

 

[Herbie]

Its not about the amount of money people raise from share sales or what they do with that money, that is just a tiny drop in the ocean.
The real problem is the confidence of banks to lend money and get it moving round the world whilst at the same time providing interest rates that encourage spending yet enable business to borrow for trade at a rate they can repay.

There are many other factors that I havent got energy to list but the share value and issue is almost irrellevant.

 

[viscount17]

wasn't there something written that said that most of the money 'lost' in the wall street crash (in the '30's?) was notional?

 

[USER1999]

Can I have some of this 'notional' money, as I am a bit short.

 

[Dave3498]

wasn't there something written that said that most of the money 'lost' in the wall street crash (in the '30's?) was notional?

I think you've got it there viscount17. It's all made-up stuff. It's not a volcano or a tzunami or a hurricane or an earthquake, or any other disaster beyond man's control, it's all notional.

 

[viscount17]

I think the logic is this.

You have £10K. you buy 1000 shares for £1K. You now have £9K and 1000 shares. If the 1000 is a significant proportion of the total shares then just buying them will cause them to rise on the market but you still have £9K and 1000 shares. Even if they double in value the situation doesn't change, £9K, 1000 shares.
If you cash in then (ignoring charges etc) you would now have £11K.
If you let them ride and they fall and you sell at a loss you have, say £9.5K. Total loss £500 but they claim they lost £1500 - crazy.