James Burns: Club opts to buy shares on any stock market dip in September as economic forces slog it out The Investment Club spent August navel-gazing. We were trying to decide how to invest the lump of cash acquired after accidentally selling out all our holding of 4.5 per cent consolidated stock in June. The particularly boring month is reflected in the Investment Club's unit price, which has gone nowhere at £3.29. So what came of the club's navel-gazing? In spite of all the machinations of politicians during the credit crunch the economic situation is unchanged - almost. That is, the economic forces of boom and bust are still slogging it out. Bust, the force destroying money and slowing the economy, is beneficial for the club. Boom is the politicians" and central bank policies to thwart a depression. These forces manifest themselves through the UK's gross domestic product (GDP) and unemployment rate. GDP is the summation, in sterling, of all the output UK citizens have produced every three months. If the forces favouring the club were gaining ground then we would expect to see GDP falling and unemployment rising. If we look at the figures since the start of the credit crunch on 9 August 2007, GDP has gone from positive 1.2 per cent growth in 2007 quarter three (Q3), to three-quarters of negative growth in 2011 Q4, 2012 Q1 and Q2. Unemployment then was 5.3 per cent compared with 8 per cent in August 2012. On the face of it the trends seem to be helping the club. To counter this trend, the Bank of England indulged in five lots of quantitative easing (QE) - essentially printing money and pumping it into the economy via the purchase of UK government debt from financial institutions. To date, £375 billion of that money, about one-third of all government borrowing issuance, has found its way into the economy. If all this money is not keeping GDP growth up and unemployment down where has it gone? Most likely to bolster banks" balance sheets because it has been predominantly banks selling gilts to the Bank of England who have received the money. But the broad money supply M4 - which shows the amount of money in circulation by you, me and the banks - is falling instead of rising. Prior to the credit crunch money supply growth had climbed to about 13 or 14 per cent. In February 2009, just as Mervyn King's first round of QE started, money supply growth climbed to 17.8 per cent. Three years and £375bn later, money supply growth is languishing around -5 per cent. Therefore, the monitory forces trying to stimulate growth appear to have succumbed to the natural forces dissipating past excesses and destroying growth. However, what might have changed is there seems to be more stability in the economy and financial markets. While growth and money supply are negative, unemployment perversely has been very slowly falling. On the stock market, the Bank of England's money has supported a rally in shares from a low of 3,512.1 on 3 March 2009, to 5,711.48 at the close of August 2012. For the stock market to fall prec­ipitously there would need to be a debt default of a large company going bankrupt or a sovereign debt haircut. Neither seems likely in the near future, because the UK economy is awash with cash and Mario Draghi, president of the European Central bank, is keeping Europe afloat. The club's conclusion is that while the economic forces seem to be in its favour, the financial markets are not. Therefore, we decided to buy shares on any stock market dip in September.