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The World Is Hoarding Cash. Are You?

Poll QuestionAlthough five years have passed since the collapse of Lehman Brothers, setting off the global financial crisis, families worldwide continue the frugal habits developed during the aftermath.

The Associated Press analyzed households in 10 of the world’s largest economies – Brazil, China, France, Germany, India, Italy, Japan, Russia, the United Kingdom and the United States – and found that families are still cautious with their cash.

You might say they’re hoarding it.

Households grew their cash holdings by $3.3 trillion in the past five years, according to figures from the Organization for Economic Cooperation and Development.

That’s significant, especially given that many in these countries have been dealing with unemployment and stagnant salaries.

So how was such a cash savings accomplished? By spending less and not accumulating debt.

They’re also not taking risk on investments. Leery of the stock market, they’re choosing low-interest-bearing savings accounts and bonds instead.

Can’t say we don’t blame folks for their wariness.

Experts aren’t sure how long it will last or whether families will ever spend like they did before the financial crisis.

Ian Bright, a senior economist at Amsterdam-based global bank ING, told the Associated Press: “It doesn’t take very much to destroy confidence, but it takes an awful lot to build it back. The attitude toward risk is permanently reset.”

Here are some more key findings:

  • Investors in the 10 countries surveyed took $1.1 trillion out of stock mutual funds in the last five years.
  • They put $1.3 trillion into bond mutual funds, which are considered less risky than stocks but have far less upside.
  • Debt per adult has fallen 1%. It had increased 34% in the five years before the crisis.
  • Consumer spending rose 1.6% annually, about half the growth rate before the economic collapse.
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