AP IMPACT: Families hoard cash 5 yrs after crisis
Associated Press BERNARD CONDON 3 hours ago
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NEW YORK (AP) — Five years after U.S. investment bank Lehman Brothers collapsed, triggering a global financial crisis and shattering confidence worldwide, families in major countries around the world are still hunkered down, too spooked and distrustful to take chances with their money.
An Associated Press analysis of households in the 10 biggest economies shows that families continue to spend cautiously and have pulled hundreds of billions of dollars out of stocks, cut borrowing for the first time in decades and poured money into savings and bonds that offer puny interest payments, often too low to keep up with inflation.
“It doesn’t take very much to destroy confidence, but it takes an awful lot to build it back,” says Ian Bright, senior economist at ING, a global bank based in Amsterdam. “The attitude toward risk is permanently reset.”
A flight to safety on such a global scale is unprecedented since the end of World War II.
The implications are huge: Shunning debt and spending less can be good for one family’s finances. When hundreds of millions do it together, it can starve the global economy.
Weak growth around the world means wages in the United States, which aren’t keeping up with inflation, will continue to rise slowly. Record unemployment in parts of Europe, higher than 35 percent among youth in several countries, won’t fall quickly. Another wave of Chinese, Brazilians and Indians rising into the middle class, as hundreds of millions did during the boom years last decade, is unlikely.
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“Money is a matter of functions four, a medium, a measure, a standard, a store.” He repeated that four times like poetry. “Six Characters in Money: Portable – Durable – Divisible – Uniformity – Limited Supply – Acceptability.” — CHURCH 10●19●62 (Vol 1) 978-0-557-08387-9 page 110
Sorry, but “cash” isn’t money these days. While it is a “medium of exchange” and “measure”, it fails as a “standard” or “store”.
And maybe if it fails “standard”, it may be failing “measure”.
OK, it does serve as a “medium of exchange”.
But that’s it.
Note that in disasters and civil unrest, there is no exchange.
And, the TEOTWAWKI (The End Of The World As We Know It) preppers point out you can eat money. But you can make an expensive fire and poor quality toilet paper out of it.
Let’s tackle “standard” next. What is a “dollar”? It’s got no measure. It’s purchasing power decreases year over year due to inflation. An ounce, a gallon, a meter — they don’t change.
Back to “measure”, a 100 is still a 100. But it’s like baseball and football records. How do we measure if every year they change the definition of distance?
And cash is certainly not a “store”. The “rats” are eating the “seed corn” of value.
I suggest the preppers’ mantra — beans, bullets, bandaids, and then bullion!
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