AP impact: families hoard cash 5 years after crisis

[xchrom]

http://hosted.ap.org/dynamic/stories/U/US_GREAT_RESET_INVESTING?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2013-10-06-00-54-30

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.

[mnhtnbb]

1. This does not surprise me.

Hubby and I have behaved the same way.

He's now 70 and I'm 62. While we have recovered from the debacle of the 2008 crash,
we have reached the point where savings and IRA investments must be maintained.
We can't risk the kind of financial beating we took five years ago again.

The population--particularly in the US--is aging. We're baby boomers and
we can't risk our retirement funds.

[SoCalDem]

4. My husband is 70 & I am 64.. we do the same thing

We save & save and pay cash for cars..and everything. What we have is ALL we will ever have, so we do not risk it.. We lost almost $30K in the crash & our house is still not back to the value we had hoped for.

We are moving next year to Oregon, but will pay cash for a so-so house on some forested land.. we'll keep the CA house until we can sell for a bit more than it's worth now.. prices are starting back up but we are in no hurry to lose money on this house.. we will rent it if we have to & have our son here manage it for us..

[mnhtnbb]

9. We got into the house situation dilemma, too, after our fire.

We rented for a year. Then we bought/remodeled a small house and moved in Oct 2008.
WHAM! Crash of housing market. We still owned the lot where the house
burned--and a detached garage with studio apartment above it that didn't burn--
and realized we were probably never going to be able to sell the lot (which was
carrying a tax value of more than $250,000. after it was revalued in 2009).
Great. So we decided--in spite of the fact I didn't want to rebuild--to go
ahead and build on the lot (for cash) and then sell the small house. When we put
it on the market in April 2011 after we had moved into the newly constructed
house, the best offer we had was $125,000. less than we had in it.
Great! All that work to lose another $125 grand!!! So the small house
has been rented since 2011. Hubby and I have decided, though
to put it back on the market next March (2014) and get what we can
out of it. I just don't want to be a landlord anymore (beyond the studio apartment) and am willing
to cut our losses before the market stalls or drops again. The market has recovered a bit here, and we
may be able to cut our losses in half both by getting a better
price and the positive effect of having rental income that covered
PITI on it for three years. Eh. We'll see.

Good luck with your move!

[Yo_Mama]

5. And with many of the young in poor-paying jobs

they have to be cautious as well.

There are reasons for all this that mostly are based in individuals trying to manage their own lives as best they can. It's not just attitude - it's reason.

With food costs, utility and fuel costs and taxes (esp. property taxes for moderate-income retirees) taking larger chunks of the household budget, caution makes sense.

[mnhtnbb]

11. Oh, boy, tell me about property taxes.

Upthread I mention the fact we have two properties that we hold--because of
the real estate crash--and we have to pay property taxes on both of them.

We're currently in an appeal situation with the county tax assessor here
on the valuation of the new construction we built to replace the house
that burned down. In fact, we have a meeting with them tomorrow!

One of the reasons we decided to rebuild on this lot was the studio apartment
that was generating sufficient income to cover the taxes on this property.
Not after their reassessment! Hubby is now semi-retired (I am retired)
and our income has dropped dramatically. We have no house payment
on this house, and I'd anticipated rental income from the studio apartment
over the garage would pay the property taxes. Looks like we're going to
be needing to budget something in the neighborhood of an additional
$2,000/year to make up the difference in what I expected our taxes
to be on the new construction vs. the valuation the assessor
wants to assign.

[Yo_Mama]

13. And that is really going to hurt the family budget.

Good luck, but you are most definitely not the only people in this situation, and with state and local budgets so tight, we all have to expect that property taxes will keep increasing in real dollars.

It's also things like water, sewer and so forth. And casualty insurance costs, which includes property insurance, have been bent upward because of very low interest rates.

One of the things I notice when I look at older folk's budgets is the ever-increasing cost of holding property, which for many moderate and low income older households is putting them in a very tight spot financially. These homeowners had planned on paying off their mortgage and not having rent to compensate for decreased incomes, but in some areas the monthly total of the increased taxes, utilities and insurance costs over the last ten years are more than their mortgage used to be!! The best-laid plans....

HOAs for many condo/coop owners are going much higher than they expected also.

[Fumesucker]

2. “There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee —

- that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again.”

[xchrom]

3. !

[marmar]

6. K&R

[fredamae]

7. This is Nothing compared

to the Trillions stashed by the 1%, that may-in part contribute to this phenom.

[Nuclear Unicorn]

15. Actually they're having a grand time buying treasury bonds at cost then selling them

back to the fed at profit so the US holds the US's debt. They're making a killing washing money from the right hand to the left and back again. It's the same currency inflation scheme ran by the Weimar only this is costing us a helluva lot more than it cost the Germans.

[fredamae]

16. Ohhhhh....that's right...forgot about that n/t

[Barack_America]

8. In other words..."good news!"

This article describes me pretty well. I have zero faith that another collapse won't occur. Why should I? What precisely has changed to prevent another one? We keep spending to a minimum and our savings in our FDIC-backed account. Our investment is our home, its value is volatile enough for us.

[edhopper]

10. Stocks have ceased

being the open market, where investing with foresight and following a prudent strategy will gain you a good return.
It is now a fixed casino where a few big players can manipulate it for their own benefit and your loss.
Cash isn't a bad choice in this environment, to bad there is a war on savings at the same time.

[North Carolina Knigh]

12. Me to

We bought our dream house and two years later it is worth $350,000 less than we paid for it. As long as we keep living in it we should be okay because we put 70% down and the market will come back eventually but it limits our movement. Now we don't invest much, mainly just keep multiple smaller bank accounts never putting in too much in any bank.

[gopiscrap]

14. Welcome to DU

[FarCenter]

17. American Banks' Loan-To-Deposit Ratio Is At A 30-Year Low

The chart to the right shows US total loan balances relative to bank deposits over the past couple of years. The total loan growth rate continues to deteriorate while deposits grow.

In fact the ratio of these two measures, the so-called loan-to-deposit ratio is now at the lowest level in some 30 years.

Read more: http://soberlook.com/2013/10/us-loan-to-deposit-ratio-lowest-in-30.html

Of course, this decreases the risk in the US banking system, which is what the changes in banking law and regulation were supposed to achieve.