Nervousness Drives Pension Funds to Cash

According to an Associated Press release, many of the country’s pension funds have been bailing out of the stock market and putting large sums of cash into New York banks. Due to the influx of funds, the banks are being forced to place extra fees on the deposits to cover the FDIC premiums.

Banks are normally willing to pay interest on deposits, but with short term interest rates currently near zero, it is financially hurting the banks to hold so much cash. Some analysts fear these fees might also be passed down to the average bank customer until the economy stabilizes.

The nervousness the pension fund investors are feeling, turning their entire investment portfolios to cash, stems from our government recently saying it would not be able to meet all of its financial obligations if the country’s debt ceiling was not raised. Normally, pension fund managers invest in short-term Treasury Bills when volatility in the stock market arises, but the historic move to move the funds to cash might be setting a precedent within the U.S. banking system.

Large movements into cash by pension and other market funds underscores the nervousness in the overall market. The fact gold prices have been rising is another indicator investors are nervous about the slow growth and unsureness of the U.S. economy. Add the fact the Dow Jones Industrial Average dipped 513 points this past Thursday, erasing the gains it made for the year, and you have several reasons why consumers have lost faith in the U.S. economy.

There is good news, however, on the horizon. The government did raise the debt ceiling, assuring a smooth financial ride through the end of 2012. That crisis is over, and that is good news, and there may be time to fix our other financial problems.

The stock market will remain volatile for a while because it responds to any negative news across the globe. The stock market is not the driving indicator for the financial health of the country, but it is one of many indicators for the nervousness and panic of investors. For instance, the stock market crash before the Great Depression was one of many indicators economic hard times were about to occur, but we are living proof the crash was not the driving indicator because the economy eventually survived. It always does, and it will survive the current economic concerns.

The economy may continue to slowly recover, and jobs may be harder to find. A fast recovery of the economy would be helpful in producing more jobs, and increased jobs could be a sign the economy is growing.  

Since the stock market reacts to every bit of news across the world, I believe bankruptcies are a more stable indicator than how the stock market moves. Until bankruptcies begin to increase, there is not as much to be nervous about as many might think.

If you need relief from the stress of debt and you live in or around the metropolitan area of Los Angeles, California, contact us at .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

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