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Column: Spend or hoard? Fate of forced savings could define pandemic recovery – Mike Dolan

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(The author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his own)

FILE PHOTO: George Washington is seen with printed medical mask on the one Dollar banknotes in this illustration taken, March 31, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

By Mike Dolan

LONDON (Reuters) – Many households have built up a stash of savings during the coronavirus lockdowns of the past three months — and how they view them may dictate the speed of recovery from the pandemic.

Although the shock has caused spikes in unemployment, most households spent lockdown periods either working from home, furloughed or on direct government income support. And with few goods or services available to buy, their savings have soared.

Whether people see these unexpected cash hoards as a windfall or a buffer against future uncertainties is likely to determine the speed of the recovery, at least this year.

If the public treats the money like a tax rebate, spending could surge, says Paul Donovan, chief economist at UBS’s global wealth management arm. He points to U.S. tax rebates in 2001 and 2008, money from which was fully spent within about two quarters — mostly on durable goods such as furniture

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