Why are Americans hoarding $3.5 trillion in cash? An interesting question. Let's dig deeper and see if we can find out why.

Here are some interesting facts about the $3.5 trillion:

• After reducing money market accounts by 11% this year, investors hold cash equal to 73% of S&P 500 Index. At its peak in 2007, the buying power was at 62%.
• Estimates are for GDP to increase sixfold to 2.9% in the third quarter.
• In 2007 and 2008, investors placed $1.45 trillion in money market accounts. As of the week ending January 14, that number reached a record $3.92 trillion.
• Investors have added $15.8 billion to domestic equity funds since March.

If you still hold stocks, should you use the recent plunge to buy? Should you hold? or Should you just get out of stocks altogether? The answer depends on how soon you need your money and your outlook for stock prices. The first question is easier to answer than the second one -- which is virtually impossible to get right. As I posted last October, if you need your money in the next six years, it probably makes sense to sell.

How bad was January 2009? After falling 38.5% in 2009, the S&P 500 lost another 8.6% of its value last month. And the January barometer effect -- the idea that as goes January, so goes the year -- has a pretty good track record. In 60 of the last 80 years, the S&P 500's performance in January has reflected the index's annual result. For example, in January 2008, the S&P 500 fell 6%. And this January was the worst ever for the market. So maybe 2009 will be even worse than 2008.

Bankrate.com reports that money market funds' exposure to subprime mortgages is creating the riskiest climate for these supposedly safe investments since the 1994 derivative crisis. Peter Crane, a money market fund expert, ranked the 1994 crisis as a 10 on a scale of one to 10, and ranks today's situation an 8.

Since August, I've posted about this topic myself here, here and here. Bankrate.com has some useful tips:

• Not a bank account. Recognize that money market funds are not FDIC insured so you can lose money if they fail.
• Know what type of money market fund you have. A Treasury or government agency fund would not have any commercial paper that could be linked to Structured Investment Vehicles (SIVs), which may be backed by subprime mortgage-backed securities. But a prime, or a general purpose type fund, could have commercial paper, although not all do. Typically, the makeup of 200 such funds that can buy commercial paper, is 40% or 50% paper and the rest in repossession, Treasury, agencies, bank paper and other money market investments. These are the riskier ones.
• Read the prospectus. As I pointed out in this post, if you look at the prospectus, you can see how exposed your fund is to SIVs.

I would add an obvious point -- if you have money in a fund that's exposed to subprime mortgages, consider finding one that has no commercial paper and shift your money to that.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

If you own one of the following money market funds, you might want to consider whether your money will be there when you want to withdraw it:

• The $16.6 billion Evergreen Institutional Money Market Fund
• The $4.5 billion Evergreen Prime Cash Management Money Market Fund
• Legg Mason Inc.'s (NYSE: LM) $52.5 billion Master Portfolio Trust Liquid Reserves Portfolio.
• The $62 billion Columbia Funds Series Trust Cash Reserves

According to the New York Times [registration required] these four funds own commercial paper -- short term corporate IOUs -- backed by residential mortgages which Standard & Poor's may downgrade. S&P specifically raised questions about four commercial paper issuers for possible downgrades:

Many people like to dream up ways to get rich quick. Many people dream about inventing great things that could make them wealthy in a hurry. I often think about money also, but just in case you haven't figured it out yet, please be warned that I have some unconventional ways of thinking.

The money question I wish to place before you today is a concept which I have never gotten a decent answer to. When I pose this question I get blank looks, shrugged shoulders, an occasional sneer, and most often a good hearty "who cares!" Be that as it may, I place my query here for you today in the hope that I might get at least one good answer. Here's the question:

What would be the immediate and long-term economic effects if the United States, Canada, and Mexico were to equalize their currencies and maintain a neutral currency exchange rate?

There, now that's not such a stupid question is it? I'm sure that the question has already been fully addressed in other forums and I would very much welcome any links that readers could provide to appropriate discussions of this concept. I welcome any and all answers. Thanks in advance for your time.