The “wealth effect” is a phenomenon that has been driving economic growth in the United States for years. This trend, where rising asset values lead to increased spending without requiring loans, has been particularly strong among older Americans.
As home and stock prices continue to rise, many Americans are seeing their portfolios and savings accounts grow, giving them the confidence to spend more on entertainment and travel. This increased spending is one of the key drivers of economic growth in the US.
According to Raymond Hill, an emeritus professor at Emory Business School, many Americans are traveling to Europe without worrying about high mortgage rates because they are not borrowing money to buy houses. Instead, they are using their newfound wealth to fund their travel plans.
Dr. David Bieri, an associate professor of public policy at Virginia Tech University, explains that higher home and stock prices have led to significant increases in people’s financial portfolios, providing them with more disposable income. This extra cash is being used to fuel consumer spending and drive economic growth.
As the economy continues to strengthen, inflation becomes more stubborn, impacting the Federal Reserve’s plans. Lonnie Golden, a professor of economics at Penn State Abington, notes that as long as people continue to spend on various sectors such as dining out, travel, and healthcare, inflation rates are unlikely to decrease. This cycle of increased spending driven by growing asset values illustrates the connection between consumer confidence, economic growth, and inflation rates.
Overall, the “wealth effect” is playing a significant role in boosting the US economy by increasing spending among older Americans. As home and stock prices continue to rise and financial portfolios grow larger