The Wealth Effect: How Older Americans are Driving US Economic Growth through Increased Spending

As the U.S. economy continues to grow, older Americans are playing a significant role in boosting it by increasing spending. With rising home and stock prices, portfolios and savings accounts also grow, giving many Americans the confidence to spend more on entertainment and travel. This trend is known as the “wealth effect,” where rising asset values lead to increased spending without requiring loans.

According to Raymond Hill, an emeritus professor at Emory Business School, Americans are traveling to Europe and not worrying about high mortgage rates because they are not borrowing money to buy houses. This increased spending is one of the reasons why the economy has not slowed down as predicted by many. 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.

As the economy strengthens, 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.

The increase in consumer spending driven by rising asset values is known as the wealth effect. As home and stock prices rise portfolios and savings accounts grow giving many Americans the confidence to spend more on entertainment and travel without taking out loans.

Raymond Hill explains how Americans are traveling abroad without worrying about high mortgage rates because they are not using loans for housing purchases.

Dr. David Bieri explains how higher home and stock prices have resulted in significant increases in people’s financial portfolios leading to increased disposable income.

Lonnie Golden notes that inflation becomes stubborn when people continue to spend on various sectors such as dining out, travel