Older Americans are playing a crucial role in boosting the U.S. economy by increasing spending as home and stock prices rise, leading to larger portfolios and savings accounts. This trend, known as the “wealth effect,” means that rising asset values lead to increased spending without requiring loans, giving many Americans the confidence to spend more on entertainment and travel.
As Dr. David Bieri, an associate professor of public policy at Virginia Tech University, explains, higher home and stock prices have led to significant increases in people’s financial portfolios, providing them with more disposable income. Raymond Hill, an emeritus professor at Emory Business School, notes that Americans are traveling to Europe without 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.
As Lonnie Golden, a professor of economics at Penn State Abington, notes, inflation becomes more stubborn as the economy strengthens. 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.
In summary, older Americans are playing a significant role in boosting the U.S. economy by increasing spending due to rising asset values leading to larger portfolios and savings accounts. Higher home and stock prices have led to significant increases in people’s financial portfolios providing them with more disposable income while also impacting inflation rates due to increased spending on various sectors such as dining out