In recent years, older Americans have been playing a significant role in boosting the U.S. economy. As home and stock prices continue to rise, they are seeing increased financial security that is giving them the confidence to spend more on things like entertainment and travel. Despite high mortgage rates, they are not deterred from spending because they are not borrowing money to purchase a house.
This increase in spending, known as the “wealth effect,” is fueled by rising home and stock prices. As people become more confident in their financial security, they are spending money on non-essential items without needing loans from banks. This type of spending has been a key factor in why the economy has not slowed down as anticipated. American households have seen a rise in their assets, including their homes and portfolios, creating more disposable income.
As the economy continues to strengthen, the Federal Reserve is reconsidering its plans due to the sticky inflation caused by increased consumer spending on various goods and services. The rise in asset values has led to increased spending across various sectors, influencing the Federal Reserve’s policies. Professor Lonnie Golden noted that as long as people continue to spend on dining out, travel, healthcare, and pharmaceuticals, inflation rates are likely to remain steady.
The wealth effect is driving an increase in consumer spending across various sectors of the economy. This trend is contributing significantly to the continued growth of the U.S. economy.
The rise in home and stock prices is giving older Americans greater financial security than ever before.
This added confidence has allowed many Americans to invest more money into non-essential items like entertainment and travel.
Despite high mortgage rates, older Americans are continuing to spend money on things like entertainment and travel because they are not borrowing money for housing.
As American households see an increase in their assets through rising home values and higher stock prices, they have more disposable income available for spending.
Professor Lonnie Golden believes that if people continue to spend money on non-essential items like dining out and healthcare, inflation rates will remain steady.
