Dr. Lacy Hunt on The Wealth Effect
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http://www.youtube.com/channel/UCZIFOCfVxLJexAKnSb2TWXg?sub_confirmation=1Dr. Lacy Hunt on The Wealth Effect
The wealth effect is a behavioral economic theory suggesting that people spend more as the value of their assets rise. The idea is that consumers feel more financially secure and confident about their wealth when their homes or investment portfolios increase in value.
They are made to feel richer, even if their income and fixed costs are the same as before.
The wealth effect reflects the psychological effect that rising asset values, such as those that occur during a bull market, have on consumer spending behavior. The concept hones in on how the feelings of security, referred to as consumer confidence, are strengthened by sizable increases in the value of investment portfolios.
Extra confidence contributes to higher levels of spending and lower levels of saving.
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