Is wealth worth anything?

Weekly Updates

Financial media often reference wealth effects as boosting consumer spending. “Equities up, spending up” is the general idea. Not everyone benefits, but those who do own wealth need more than assets to be able to consume. Assets must turn into cash to boost consumption, and that cash has to come from somewhere.
The most obvious way to turn wealth into consumption is to sell assets. Realizing capital gains allows spending. If the asset buyers are domestic, they must hold cash savings to purchase the asset. If potential asset buyers have no cash, there is no sale—and no sale means no consumer spending for asset owners.
Consumers might borrow against the increased cash value of an asset. This was popular before the global financial crisis, when (particularly in the US) the family home was turned into a cash machine through the miracle of remortgaging. For obvious reasons, this is less popular with consumers today.
Rising asset values may reduce consumers’ incentive to save—resulting in a lower monthly savings rate, or reducing the stock of savings. Lower savings free cash for more consumption. This common wealth effect has a natural limit. If the cash savings run out, then consumption stops, no matter how high asset prices rise.