The Wealth Effect.

• Author: Drucker, Vanessa
• Position: Business Briefs - Poem

he Wealth Effect When people perceive that their net worth is higher, They tend to acquire the gods they desire. They buy new attire, a couch or spin dryer. A man called Pigou (who? I'll give you a clue: He taught economics in Nineteen-o-two.) Said, when prices fall, there's more money for you. You may think big spending derives from cupidity, Joie de vivre, or longing for social solidity. Pigou says, 'not true' -- it depends on liquidity. A model that worked in the Nineties has stuck: Whenever the market goes up by a buck, We spend four cents more, and give thanks for dumb luck. Before you get eager to open your purse, Remember the wealth effect works in reverse. It's a long, hard way down, and the going gets worse. You feel like a king as your wealth mounts on paper. Then the bear bites, and you watch your worth taper. How swiftly it melts, like snow into vapor. At first you won't look at the price of your stock. Put your silver in hock. Send your art to the block. When the S&P dips, people stop taking trips. They cut back on taxis, get stingy with tips, And...