The Consumption Wealth Ratios Contain Information About Real Rates

Pierre Olivier: Consumption wealth ratios contain information about future real rates. If i see this consumption to wealth ratio being low, it should contain some information either about future consumption growth or the future return on the wealth. He says that if a household is consuming less than one per cent of its wealth then there are two possible explanations for why they're doing so. Future return on thewealth is going to be low, or future consumption growth is going toBe high. That's what we take from the data. We say, well, how much can we tell about future rates of return? Whether the risk free rate, or the gap between the return on wealth and the risk free