FIRE Economy

AAA

DEFINITION of 'FIRE Economy '

A sector of the economy composed of finance, insurance and real estate - hence the acronym, FIRE. Businesses that make up the FIRE economy include banks and credit unions, credit card companies, insurance agencies, mortgage brokers, investment brokerages, real estate agencies, hedge funds and more. The FIRE economy is a major contributor to the overall U.S. economy.

INVESTOPEDIA EXPLAINS 'FIRE Economy '

The FIRE economy has grown significantly since the 1980s and has accompanied the decline of the U.S. manufacturing sector. It generates revenue largely through rising asset prices and interest on debt. When asset prices suffer, as they did during the housing bubble and financial crisis of 2008, the FIRE economy suffers. When the FIRE economy suffers, the rest of the economy can experience debt defaults, failed businesses, increasing unemployment, reduced demand and debt deflation. The ripple effect that the FIRE economy’s decline had on the rest of the economy illustrated how important the finance, real estate and insurance sector has become. Even non-FIRE businesses had difficulty continuing operations because of limited access to credit and reduced consumer demand.

The FIRE acronym has been used since at least 1982, when it was printed in a Washington Post newspaper article describing job growth in New York City. Within the United States, the FIRE economy is particularly important in New York City, where many financial companies are based. 

The FIRE acronym was also used in a U.S. Census Bureau classification system first employed in 1992 for the economic census, which collects data on the structure and functioning of the U.S. economy. The economic census classified as part of the FIRE economy depository institutions; nondepository credit institutions; insurance carriers, agents and brokers; real estate businesses; holding and investment offices; and security and commodity brokers, dealers, exchanges and services. 

 

RELATED TERMS
  1. No results found.
Related Articles
  1. No results found.
comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center