The Rise In U.S. Household Indebtedness: Causes And Consequences
Source: Federal Reserve Board
During the past several decades in the United States, significant changes have occurred in household saving and borrowing behavior. As shown in the top panel of Figure 1, the personal saving rate has fallen from an average of 9.1 percent in the 1980s to an average of 1.7 percent so far this decade. Between the same periods, the ratio of total household debt to aggregate personal income, shown in the bottom panel, rose from 0.6 to 1.0. In this paper, the author considers the causes and consequences of the dramatic increase in household indebtedness. Clearly the issues surrounding household borrowing are closely related to those surrounding household saving.