Historical Perspective
In the twentieth century, spending on consumer durables rose significantly. Household debt rose as living standards rose, as consumers demanded an array of durable goods (commodities). This included major durables like high-end electronics, vehicles, and appliances, that were purchased with credit. Easy credit encouraged a shift from saving to spending.
Households in developed countries significantly increased their household debt relative to their disposable income and GDP during the 1980-2007 period, one of the many factors behind the U.S. and European crises of 2007-2012.
U.S. households made significant progress in deleveraging (reducing debt) post-crisis, much of it due to foreclosures and financial institution debt write-downs. By some measures, consumers began to add certain types of debt again in 2012, a sign that the economy may be improving as this borrowing supports consumption.
Read more about this topic: Household Debt
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