According to the Federal Reserve's
quarterly flow of funds report, Americans increased their household debt at an annual rate of 11.6% in the third quarter, the fastest growth in 18 years.
DEMblogs has some informed anaylsis
here:
In order to finance their lifestyle, most people use vast amounts of debt. Total mortgage debt outstanding has increased from 4.8 trillion in January 2001 to 8.2 trillion in the third quarter of 2005.
And people aren't saving at all. Economists define savings as the money left over after someone spends for their monthly expenses/items. The number has been negative for the last 7 months. In addition, contributions to retirement plans are very low. Of 401(k) plans, IRAs and defined benefit plans, only IRAs are growing over 1% of GDP for the last 4 years, and then the largest annual contribution is around 2%.
In short, low-wage growth and low-interest rates are inflating an asset class' value, increasing borrowing and provide a disincentive to saving.
Economist Dean Baker from the Center for Economic Policy research has a paper worth reading entitled "Dangerous Trends: The Growth of Debt in the U.S. Economy"
I came across this American Prospect article (from 2000) Deeper in Debt it's a must-read on the topic.
CNN warns: US consumers are hooked on spending.
Meanwhile, the US trade deficit hit a historic high in October.