All components of private debt grew significantly in the decade leading up to the financial crisis which consumer debt leading the way. The household sector, in particular, already squeezed for liquidity by the move to build increasing federal surpluses during the Clinton era, were enticed by lower interest rates and the vehement marketing strategies of the financial engineers to borrow increasing amounts…..While this strategy sustained consumption growth for a time it was unsustainable because it relied on the private sector becoming increasingly indebted. ……With growth being maintained by increasing credit the balance sheets of private households and firms became increasingly precarious and it was only a matter of time before households and firms realized they had to restore some semblance of security by resuming saving.
via A radical redistribution of income undermined US entrepreneurship | Bill Mitchell – billy blog.