Household Debt Remains Historically High

March 29, 2018

For better or worse, debt is a key factor in household financial stability. Some consumption is financed by borrowing, which is not necessarily a bad thing. However, at the same time, rising consumer debt levels can raise concerns about household financial stability and in turn financial system stability, research shows.

In fact, the ratio of household debt to disposable personal income in the United States peaked at the end of 2007, immediately before the Great Recession. That ratio has since fallen. Yet in mid-2017 it remained historically high, at 102 percent, according to the Federal Reserve Bank of St. Louis's Center for Household Financial Stability.

That ratio never exceeded 100 percent before 2002. Higher debt levels have made American households and the nation's economy more financially vulnerable, according to research presented at a 2017 symposium sponsored by the St. Louis Fed's center. Likewise, the International Monetary Fund's 2017 Global Financial Stability Report notes that experience from the financial crisis and recent research suggest increases in household debt levels may play a role in amplifying shocks to the economy or to the financial system.

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