Perspectives on Recent Trends in Consumer Debt

The causes and ramifications of the rise in the consumer debt burden over time have been subject to much debate. This paper first offers a brief overview and analysis of the key economic variables used to evaluate consumer debt levels. The principal focus of the paper, however, is a broad review of the literature on the topic of consumer debt to provide a framework for how to assess recent credit trends. In addition, three explanations for credit growth — the democratization of credit, increased convenience use of credit, and increased homeownership — are evaluated in terms of their contribution to overall credit growth. This paper concludes that while these three trends have all played some part in increasing credit outstanding, there are clearly other significant factors contributing to the increase in consumer debt over time.