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Finance and Economics Discussion Series: 2007-37 Screen Reader version

The Rise in U.S. Household Indebtedness: Causes and Consequences

Karen E. Dynan
Federal Reserve Board

Donald L. Kohn
Federal Reserve Board

August 8, 2007

Figure 1: The Evolution of Household Saving and Debt in the United States
Upper Panel
Personal Saving Rate
Year Annual Average
1980 10
1981 10.9
1982 11.2
1983 9
1984 10.8
1985 9
1986 8.2
1987 7
1988 7.3
1989 7.1
1990 7
1991 7.3
1992 7.7
1993 5.8
1994 4.8
1995 4.6
1996 4
1997 3.6
1998 4.3
1999 2.4
2000 2.3
2001 1.8
2002 2.4
2003 2.1
2004 2.1
2005 0.5
2006 0.4

Source: U.S. National Income and Product Accts

Figure 1: The Evolution of Household Saving and Debt in the United States
Lower Panel
Ratio of Household Sector Debt to Personal Income
Year Ratio, End-of-Year
1980 0.57
1981 0.56
1982 0.56
1983 0.56
1984 0.57
1985 0.63
1986 0.67
1987 0.68
1988 0.7
1989 0.71
1990 0.73
1991 0.74
1992 0.72
1993 0.74
1994 0.76
1995 0.78
1996 0.78
1997 0.78
1998 0.78
1999 0.8
2000 0.82
2001 0.87
2002 0.95
2003 1.01
2004 1.06
2005 1.12
2006 1.14

Source: U.S. Flow of Funds Accounts and National Income and Product Accts

Figure 2: Evidence on Impatience
Upper Left Panel
Planning Horizon 1 Year or Less
Year Share of HHs
1981  
1982  
1983  
1984  
1985  
1986  
1987  
1988  
1989  
1990  
1991  
1992 36.68
1993  
1994  
1995 39.11
1996  
1997  
1998 33.34
1999  
2000  
2001 29.8
2002  
2003  
2004 33.19
2005  
2006  

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Upper Right Panel
Planning Horizon 1 Year or Less
Year Share of HHs
1981  
1982  
1983  
1984  
1985  
1986  
1987  
1988  
1989  
1990  
1991  
1992 15.01
1993  
1994  
1995 11.8
1996  
1997  
1998 14.95
1999  
2000  
2001 16.93
2002  
2003  
2004 13.32
2005  
2006  

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Middle Left Panel
Saving for Retirement
Year Share of HHs
1981  
1982  
1983 16.62
1984  
1985  
1986  
1987  
1988  
1989 18.69
1990  
1991  
1992 19.37
1993  
1994  
1995 23.75
1996  
1997  
1998 32.95
1999  
2000  
2001 32.07
2002  
2003  
2004 34.66
2005  
2006  

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Middle Right Panel
Saving for Retirement
Residuals from Regression on Age
Year Share of HHs
1981  
1982  
1983 -10.1
1984  
1985  
1986  
1987  
1988  
1989 -8.7
1990  
1991  
1992 -8.29
1993  
1994  
1995 -4.01
1996  
1997  
1998 5.05
1999  
2000  
2001 3.86
2002  
2003  
2004 6.33
2005  
2006  

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Lower Left Panel
Okay to Borrow for Car Purchase
Year Share of HHs
1981  
1982  
1983  
1984  
1985  
1986  
1987  
1988  
1989  
1990  
1991  
1992 77.71
1993  
1994  
1995 80.75
1996  
1997  
1998 79.13
1999  
2000  
2001 78.85
2002  
2003  
2004 80.67
2005  
2006  

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Lower Right Panel
Okay to Borrow for Vacation
Year Share of HHs
1981  
1982  
1983  
1984  
1985  
1986  
1987  
1988  
1989  
1990  
1991  
1992 12.96
1993  
1994  
1995 16.12
1996  
1997  
1998 14.32
1999  
2000  
2001 14.89
2002  
2003  
2004 14.38
2005  
2006  

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Upper Left Panel
Willingness to Take No Risk
to Get Returns
Year Share of HHs
1981  
1982  
1983  
1984  
1985  
1986  
1987  
1988  
1989  
1990  
1991  
1992 49.83
1993  
1994  
1995 45.66
1996  
1997  
1998 38.75
1999  
2000  
2001 39.8
2002  
2003  
2004 42.31
2005  
2006  

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Upper Right Panel
Willingness to Take Above Average
Risk to Get Returns
Year Share of HHs
1981  
1982  
1983  
1984  
1985  
1986  
1987  
1988  
1989  
1990  
1991  
1992 14.27
1993  
1994  
1995 17.09
1996  
1997  
1998 22.79
1999  
2000  
2001 22.77
2002  
2003  
2004 19.25
2005  
2006  

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Middle Left Panel
Saving for Liquidity
Year Share of HHs
1981  
1982  
1983 40.68
1984  
1985  
1986  
1987  
1988  
1989 34.38
1990  
1991  
1992 33.94
1993  
1994  
1995 32.99
1996  
1997  
1998 29.8
1999  
2000  
2001 31.19
2002  
2003  
2004 30.05
2005  
2006  

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Middle Right Panel
Saving for Liquidity
Residuals from Regression on Age
Year Share of HHs
1981  
1982  
1983 9.55
1984  
1985  
1986  
1987  
1988  
1989 3.13
1990  
1991  
1992 2.65
1993  
1994  
1995 1.72
1996  
1997  
1998 -1.49
1999  
2000  
2001 -0.09
2002  
2003  
2004 -1.31
2005  
2006  

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Lower Panel
Expected Change in Real Income
Year Index
1980.00 57.2
1980.25 65.5
1980.50 67.3
1980.75 69.8
1981.00 70.7
1981.25 75.6
1981.50 75.6
1981.75 72.6
1982.00 80.6
1982.25 81.4
1982.50 77.4
1982.75 84.3
1983.00 82.3
1983.25 89.7
1983.50 85.3
1983.75 86.5
1984.00 93.5
1984.25 90.1
1984.50 93.8
1984.75 92.6
1985.00 85.1
1985.25 88.5
1985.50 87.4
1985.75 87.4
1986.00 87.6
1986.25 90.3
1986.50 91.4
1986.75 88.5
1987.00 84.2
1987.25 83.1
1987.50 83.1
1987.75 85.4
1988.00 87.6
1988.25 85.1
1988.50 88.9
1988.75 83.3
1989.00 81.1
1989.25 79.3
1989.50 81
1989.75 83.7
1990.00 81.6
1990.25 84.6
1990.50 76.5
1990.75 68.8
1991.00 77.9
1991.25 75.2
1991.50 78.7
1991.75 75.9
1992.00 77.6
1992.25 85.5
1992.50 77.1
1992.75 85.2
1993.00 82.4
1993.25 77.5
1993.50 80.1
1993.75 77.7
1994.00 84.5
1994.25 82.2
1994.50 77.2
1994.75 80
1995.00 81.8
1995.25 82.8
1995.50 84.2
1995.75 80
1996.00 83.1
1996.25 79
1996.50 85.1
1996.75 85.3
1997.00 84.7
1997.25 85.6
1997.50 85.2
1997.75 90.4
1998.00 93.6
1998.25 92.6
1998.50 97.9
1998.75 89.2
1999.00 94.9
1999.25 89.4
1999.50 92.6
1999.75 93.6
2000.00 95.2
2000.25 93.5
2000.50 93.2
2000.75 91.7
2001.00 90.9
2001.25 86.9
2001.50 91.3
2001.75 92.3
2002.00 94.2
2002.25 89.2
2002.50 90.2
2002.75 90.8
2003.00 85.6
2003.25 89.4
2003.50 88.8
2003.75 88.8
2004.00 89
2004.25 81.7
2004.50 83.4
2004.75 83.5
2005.00 83.4
2005.25 77.6
2005.50 78.6
2005.75 77.3
2006.00 76.6
2006.25 76.5
2006.50 80.8
2006.75 86.2
2007.00 82.3
2007.25 76.3

Source: Reuters/University of Michigan Surveys of Consumers
Note: Calculated as the share expecting their income to rise more than prices less the share expecting prices to rise more than their incomes + 100

Figure 3: Evidence on Precautionary Saving and Expected Income
Lower Panel
Expected Change in Real Income
Year Index
1980.00 57.2
1980.25 65.5
1980.50 67.3
1980.75 69.8
1981.00 70.7
1981.25 75.6
1981.50 75.6
1981.75 72.6
1982.00 80.6
1982.25 81.4
1982.50 77.4
1982.75 84.3
1983.00 82.3
1983.25 89.7
1983.50 85.3
1983.75 86.5
1984.00 93.5
1984.25 90.1
1984.50 93.8
1984.75 92.6
1985.00 85.1
1985.25 88.5
1985.50 87.4
1985.75 87.4
1986.00 87.6
1986.25 90.3
1986.50 91.4
1986.75 88.5
1987.00 84.2
1987.25 83.1
1987.50 83.1
1987.75 85.4
1988.00 87.6
1988.25 85.1
1988.50 88.9
1988.75 83.3
1989.00 81.1
1989.25 79.3
1989.50 81
1989.75 83.7
1990.00 81.6
1990.25 84.6
1990.50 76.5
1990.75 68.8
1991.00 77.9
1991.25 75.2
1991.50 78.7
1991.75 75.9
1992.00 77.6
1992.25 85.5
1992.50 77.1
1992.75 85.2
1993.00 82.4
1993.25 77.5
1993.50 80.1
1993.75 77.7
1994.00 84.5
1994.25 82.2
1994.50 77.2
1994.75 80
1995.00 81.8
1995.25 82.8
1995.50 84.2
1995.75 80
1996.00 83.1
1996.25 79
1996.50 85.1
1996.75 85.3
1997.00 84.7
1997.25 85.6
1997.50 85.2
1997.75 90.4
1998.00 93.6
1998.25 92.6
1998.50 97.9
1998.75 89.2
1999.00 94.9
1999.25 89.4
1999.50 92.6
1999.75 93.6
2000.00 95.2
2000.25 93.5
2000.50 93.2
2000.75 91.7
2001.00 90.9
2001.25 86.9
2001.50 91.3
2001.75 92.3
2002.00 94.2
2002.25 89.2
2002.50 90.2
2002.75 90.8
2003.00 85.6
2003.25 89.4
2003.50 88.8
2003.75 88.8
2004.00 89
2004.25 81.7
2004.50 83.4
2004.75 83.5
2005.00 83.4
2005.25 77.6
2005.50 78.6
2005.75 77.3
2006.00 76.6
2006.25 76.5
2006.50 80.8
2006.75 86.2
2007.00 82.3
2007.25 76.3

Source: Reuters/University of Michigan Surveys of Consumers
Note: Calculated as the share expecting their income to rise more than prices less the share expecting prices to rise more than their incomes + 100

Figure 4: Debt and Demographics
Upper Left Panel
Household with Positive Debt
By Age (Percent)
Year younger than 35 35 to 54 55 or older
1981      
1982      
1983 79.33 84.27 47.23
1984      
1985      
1986      
1987      
1988      
1989 80.19 87.29 50.65
1990      
1991      
1992 81.65 85.94 53.04
1993      
1994      
1995 84.03 86.66 53.88
1996      
1997      
1998 81.81 87.56 52.86
1999      
2000      
2001 83.03 86.64 55.74
2002      
2003      
2004 80.06 88.48 60.77
2005      
2006      

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Upper Right Panel
Median D/Y for Borrowers
By Age (Ratio)
Year younger than 35 35 to 54 55 or older
1981      
1982      
1983 0.42 0.57 0.26
1984      
1985      
1986      
1987      
1988      
1989 0.56 0.64 0.28
1990      
1991      
1992 0.47 0.79 0.36
1993      
1994      
1995 0.61 0.82 0.4
1996      
1997      
1998 0.8 0.94 0.56
1999      
2000      
2001 0.74 0.91 0.53
2002      
2003      
2004 1.08 1.27 0.71
2005      
2006      

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Middle Left Panel
Household with Positive Debt
By Education (Percent)
Year No HS Degree HS Degree Only College Degree
1981      
1982      
1983 51.21 74.75 83.98
1984      
1985      
1986      
1987      
1988      
1989 55.81 74.49 83.11
1990      
1991      
1992 52.66 75.52 82.96
1993      
1994      
1995 54.97 77.42 82.23
1996      
1997      
1998 53.43 74.55 84.26
1999      
2000      
2001 55.75 76.54 82.38
2002      
2003      
2004 53.48 77.43 84.29
2005      
2006      

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Middle Right Panel
Median D/Y for Borrowers
By Education (Ratio)
Year No HS Degree HS Degree Only College Degree
1981      
1982      
1983 0.22 0.41 0.64
1984      
1985      
1986      
1987      
1988      
1989 0.3 0.5 0.71
1990      
1991      
1992 0.33 0.49 0.82
1993      
1994      
1995 0.42 0.59 0.86
1996      
1997      
1998 0.44 0.79 1.01
1999      
2000      
2001 0.47 0.7 0.95
2002      
2003      
2004 0.51 0.92 1.3
2005      
2006      

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Lower Panel
Coefficients from Median Regression of D/Y on Demographic Characteristics (Percent)
Year Without Demographic Controls With Demographic Controls
1987    
1988    
1989 0.14 0.07
1990    
1991    
1992 0.15 0.05
1993    
1994    
1995 0.25 0.12
1996    
1997    
1998 0.35 0.22
1999    
2000    
2001 0.32 0.17
2002    
2003    
2004 0.57 0.38
2005    
2006    

Source: Survey of Consumer Finances

Figure 5: Debt and House Prices
Upper Left Panel
Composition of the Aggregate D/Y
Survey of Consumer Finances (Ratio)
Year Lower Line Upper Line
1981    
1982    
1983 0.29 0.64
1984    
1985    
1986    
1987    
1988    
1989 0.2 0.64
1990    
1991    
1992 0.22 0.79
1993    
1994    
1995 0.22 0.81
1996    
1997    
1998 0.25 0.89
1999    
2000    
2001 0.2 0.79
2002    
2003    
2004 0.28 1.12
2005    
2006    

Source: Survey of Consumer Finances
(In Figure, the space between the horizontal axis and the lower line is labelled Other Debt and the space between the lower and upper lines is labelled Primary Residence Debt)

Figure 5: Debt and House Prices
Upper Right Panel
Composition of the Aggregate D/Y
Flow of Funds (Ratio)
Year Lower Line Upper Line
1981    
1982    
1983 0.2 0.56
1984 0.21 0.57
1985 0.23 0.63
1986 0.23 0.67
1987 0.23 0.68
1988 0.23 0.7
1989 0.23 0.71
1990 0.22 0.73
1991 0.21 0.74
1992 0.21 0.72
1993 0.21 0.74
1994 0.23 0.76
1995 0.25 0.78
1996 0.25 0.78
1997 0.25 0.78
1998 0.25 0.78
1999 0.25 0.8
2000 0.26 0.82
2001 0.27 0.87
2002 0.28 0.95
2003 0.28 1.01
2004 0.27 1.06
2005 0.28 1.12
2006 0.28 1.14

Source: Flow of Funds
(In Figure, the space between the horizontal axis and the lower line is labeled Other Debt and the space between the lower and upper lines is labeled Home Mortgage Debt)

Figure 5: Debt and House Prices
Middle Left Panel
Home Mortgage Debt and House Prices (4-Quarter Percent Change)
Quarter House Prices Home Mortgage Debt
1981.00 5.77 9.83
1981.25 6.77 10.32
1981.50 4.82 8.95
1981.75 4.76 7.23
1982.00 4.97 6.61
1982.25 3.55 5.19
1982.50 1.78 4.46
1982.75 2.28 4.75
1983.00 2.77 5.52
1983.25 3.22 6.91
1983.50 4.4 8.94
1983.75 3.86 10.19
1984.00 3.71 11.56
1984.25 4.36 11.87
1984.50 4.63 11.47
1984.75 5.47 11.4
1985.00 5.36 12.05
1985.25 5.34 11.86
1985.50 6.23 13.69
1985.75 6.51 14.5
1986.00 7.05 13.04
1986.25 7.61 13.42
1986.50 7.65 13.32
1986.75 8.16 13.73
1987.00 8.38 14.55
1987.25 8.09 15.66
1987.50 7.77 14.51
1987.75 6.79 13.45
1988.00 6.35 12.58
1988.25 6.58 11.85
1988.50 6.08 11.75
1988.75 6.21 11.8
1989.00 5.75 10.94
1989.25 4.91 10.24
1989.50 6.15 10.38
1989.75 6.04 10.96
1990.00 5.08 11.37
1990.25 3.67 11.24
1990.50 1.7 10.27
1990.75 0.26 8.73
1991.00 0.62 8.3
1991.25 0.98 8.16
1991.50 0.56 6.91
1991.75 1.75 6.95
1992.00 1.74 6.82
1992.25 1.56 5.64
1992.50 2.49 6.55
1992.75 2.27 6.39
1993.00 0.97 5.38
1993.25 2.31 6.09
1993.50 2.32 5.89
1993.75 2.36 5.5
1994.00 3.37 6.07
1994.25 3.39 5.66
1994.50 3.26 5.37
1994.75 2.65 5.54
1995.00 2.28 5.31
1995.25 2.21 5.26
1995.50 2.44 5.34
1995.75 2.47 4.84
1996.00 3.18 5.58
1996.25 3.27 5.88
1996.50 3.01 5.81
1996.75 3.06 6.17
1997.00 2.67 6.01
1997.25 2.93 5.82
1997.50 3.06 6.52
1997.75 3.41 6.11
1998.00 4.06 6.43
1998.25 4.52 7
1998.50 5.09 6.62
1998.75 5.66 8.03
1999.00 5.89 8.59
1999.25 6.01 8.77
1999.50 6.24 9.69
1999.75 6.17 9.35
2000.00 6.52 8.86
2000.25 6.78 9.03
2000.50 6.9 8.58
2000.75 7.24 8.52
2001.00 7.32 8.71
2001.25 7.35 9.27
2001.50 7.43 9.64
2001.75 7.25 10.1
2002.00 7.09 10.67
2002.25 7.32 10.56
2002.50 7.82 11.54
2002.75 8.32 12.88
2003.00 8.4 13.4
2003.25 8.17 14.72
2003.50 8.15 15.1
2003.75 8.44 14.37
2004.00 8.87 14.15
2004.25 9.47 13.68
2004.50 10 13.76
2004.75 10.25 14.22
2005.00 10.42 13.71
2005.25 10.93 13.52
2005.50 10.9 13.6
2005.75 10.65 13.44
2006.00 10.04 13.45
2006.25 8.39 12.48
2006.50 6.08 10.81
2006.75 4.31 9.33

Source: Flow of Funds and Office of Federal Housing Enterprise Oversight

Figure 5: Debt and House Prices
Middle Right Panel
Home Mortgage Debt and House Prices
Quarter House Prices Home Mortgage Debt
1981.00 105.77 944.55
1981.25 107.86 966.1
1981.50 109.29 980.86
1981.75 109.67 998.22
1982.00 111.03 1012.69
1982.25 111.69 1021.95
1982.50 111.24 1017.13
1982.75 112.17 1031.15
1983.00 114.1 1033.14
1983.25 115.29 1057.11
1983.50 116.14 1085.78
1983.75 116.5 1116.23
1984.00 118.33 1152.91
1984.25 120.32 1182.02
1984.50 121.52 1209.76
1984.75 122.87 1242.83
1985.00 124.67 1316.13
1985.25 126.75 1347.4
1985.50 129.09 1400.64
1985.75 130.87 1448.31
1986.00 133.46 1487.82
1986.25 136.4 1528.26
1986.50 138.97 1587.18
1986.75 141.55 1647.04
1987.00 144.65 1692.64
1987.25 147.43 1755.91
1987.50 149.77 1802.3
1987.75 151.16 1826.56
1988.00 153.84 1885.67
1988.25 157.13 1944.23
1988.50 158.87 1997.71
1988.75 160.54 2052.79
1989.00 162.69 2090.18
1989.25 164.84 2141.71
1989.50 168.64 2203.39
1989.75 170.24 2275.99
1990.00 170.95 2357.04
1990.25 170.89 2411.53
1990.50 171.5 2458.86
1990.75 170.68 2503.74
1991.00 172.02 2552.65
1991.25 172.57 2608.32
1991.50 172.46 2628.83
1991.75 173.67 2681.41
1992.00 175.01 2730.3
1992.25 175.27 2759.01
1992.50 176.76 2804.5
1992.75 177.61 2852.68
1993.00 176.71 2877.26
1993.25 179.31 2927.08
1993.50 180.86 2969.78
1993.75 181.8 3011.89
1994.00 182.66 3054.41
1994.25 185.38 3095.08
1994.50 186.76 3131.68
1994.75 186.62 3178.87
1995.00 186.83 3216.67
1995.25 189.48 3257.85
1995.50 191.32 3298.84
1995.75 191.23 3332.7
1996.00 192.76 3396.28
1996.25 195.67 3449.45
1996.50 197.08 3490.59
1996.75 197.08 3538.16
1997.00 197.9 3600.44
1997.25 201.4 3650.15
1997.50 203.12 3718.09
1997.75 203.8 3754.25
1998.00 205.94 3831.97
1998.25 210.5 3905.55
1998.50 213.46 3964.27
1998.75 215.35 4055.9
1999.00 218.07 4160.97
1999.25 223.14 4248.04
1999.50 226.77 4348.58
1999.75 228.64 4432.87
2000.00 232.27 4527.52
2000.25 238.26 4629.17
2000.50 242.41 4719.19
2000.75 245.19 4810.46
2001.00 249.29 4921.74
2001.25 255.77 5058.47
2001.50 260.42 5174.25
2001.75 262.96 5296.42
2002.00 266.97 5447.11
2002.25 274.5 5592.48
2002.50 280.78 5771.2
2002.75 284.84 5978.56
2003.00 289.38 6177.22
2003.25 296.93 6415.62
2003.50 303.68 6642.82
2003.75 308.87 6837.65
2004.00 315.06 7051.01
2004.25 325.04 7293.21
2004.50 334.04 7571.57
2004.75 340.54 7824.5
2005.00 347.9 8032.43
2005.25 360.56 8294.38
2005.50 370.44 8601.31
2005.75 376.82 8876.29
2006.00 382.84 9112.55
2006.25 390.8 9329.24
2006.50 392.95 9530.86
2006.75 393.07 9704.67

Source: Flow of Funds and Office of Federal Housing Enterprise Oversight
1980 = 100 for House Prices, $ Billion for Mortgage Debt

Figure 5: Debt and House Prices
Lower Left Panel
Household with Positive Debt
By Homeownership (Percent)
Year Homeowners Non-homeowners
1981    
1982    
1983 75.51 61.06
1984    
1985    
1986    
1987    
1988    
1989 78.19 62.08
1990    
1991    
1992 78.44 64.06
1993    
1994    
1995 79.76 65.51
1996    
1997    
1998 79.53 64.09
1999    
2000    
2001 79.93 65.24
2002    
2003    
2004 82.3 63.44
2005    
2006    

Source: Survey of Consumer Finances

Figure 5: Debt and House Prices
Lower Right Panel
Median D/Y for Borrowers
By Homeownership (Percent) YearHomeownersNon-homeowners
1981    
1982    
1983 0.72 0.12
1984    
1985    
1986    
1987    
1988    
1989 0.78 0.18
1990    
1991    
1992 0.94 0.18
1993    
1994    
1995 1.02 0.22
1996    
1997    
1998 1.19 0.25
1999    
2000    
2001 1.12 0.21
2002    
2003    
2004 1.47 0.26
2005    
2006    

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Upper Left Panel
Household with Positive Debt
Year Percent
1981  
1982  
1983 70.21
1984  
1985  
1986  
1987  
1988  
1989 72.39
1990  
1991  
1992 73.25
1993  
1994  
1995 74.76
1996  
1997  
1998 74.37
1999  
2000  
2001 75.21
2002  
2003  
2004 76.49
2005  
2006  

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Upper Right Panel
Aggregate D/Y (Ratio)
Year Actual Counterfactual: Share of Borrowers Held at 1983 Level
1981    
1982    
1983 0.64 0.64
1984    
1985    
1986    
1987    
1988    
1989 0.64 0.63
1990    
1991    
1992 0.79 0.76
1993    
1994    
1995 0.81 0.78
1996    
1997    
1998 0.89 0.85
1999    
2000    
2001 0.79 0.75
2002    
2003    
2004 1.12 1.04
2005    
2006    

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Middle Left Panel
Percentiles of D/Y (Ratio)
Upper Half of Distribution
Year 50th pctile 75th pctile 90th pctile 95th pctile
1981        
1982        
1983 0.14 0.75 1.55 2.18
1984        
1985        
1986        
1987        
1988        
1989 0.23 0.88 1.74 2.43
1990        
1991        
1992 0.24 1.05 1.98 2.82
1993        
1994        
1995 0.31 1.19 2.26 3.16
1996        
1997        
1998 0.38 1.34 2.44 3.37
1999        
2000        
2001 0.38 1.28 2.35 3.24
2002        
2003        
2004 0.54 1.79 3.1 4.21
2005        
2006        

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Middle Right Panel
Median D/Y for Borrowers (Ratio)
By Income (for HHs < 60)
Year Lower Third Middle Third Upper Third
1981      
1982      
1983 0.31 0.39 0.63
1984      
1985      
1986      
1987      
1988      
1989 0.43 0.61 0.73
1990      
1991      
1992 0.45 0.55 0.9
1993      
1994      
1995 0.49 0.69 0.94
1996      
1997      
1998 0.56 0.85 1.06
1999      
2000      
2001 0.55 0.91 0.96
2002      
2003      
2004 0.73 1.3 1.25
2005      
2006      

Source: Survey of Consumer Finances

Figure 7: Household Vulnerability to Economic Shocks
Upper Left Panel
Household Financial Obligations
(Percent of Disposable Income)
Year Debt Service Ratio Financial Obligations Ratio
1981 10.65 15.52
1982 10.68 15.67
1983 10.58 15.59
1984 10.81 15.72
1985 11.57 16.71
1986 12.06 17.37
1987 12.14 17.64
1988 11.89 17.25
1989 11.93 17.22
1990 11.98 17.31
1991 11.75 17.19
1992 11.05 16.44
1993 10.89 16.31
1994 11.05 16.56
1995 11.65 17.23
1996 12 17.56
1997 12.12 17.71
1998 12.04 17.5
1999 12.32 17.82
2000 12.59 17.94
2001 13.15 18.55
2002 13.39 18.69
2003 13.52 18.63
2004 13.54 18.47
2005 14.14 19.05
2006 14.45 19.3

Source: Federal Reserve Board

Figure 7: Household Vulnerability to Economic Shocks
Upper Right Panel
Household Real Estate and Equity Wealth
(Ratio to Personal Income)
Year Value of Real Estate Value of Equities
1981 1.23 0.46
1982 1.22 0.49
1983 1.17 0.53
1984 1.21 0.46
1985 1.29 0.56
1986 1.34 0.62
1987 1.35 0.59
1988 1.37 0.62
1989 1.38 0.72
1990 1.33 0.63
1991 1.32 0.85
1992 1.29 0.89
1993 1.29 1
1994 1.27 0.95
1995 1.28 1.22
1996 1.25 1.38
1997 1.24 1.67
1998 1.26 1.81
1999 1.3 2.16
2000 1.33 1.79
2001 1.42 1.5
2002 1.54 1.12
2003 1.63 1.39
2004 1.71 1.42
2005 1.83 1.41
2006 1.84 1.46

Source: Flow of Funds and National Income and Product Accounts

Figure 7: Household Vulnerability to Economic Shocks
Middle Panel
Estimated MPC Out of Contemporaneous Income
Quarter Lowest Line (Dashed) Middle Line (solid) Highest Line (dashed)
1965.00      
1965.25 -0.33 0.25 0.83
1965.50 -0.55 0.1 0.75
1965.75 -0.59 0.04 0.68
1966.00 -0.36 0.26 0.89
1966.25 0.05 0.69 1.34
1966.50 0.03 0.66 1.29
1966.75 -0.1 0.62 1.34
1967.00 -0.23 0.51 1.26
1967.25 -0.16 0.6 1.36
1967.50 -0.13 0.6 1.34
1967.75 0.11 0.74 1.37
1968.00 0.03 0.65 1.27
1968.25 -0.01 0.7 1.41
1968.50 -0.49 0.25 0.99
1968.75 -0.33 0.33 0.99
1969.00 -0.42 0.1 0.61
1969.25 -0.36 0.12 0.61
1969.50 -0.24 0.23 0.7
1969.75 -0.33 0.15 0.63
1970.00 -0.37 0.13 0.62
1970.25 -0.59 -0.04 0.51
1970.50 -0.6 -0.07 0.46
1970.75 -0.57 -0.03 0.5
1971.00 -0.77 -0.16 0.46
1971.25 -1.02 -0.3 0.42
1971.50 -0.65 -0.07 0.5
1971.75 -0.57 -0.04 0.48
1972.00 -0.26 0.12 0.5
1972.25 -0.38 0.05 0.48
1972.50 -0.32 0.11 0.53
1972.75 -0.59 -0.03 0.53
1973.00 -0.45 0.09 0.62
1973.25 -0.21 0.35 0.92
1973.50 -0.13 0.45 1.04
1973.75 -0.14 0.53 1.2
1974.00 -0.8 0.11 1.03
1974.25 -1.22 -0.2 0.81
1974.50 -0.74 0.07 0.88
1974.75 -0.74 0.14 1.01
1975.00 -0.99 0.02 1.03
1975.25 -0.4 0.16 0.73
1975.50 -0.08 0.85 1.77
1975.75 0 0.62 1.25
1976.00 -0.01 0.55 1.12
1976.25 0.03 0.57 1.11
1976.50 -0.1 0.47 1.03
1976.75 -0.1 0.5 1.1
1977.00 -0.06 0.41 0.88
1977.25 -0.05 0.41 0.87
1977.50 -0.05 0.42 0.9
1977.75 -0.05 0.43 0.92
1978.00 -0.05 0.41 0.88
1978.25 -0.12 0.34 0.8
1978.50 -0.03 0.44 0.91
1978.75 0.03 0.47 0.91
1979.00 0.05 0.46 0.88
1979.25 0 0.39 0.77
1979.50 0.02 0.43 0.83
1979.75 0.06 0.5 0.93
1980.00 0.1 0.54 0.98
1980.25 0.24 0.64 1.03
1980.50 0.22 0.62 1.02
1980.75 0.25 0.62 0.98
1981.00 0.21 0.61 1
1981.25 0.19 0.6 1.01
1981.50 0.18 0.55 0.93
1981.75 0.18 0.63 1.09
1982.00 0.18 0.64 1.09
1982.25 0.15 0.6 1.06
1982.50 0.13 0.65 1.17
1982.75 0.08 0.63 1.17
1983.00 0.11 0.62 1.13
1983.25 0.11 0.58 1.04
1983.50 0.06 0.52 0.97
1983.75 0.11 0.52 0.92
1984.00 0.04 0.39 0.74
1984.25 0.05 0.38 0.71
1984.50 0.04 0.37 0.69
1984.75 -0.01 0.32 0.64
1985.00 -0.02 0.29 0.61
1985.25 -0.22 0.25 0.72
1985.50 -0.3 0.18 0.65
1985.75 -0.31 0.17 0.65
1986.00 -0.28 0.19 0.66
1986.25 -0.28 0.22 0.71
1986.50 -0.11 0.33 0.77
1986.75 -0.12 0.33 0.77
1987.00 -0.19 0.29 0.76
1987.25 -0.23 0.25 0.73
1987.50 -0.27 0.16 0.59
1987.75 -0.33 0.09 0.51
1988.00 -0.35 0.07 0.49
1988.25 -0.32 0.08 0.48
1988.50 -0.34 0.06 0.45
1988.75 -0.33 0.06 0.45
1989.00 -0.31 0.06 0.42
1989.25 -0.37 0.02 0.41
1989.50 -0.29 0.08 0.44
1989.75 -0.26 0.1 0.46
1990.00 -0.24 0.1 0.44
1990.25 -0.35 0.01 0.37
1990.50 -0.42 -0.02 0.38
1990.75 -0.47 -0.06 0.35
1991.00 -0.58 -0.13 0.33
1991.25 -0.71 -0.15 0.42
1991.50 -1.1 -0.33 0.43
1991.75 -0.79 -0.14 0.5
1992.00 -0.53 0.04 0.61
1992.25 -0.59 -0.03 0.53
1992.50 -0.61 -0.14 0.34
1992.75 -0.67 -0.18 0.3
1993.00 -0.57 -0.09 0.38
1993.25 -0.57 -0.1 0.36
1993.50 -0.55 -0.08 0.38
1993.75 -0.5 -0.07 0.36
1994.00 -0.43 0.15 0.73
1994.25 -0.41 0.21 0.82
1994.50 -0.39 0.14 0.68
1994.75 -0.4 0.18 0.76
1995.00 -0.33 0.21 0.74
1995.25 -0.3 0.18 0.67
1995.50 -0.26 0.2 0.66
1995.75 -0.29 0.21 0.7
1996.00 -0.24 0.2 0.64
1996.25 -0.18 0.25 0.67
1996.50 -0.23 0.16 0.55
1996.75 -0.26 0.15 0.56
1997.00 -0.29 0.09 0.46
1997.25 -0.38 0.06 0.49
1997.50 -0.41 0.03 0.47
1997.75 -0.48 -0.04 0.4
1998.00 -0.5 -0.1 0.31
1998.25 -0.5 -0.09 0.31
1998.50 -0.35 0.01 0.37
1998.75 -0.36 -0.01 0.35
1999.00 -0.37 0.04 0.44
1999.25 -0.43 -0.02 0.38
1999.50 -0.43 -0.03 0.37
1999.75 -0.38 -0.02 0.34
2000.00 -0.35 0.01 0.37
2000.25 -0.54 -0.14 0.26
2000.50 -0.43 -0.08 0.26
2000.75 -0.39 -0.06 0.28
2001.00 -0.38 0.09 0.55
2001.25 -0.3 0.01 0.32
2001.50 -0.27 0 0.27
2001.75 -0.45 -0.19 0.07
2002.00 -0.57 -0.27 0.03
2002.25 -0.39 -0.13 0.13
2002.50 -0.43 -0.12 0.19
2002.75 -0.25 0 0.24
2003.00 -0.33 -0.1 0.14
2003.25 -0.25 0.02 0.29
2003.50 -0.23 0.05 0.32
2003.75 -0.14 0.2 0.54
2004.00 -0.1 0.25 0.61
2004.25 -0.07 0.3 0.68
2004.50 -0.15 0.23 0.61
2004.75 -0.31 0.11 0.53
2005.00 -0.67 -0.16 0.36

Source: Dynan, Elmendorf, and Sichel (2006a)
Note: 95th Percentile Confidence Interval Shown by Dashed Lines

Figure 7: Household Vulnerability to Economic Shocks
Lower Left Panel
Household Net Worth
Relative to Personal Income
Year Ratio
1980 3.89
1981 3.81
1982 3.86
1983 3.85
1984 3.75
1985 3.95
1986 4.14
1987 4.1
1988 4.16
1989 4.25
1990 4.09
1991 4.24
1992 4.13
1993 4.23
1994 4.15
1995 4.42
1996 4.53
1997 4.77
1998 4.91
1999 5.26
2000 4.83
2001 4.62
2002 4.35
2003 4.71
2004 4.79
2005 4.9
2006 4.96

Source: Flow of Funds

Figure 7: Household Vulnerability to Economic Shocks
Lower Right Panel
Percentiles of NW/Y (Ratio)
Year 25th Pctile 50th Pctile 75th Pctile 90th Pctile
1981        
1982        
1983 0.33 1.55 3.9 8.14
1984        
1985        
1986        
1987        
1988        
1989 0.32 1.72 4.67 9.77
1990        
1991        
1992 0.34 1.71 4.82 10
1993        
1994        
1995 0.46 1.69 4.88 10.35
1996        
1997        
1998 0.43 1.93 5.25 10.7
1999        
2000        
2001 0.46 2.04 5.81 12.32
2002        
2003        
2004 0.46 2.13 5.89 12.06
2005        
2006        

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Upper Left Panel
Households with Late Payments
High D/A (Share of Households)
Year Above the 75th Percentile Above the 90th Percentile
1988    
1989 11.53 17.04
1990    
1991    
1992 9.97 14.58
1993    
1994    
1995 12.07 13.59
1996    
1997    
1998 13.27 18.41
1999    
2000    
2001 13.35 19.36
2002    
2003    
2004 15.91 24.08
2005    
2006    

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Upper Right Panel
Households with Late Payments
High D/Y (Share of Households)
Year Above the 75th Percentile Above the 90th Percentile
1988    
1989 6.06 6.77
1990    
1991    
1992 6.49 9.6
1993    
1994    
1995 7.15 9.16
1996    
1997    
1998 8.62 9.38
1999    
2000    
2001 7.25 10.8
2002    
2003    
2004 7.86 10.56
2005    
2006    

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Middle Left Panel
Percentiles of D/A
Upper Half of Distribution (Ratio)
Year 50th pctile 75th pctile 90th pctile 95th pctile
1981        
1982        
1983 0.12 0.39 0.71 0.95
1984        
1985        
1986        
1987        
1988        
1989 0.13 0.44 0.79 1.1
1990        
1991        
1992 0.15 0.47 0.81 1.23
1993        
1994        
1995 0.16 0.51 0.83 1.14
1996        
1997        
1998 0.17 0.51 0.87 1.35
1999        
2000        
2001 0.16 0.5 0.82 1.15
2002        
2003        
2004 0.21 0.55 0.88 1.27
2005        
2006        

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Middle Right Panel
Percentiles of NW/Y
Age of Head 30-39 (Ratio)
Year 25th pctile 50th pctile 75th pctile 90th pctile
1981        
1982        
1983 0.25 1.01 2.33 4.17
1984        
1985        
1986        
1987        
1988        
1989 0.12 0.83 2 3.99
1990        
1991        
1992 0.16 0.79 2.07 4.1
1993        
1994        
1995 0.23 0.88 1.97 3.88
1996        
1997        
1998 0.17 0.91 2.24 5.02
1999        
2000        
2001 0.15 0.95 2.22 4.61
2002        
2003        
2004 0.22 0.92 2.19 4.38
2005        
2006        

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Lower Left Panel
Percentiles of NW/Y
Age of Head 40-49 (Ratio)
Year 25th pctile 50th pctile 75th pctile 90th pctile
1981        
1982        
1983 0.63 1.74 3.23 6.4
1984        
1985        
1986        
1987        
1988        
1989 0.53 1.78 3.8 7.27
1990        
1991        
1992 0.52 1.49 3.26 5.95
1993        
1994        
1995 0.6 1.55 3.55 6.79
1996        
1997        
1998 0.63 1.82 3.79 7.22
1999        
2000        
2001 0.7 1.93 4.22 8.03
2002        
2003        
2004 0.66 2.05 4.17 7.28
2005        
2006        

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Lower Right Panel
Percentiles of NW/Y
Age of Head 50-59 (Ratio)
Year 25th pctile 50th pctile 75th pctile 90th pctile
1981        
1982        
1983 1.05 2.49 4.74 9.71
1984        
1985        
1986        
1987        
1988        
1989 1.25 2.71 4.93 9.96
1990        
1991        
1992 0.9 2.85 5.76 10.44
1993        
1994        
1995 1.09 2.83 5.33 9.72
1996        
1997        
1998 0.97 2.88 6.12 11.3
1999        
2000        
2001 1.19 3.11 6.47 12.76
2002        
2003        
2004 1.06 3.24 6.84 13.3
2005        
2006        

Source: Survey of Consumer Finances

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