The ratio of household debt to disposable personal income fell rapidly during the recession of 2007-09 as consumers defaulted on loans, paid down debt, and took out fewer loans. According to some economists, this household debt reduction — "deleveraging" — has constrained consumer spending, contributing to a longer, deeper recession and a slower recovery. As households strengthen their balance sheets, their ability to take on new debt to finance consumption is improving, but household debt remains elevated by historical standards, and other determinants of consumer spending remain weak.
Case, Karl E., John M. Quigley, and Robert J. Shiller, "Wealth Effects Revisited 1978-2009," NBER Working Paper No. 16848, March 2011. (An earlier version is available online.)
Household Debt Service and Financial Obligations Ratios, Federal Reserve Board of Governors
Mishkin, Frederic S., "What Depressed the Consumer? The Household Balance Sheet and the 1973-75 Recession," Brookings Papers on Economic Activity, 1977, vol. 1, pp. 123-164.