The blue line is income, the black line is borrowing, and the result is the orange line, the standard of living.
This is the “gap” between the “standard of living” and real disposable incomes.
In 1990, incomes alone were no longer able to meet the standard of living. Therefore, consumers turned to debt to fill the “gap.”
Currently, there is almost a $2150 annual deficit facing the average American. (Note: this deficit accrues every year, which is why consumer credit keeps hitting new records.)
The debt surge is partly by design. A byproduct of low borrowing costs the Federal Reserve engineered after the financial crisis to get the economy moving. It has reshaped both borrowers and lenders. Consumers increasingly need it. Companies increasingly can’t sell their goods without it. And the economy, which counts on consumer spending for more than two-thirds of GDP, would struggle without a plentiful supply of credit.
Modern paper money is debt. More debt = more money.
All the current trends are unsustainable and accelerating out of control. The financial aristocracy at the top are doing very nicely, but below the top 10% living standards in the West are past their peak (not so coincidentally in 1971, the year financialization of money became complete).
This is almost entirely due to the way we manufacture money and distribute it. The system of creating money out of thin air that has reigned since 1971, inevitably, became absolutely corrupted. History indicates it takes about 50 years (two generations) on average, which is right where we are now.