SOURCE: Federal Reserve Bank of Richmond

September 18, 2006 17:08 ET

Richmond Fed's Economic Quarterly Examines Whether American Consumers Are Living Beyond Their Means

Borrowing by U.S. Households by John A. Weinberg

RICHMOND, VA -- (MARKET WIRE) -- September 18, 2006 -- Throughout American culture, credit typically has been seen as a good thing, while debt has had more negative connotations. Are these perceptions valid? And are today's Americans "drowning" in debt? Not necessarily, if you're looking at the economics of borrowing. From that vantage point, the story is quite different. John A. Weinberg, the Bank's Director of Research, looks at the recent history of borrowing in the United States and suggests that the expansion of credit has been beneficial to most people. Generally, households make forward-looking borrowing decisions, which allow them to smooth their consumption over time. Improved technology and increased competition have driven down the average costs of borrowing, making it easier for households to service their debt. Not all consumers make wise borrowing decisions, however, and as a result greater focus on financial education may be an appropriate policy response.

You can find the full text of this article and others in the latest issue of Economic Quarterly at:

Also in the Summer 2006 issue:

--  The Productivity of Nations by Margarida Duarte and Diego Restuccia
--  Inflation Uncertainty and the Recent Low Level of the Long Bond Rate
    by Yash P. Mehra
--  Making the Systematic Part of Monetary Policy Transparent by Robert L.
The Economic Quarterly is a free publication containing economic analysis pertinent to Federal Reserve monetary and banking policy. For free copies or more information, contact the Federal Reserve Bank of Richmond's Public Affairs office at 804.697.7982.

The Federal Reserve Bank of Richmond is one of 12 District Reserve Banks that together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Richmond Fed serves the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

Contact Information

  • Contacts:
    John Weinberg
    Director of Research
    Federal Reserve Bank of Richmond

    Kay Haynes
    Research/Publications Unit
    Email Contact