The 2008 U.S. financial upheaval raises important questions about the sources of household consumption and debt growth, along with their macroeconomic effects. We argue that spending and financial preferences evolve as social norms interact with both cultural trends and institutional changes in household finance. We identify historical forces that raised consumption and debt over the past quarter century and interpret these events with Hyman Minsky's financial cycle framework. Strong consumption helped moderate recessions and boost growth since the mid 1980s. But unprecedented household debt has now culminated in a financial crisis that threatens to cause a deep recession.
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