Page 218 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

5. Debt rose tremendously. But so did incomes, so the impact wasn’t a
big deal.
COBACOBA

Household debt increased fivefold from 1947 to 1957 due to the
combination of the new consumption culture, new debt products, and interest
rates subsidized by government programs, and held low by the Federal
Reserve.

But income growth was so strong during this period that the impact on
households wasn’t severe. And household debt was so low to begin with

after the war. The Great Depression wiped out a lot of it, and household
spending was so curtailed during the war that debt accumulation was
restricted. So the growth in household debt-to-income from 1947–1957 was
manageable.

Household debt-to-income today is just over 100%. Even after rising in the
1950s, 1960s, and 1970s, it stayed below 60%.

Driving a lot of this debt boom was a surge in home ownership.

The homeownership rate in 1900 was 47%. It stayed right about there for the
next four decades. Then it took off, hitting 53% by 1945 and 62% by 1970.
A substantial portion of the population was now using debt that previous
generations would not—could not—have accessed. And they were mostly
OK with it.

David Halberstam writes in his book The Fifties:

They were confident in themselves and their futures in a way that [those]
growing up in harder times found striking. They did not fear debt as their
parents had … They differed from their parents not just in how much they

made and what they owned but in their belief that the future had already
arrived. As the first homeowners in their families, they brought a new
excitement and pride with them to the store as they bought furniture or
appliances—in other times young couples might have exhibited such