The whole sorry mess in one picture | Wise Bread

"Everything looks fine from the 1950s right up until the late 1990s. New borrowing goes up during expansions and drops during recessions. (Sometimes it even drops below zero in a recession--people are paying off old debt faster than they're taking on new debt.) Saving rises a bit during the early 1980s, when interest rates reached generational highs, then declines pretty steadily as interest rates fell.

Then, starting in about 1998, borrowing just goes through the roof.

How did that happen? It was largely due to two things:

++ China and rich oil-producing countries were making huge profits from our purchases, leaving them with lots of dollars. One thing they did with those dollars was lend them to us.

++ Banks lobbied for and got permission to lend much more money for each dollar deposited. Instead of lending out around $10 for each dollar deposited, they could lend out $30 or $40. And, using houses as collateral, they did just that."