American consumers took on debt at a rapid rate to start the 21st Century.  Take a look at this chart of houshold debt from the McKinsey Quarterly:

So when the bubble burst, what happened?  Americans stopped borrowing and started saving.  Look at the fall in borrowing--starting just before the global economic crisis hit last September:

The charts are from a new article by Charles Atkins and Susan Lund, consultants for McKinsey.  In The Economic Impact of Increased US Savings, they write that the current trends could be part of a dangerous cycle:

How far these trends will go is a critical economic uncertainty in the months ahead. The economic impact of today’s deleveraging will depend on how it unfolds—through income growth, higher savings, or some combination of the two.

If incomes stagnated, for example, households could deleverage only by saving more. Every percentage point reduction in the debt-to-income ratio would require nearly a one percentage point increase in the savings rate. The US personal savings rate reached 5 percent in January, 2009. If this level prevailed and incomes didn’t grow, this would reduce the household debt-to-income ratio by five percentage points—which still wouldn’t be enough to restore the levels of indebtedness prevailing in 2000, before borrowing started to accelerate.

But if incomes rose, households could both reduce their debt burden significantly over time and continue to consume. If US incomes grew by 2 percent a year, for instance, households could reduce their debt-to-income ratio by as much as they would in the scenario above—but with a personal savings rate of only 2.3 percent.

Read the full article here.