From page 22 of How to Predict the Next Financial Crisis (PDF, 30 pages, 2012) by Steve Clemons and Richard Vague:
Creating consumer demand — the goal that so often eluded policymakers from Roosevelt forward — is a straightforward process. In 1990, the U.S. consumer debt-to-GDP level was 62 percent. In 2000 it was 70 percent. Today, even after some deleveraging, it is 88 percent. Reduced demand is largely a function of these high levels. Reduce the debt, and demand reappears.
"Reduce the debt, and demand reappears."
It's not a metaphor for something else. It is offered as a way to fix the economy.
If Clemons and Vague are right, we must be able to see it in the numbers. Okay, so here is consumer debt. Or more precisely, household debt:
|Graph #1: Household Debt|
And you know what? Consumer demand was good in the 1990s, after about 1994. That was the time they call "the Goldilocks years", when everything was "just right". Where's the reduced debt that made those years good? Ha!
Oh, you know what? The quote says "debt-to-GDP" but I only showed debt. This next graph shows consumer debt-to-GDP:
|Graph #2: Household Debt relative to Income|
And the 1990s? There's a sharp increase in the mid-1980s, not a reduction of debt. And then from the mid-80s to the year 2000, persistent increase. Again: no reduction of debt appears on this graph.
Let's try one more graph. This one shows household debt, relative to the quantity of money that's used as income. That's the money we use when we make payments on our debts -- and the money we spend on other things, instead of using credit:
|Graph #3: Household Debt relative to the Money We Use as Income|
And the 1990s? Well look at that! Yes, on this graph debt fell a bit in the early 1990s, just before productivity improved and the economy got pretty good for a while. There it is in the numbers, the reduced debt that made the "Goldilocks" years good.