For the past several years, the U.S. has been inundated with cheap credit. On the plus side, low interest rates meant more families could afford, among other things, mortgages even while prices for homes were going higher and higher. Consequenlty, in just ten years the national homeownership rate went from 65.4 percent in 1996 to 68.8 percent in 2006. That’s a huge jump considering that the national rate wobbled between 64-65 percent for almost 4 decades.

On the negative side, low interest rates meant families assumed more debt; and with more debt comes more interest payments on that debt. The Federal Reserves tracks what they call the household debt service ratio – an estimate of the ratio of debt payments to disposable personal income. From 1996 to 2006, the debt service ration jumped from 11.87 percent to 14.29 percent. For households in the lowest income quintile, the debt burden eat up 26 percent of their income in 2004. In other words, for every dollar that low-income families earned, 26 cents went to pay off their debts, leaving only 74 cents to pay for everything else.

Bottom line is that low cost credit meant more spending and thus less savings. It’s no wonder that our national savings rate dipped to negative 1 percent during this period of low-cost credit.

But the party seems to be coming to a close. Maybe now we can start a serious policy discussion on how to help families save and invest on assets that matter.