OECD economists Nathalie Girouard, Mike Kennedy and Christophe Andre published an interesting study on the rise of household debt driven by rising household wealth. They document a significant relationship, that on average a dubling of net worth reduced household savings by 1 to 6 percent of GDP, depending on method used. Concluding paragraph is below:

“In those countries where wealth valuation effects have increasingly been used as a substitute for personal saving, a marked fall in asset values has the potential to trigger a compensatory increase in the saving ratio, implying a slowdown in household consumption. This could have significant effects on the overall economy, given the importance of private consumption in national income, thereby also possibly adding to any stain on financial sector balance sheets. In the United States, however, the possibility of cooling asset markets and raising borrowing costs may move the saving ratio to a level which is more in line with historical averages. While such a development would act as a short-term drag on household spending and GDP growth, an increase in domestic saving would probably help correct the large imbalance that exists in the US current account.”