For those who remember the days of recession, high unemployment and high inflation in the 1970s, the state of the American economy in 1999 is remarkable. We are enjoying the longest peacetime recovery in U.S. history, a record low unemployment rate (4.3 percent in May), and few signs of inflation, despite rapid expansion of output and jobs. The strength of the U.S. economy is largely the result of unusually strong spending by consumers. Increased levels of personal wealth (in the form of rising values of financial capital and housing) have made households more comfortable about borrowing to finance spending. Furthermore, demographic changes have augmented the number of younger households, which borrow against future earnings as they begin to establish families and careers, as well as the share of retired households, which spend beyond their current incomes by gradually reducing savings and selling assets.