of this comment is that our current economic difficulties are a payback for past excesses. households, it is said, were seduced by easy credit and rising asset prices, leading to a debt fuelled spending boom. as a result, we now face a period of retrenchment as we make amends for our former spendthrift ways. like much conventional wisdom, these views contain a kernel of truth. but their repetition has led to exaggeration and distortion. separating fact from fiction is vital when forming a view on the economic outlook. consumer spending accounts for two - thirds of total demand in our economy ; decisions made by consumers up and down the country will be critical in determining the strength and sustainability of the recovery. a natural place to start would be with the “ consumption boom ”, which is often presumed to have preceded the bust. but in fact there was no such boom. between the turn of this century and the onset of the financial crisis, consumer spending increased no faster than it had done, on average, over the past 40 years. 1 moreover, the fraction of our national output consumed by households did not increase. the kernel of truth in the consumption boom story is that changes in the distribution of our national income meant that this stable growth of aggregate consumer spending was associated with a sharp decline in the household savings ratio. the proportion of income that households set aside fell from close to 10 % in 1997 to a little over 2 % ten years later. although there was no spending boom, households were making less provision for the future. where did all the debt go? but how does the absence of a spending boom fit with the headlines about the rise in debt. the big increase in household debt over the past decade is certainly not a myth. household consumption growth was, however, unusually strong in the period 1996 - 2000. my colleague andrew sentance has stressed the importance of analysing trends in consumption over longer periods ( eg sentance 2007 ). debt as a proportion of income increased from 100 % to 165 % in the 10 years to 2007. if this big run up in debt was not used to finance a surge in spending, where did it all go? the answer to this question lies in developments within the housing market. house prices trebled in the ten years to 2007. and mortgage debts were accumulated to pay for the housing that had become so much more expensive. the conventional wisdom that the sharp increase in household debt was associated with the house price boom of the

that substantially revise the process by which banks return unpaid checks, which has expedited the receipt of those checks by depositary banks and ensured prompt notice of large - dollar returned checks. in addition, the board has adopted rules that enhance the legal abilities of private - sector banks to obtain same - day final settlement for checks presented by a specified time, which has spurred competition in the provision of check clearing services, improved efficiency, and sped the collection of many checks. section 611 ( f ) of the efaa states " the board is authorized to impose on or allocate among depository institutions the risks of loss and liability in connection with any aspect of the payment system, including the receipt, payment, collection, or clearing of checks, and any related function of the payment system with respect to checks. liability under this subsection shall not exceed the amount of the check giving rise to the loss or liability, and, where there is bad faith, other damages, if any, suffered as a proximate consequence of any act or omission giving rise to the loss or liability. " [ 12 u. s. c. § 4010 ( f ) ]