US household debt has climbed to a record high, and a leading European bank is warning that the trend could spell serious trouble for the broader economy. With Americans borrowing more while saving less, analysts say the foundations of US economic growth may be far more fragile than they appear.

A Record Debt Pile

In a recent note to clients, Société Générale highlighted a worrying pattern that has taken hold across the United States in recent years: rising household debt paired with a steep decline in household savings.

The numbers tell a striking story. Total liabilities among US households swelled to a record $19.9 trillion at the end of the first quarter, according to Federal Reserve data — a clear sign that Americans are continuing to borrow heavily to fund their spending.

At the same time, the personal savings rate has dropped to near-record lows, shrinking to just 2.6% in April, according to the Bureau of Economic Analysis. In other words, Americans are spending more while setting aside less of their income than almost ever before.

The Wealth Effect at Work

So what’s driving this behavior? According to Albert Edwards, a SocGen strategist and well-known market bear, the answer may lie in the so-called “wealth effect” — a phenomenon where people spend more because rising asset prices make them feel wealthier.

With stocks and real estate climbing, many Americans feel richer on paper, even if their actual incomes aren’t keeping pace. The stock market, in particular, has surged on relentless enthusiasm for artificial intelligence, with the tech trade staging a red-hot comeback after stumbling earlier in the year.

Why This Is Risky

Here’s where the danger lies. If consumers are spending more largely because of their rising paper wealth, then economic growth becomes increasingly tied to the fate of the AI-driven market rally.

That’s a significant vulnerability, given that consumer spending accounts for roughly 70% of US GDP, according to an analysis from the Boston Fed. When so much of the economy rests on consumer behavior, a sudden shift in spending could have outsized consequences.

Compounding the concern, measures of household income growth have already begun to weaken. Personal income excluding transfers contracted to $16.5 trillion in April, down about $200 billion from its 2025 peak.

The Wile E. Coyote Warning

Edwards offered a memorable and ominous metaphor to describe the situation. He compared the US consumer to Wile E. Coyote — the cartoon character who runs off a cliff, hangs suspended in midair for a moment, and then plummets.

The point is that consumer spending could face a sharp collapse if Americans suddenly felt motivated to save more, such as in the event of a major stock market downturn. As Edwards put it, it doesn’t take a Fed economist to recognize that if the savings rate stops falling, consumer spending will only grow in line with income — which is already declining. And if the savings rate were to climb back toward more normal levels, the consequences for the economy could be severe.

Debt Is Losing Its Power

Beyond the savings concern, Edwards pointed to another troubling development: debt is becoming less effective at fueling economic growth.

He cited the “credit intensity of GDP,” a measure of how much debt is required to generate a given amount of economic growth. That figure rose to 3.73 last year — the highest in at least 70 years, according to analysis from Bespoke Investment. In simple terms, it now takes more borrowing than ever to produce the same economic gains.

A Vulnerable Economy

Taken together, these trends paint a picture of an economy leaning heavily on borrowed money and inflated asset values. Edwards warned that this leaves the US especially exposed should investors begin to doubt the long-promised payoff from the AI boom — the “pot of gold at the end of the AI rainbow,” as he described it.

His advice was blunt: watch this debt-laden space closely.

The Bottom Line

The surge in US household debt, combined with shrinking savings and weakening income growth, has placed the economy in a precarious position. For now, rising markets and the AI trade are helping keep consumers spending. But if that confidence falters, the very foundation supporting much of US economic growth could give way — leaving the consumer, like Wile E. Coyote, suspended briefly before the fall.