Final answer:
Higher debt has resulted in consumers having less financial flexibility. With stagnant wages and increased borrowing like subprime mortgages and credit card debt, consumers' ability to spend and save is diminished. The credit boom in the post-1990s, and the subsequent financial crisis, illustrate the risks associated with high consumer debt levels.
Step-by-step explanation:
Due to higher debt, consumers now have less financial flexibility. As debt levels rise, consumers face increased financial obligations from interest and principal repayments, which reduce their disposable income. Over time, with wages not keeping up with inflation, many have resorted to borrowing to maintain their standard of living, but this has led to an accumulation of debt that can limit future spending and saving. Subprime mortgages and credit card borrowing in particular have placed additional strain on consumer finances.
The credit market conditions described above, particularly post the 1990s economic growth, saw consumers increasingly turning to credit options to supplement their income. With stagnant wages and rising costs, credit has become a means to bridge the gap, but with adverse effects on savings and increases in debt-to-income ratios. This precarious financial state was a contributing factor to the financial crisis around 2008 where high levels of indebtedness and risky lending practices led to widespread defaults.