Standard Of Living Bubble

DEFINITION of 'Standard Of Living Bubble'

The concept of consumers living beyond their means for an extended period of time. The notion of a standard of living bubble is characterized by flat inflation-adjusted earnings for members of the workforce over several years, during which the use of consumer credit and spending increases in order to provide the illusion of increases in standard of living.

BREAKING DOWN 'Standard Of Living Bubble'

The standard of living bubble refers to consumers relying on credit to feel rich, instead of relying on increased real wages, which simply did not occur. Some have characterized the western economies as having this type of consumer credit bubble, as in years, such as 2005; the average personal savings rate for Americans was negative. This meant that the average American was actually saving a negative amount of money over the course of the year, i.e. spending more than they earned.