The conventional division of household payment flows between consumption and saving is not suitable for investigating either the causes of changing household debt–income ratios, or the interaction of household debt with aggregate demand. To explain changes in household debt, it is necessary to use an accounting framework that isolates net credit-market flows to the household sector, and that takes account of changes in the debt–income ratio resulting from nominal income growth as well as from new borrowing. To understand the implications of changing household income and expenditure flows for aggregate demand, it is necessary to distinguish expenditures that contribute to demand from expenditures that do not. Applying a conceptually appropriate accounting framework to the historical data reveals that the rise in household leverage over the past 3 decades cannot be understood in terms of increased household borrowing. For both the decade of the 1980s and the full post-1980 period, rising household debt–income ratios are entirely explained by the rise in nominal interest rates relative to nominal income growth. The rise in household debt after 1980 is best thought of as a debt disinflation, analogous to the debt deflation of the 1930s.