Neiman Marcus knows that consumers love to spend money. That's why it recently began selling a $10,000
custom-designed mermaid suit . But is all this spending getting out of hand? The data say it is. After three years of low interest rates, consumers are awash in debt. Liabilities in the household sector have risen almost 12% in the last year, outpacing asset growth by a factor of nearly three, according to Merrill Lynch. "There's a bubble all right, and it's in debt creation," said Merrill's chief economist David Rosenberg in a recent research note. "This economy has become so addicted to leverage this cycle that it probably wouldn't take much in the way of interest rate action to tip the economic scales the other way." According to Fed data, which came out Friday, consumer credit grew at a 6.5% annual rate in the third quarter, up from 4.8% in the second quarter and higher than the 5.8% pace in the same period a year ago. In September, consumer credit rose at an annual rate of 9.75%. The data comprise both revolving and nonrevolving debt. Mortgage balances have surged 14% in the past year, almost double the pace of real estate appreciation and household debt-to-net-worth ratios are now sitting near all-time highs of 21.5%. Just last year, this ratio was sitting at under 20% and at the end of the 1990s it stood at 15%. Consumers got into this mess largely because the Federal Reserve cut interest rates to a 45-year low. This enabled consumers, whose spending accounts for two-thirds of gross domestic product, to purchase homes, cars and other goods with low financing charges and to take out cheap home equity loans. Despite these high debt levels, most economists don't expect consumers to stop spending any time soon. But the high level of indebtedness could mean that the pace of spending will be modest going forward. Some restraint might already be apparent in earnings reports Thursday by Wal-Mart and Target .