Americans are piling on record debt

Good news! Americans are taking out loans at the fastest pace in years. The bad news? Americans are taking out loans at the fastest pace in years.

Total consumer borrowing reached a record high in September of $3.5 trillion, recording the biggest one-month jump since the U.S. entered the Second World War, according to data released last week by the Federal Reserve.

At the same time, businesses in recent years have capitalized on low interest rates to issue what Goldman Sachs (GS) analysts say are "record" levels of debt. Most of that money is going to fund repurchases of their own stock, dividend payments, and mergers and acquisitions.

"This has driven the total amount of debt on balance sheets to more than double pre-crisis levels," they wrote in a research note.

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Companies have issues a record amount of debt this year to fund share buybacks, dividends and M&A deals.
Dealogic, Goldman Sachs

What are most people using the money for? Largely to cover car payments and school costs -- September represented the largest increase in auto and student loans since mid-2011. Credit card debt is also climbing, while mortgage lending is rising slowly.

Consumers taking on more debt typically signals growing confidence in the economy. Of late, that's for good reason. Job growth hit the gas in October, while employees wages -- the recovery's missing piece -- rose to a post-recession annualized high of 2.5 percent. In turn, growing optimism should propel consumer spending, corporate profits and hiring, which tends to further push up worker pay.

At least that's the way it's supposed to work. Goldman notes that companies' cash flows haven't kept pace with their borrowing, resulting in the highest corporate leverage metrics in 10 years. And while borrowing to buy back stock may benefit some investors, it may not do much to help companies grow over the longer term.

The question is whether the party will end once the Federal Reserve hikes interest rates, as many forecasters expect it to in December, and if slowing global growth will dent the U.S. economy.

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    Alain Sherter covers business and economic affairs for CBSNews.com.