The story is actually dates from the 13th century, made popular by the Brothers Grimm in the 19th. The villagers renege on their deal with the rat clearing piper & he exacts his revenge in a horrific manner. From this we get the phrase, "paying the piper."
In the 1940s personal savings rates were close to 25%, perhaps this had as much to do with rationing and the lack of goods to purchase, however even in the 70's & 80's they ran between 6% and 8%. By the Millennium savings rates had dropped to around 2% and actually went into negative territory (people extracting more from their savings than depositing) in 2004.
Household debt (adjusted for income) as a share of disposable income rose from around 33% in the 1940s to 86% in the late 90's. However, from 2000 until 2005 it had risen 30 points from 102% to 131%, in other words, people were spending 30% more than they earned.
The savings rate & spending rate are closely tied, the less you save, the more you spend & it was this burst of credit fueled purchasing that drove our economy into overdrive over the past decade.
We lived in a beautiful upwards spiral, ever lax banking regulation funneled more & more dollars into consumer's hands. Buoyed with this wealth they bought bigger homes forcing property prices upwards. They then borrowed against these homes' inflated values to purchase big ticket consumer goods. By now financial institutions were repackaging loans & selling them off so a borrower's ability to pay became less important than the origination fees associated with the debt. The huge sums of money flowing into the economy by unrestrained consumer spending buoyed up every sector of the market.
However, a house of cards is just that. For all the endless analysis & chatter in the media it's a very simple equation, an economy cannot be built on top of a giant Ponzi scheme. An endless party of borrowing and spending was obviously not going to have much sustainability. And here we are, acting all surprised as usual.