Household debt to GDP tells you the state of the society. Household debt to income tells you households' ability to repay. If Debt/GDP is fine but Debt/Income is not, you're looking at (a) default (lenders eat dust), (b) inflation (savers eat dust) or (c) public assistance (non-borrowing taxpayers eat dust). That's a political question. If Debt/GDP isn't fine, option (c) flies off the table.
That sounds reasonable, but aren't all of those mitigations for after the shit hits the fan? None of options will prevent a crash unless you can actually exercise them pre-crash.
> aren't all of those mitigations for after the shit hits the fan?
Not necessarily. Raising minimum wages or cutting certain taxes are examples of pre-emptive steps political systems can take to increase households' incomes. Making debt harder or easier to discharge, or raising or lowering policy rates, can be similarly prophylactic.
But according to graphs like this, even though the GDP has been rising, median households have not been getting a corresponding increase in income: https://en.wikipedia.org/wiki/Household_income_in_the_United...
So the income we are adjusting against is not necessarily going to the people that are in debt!