I confess. I haven't borrowed money to buy shares of stock.

But 40 percent of American households have increased their indebtedness to invest in the stock market. They have been using one method called margin trading (drawing on credit lines to pay for share purchases).

As share prices (notably of technology stocks) soared, margin trading took off. And dot-com millionaires sprouted like weeds in spring. Financial optimism ruled creditors and debtors. Some had a jolly good time. Federal Reserve Chairman Alan Greenspan termed their behavior "irrational exuberance."

The explosion in margin debt is striking.

Americans' margin debt reached $278 billion in March 2000 versus $156 billion in March 1999. Households (as opposed to businesses or institutions) carry about 40 percent of this record $278 billion of margin debt, a $13 billion increase from February.

Taking notice of America's heavy borrowing to play the stock market are financial regulators in Britain.

In an April 22 article by James Doran in the Financial Times, he quotes an unidentified spokesperson for the British Financial Service Authority on the perils of margin trading.

"Investors need to understand the implications of what they are doing and the risks involved. The simple message is 'understand the risks you are running and don't risk what you can't afford to lose.'"

Doran continues: "Margin trading is expected to become prevalent in the UK next year when the Stock Exchange moves from T5 to T3 settlement, which means share bargains have to be settled within three days of transaction, rather than five days."

Recall that in America, margin trading mushroomed as share prices climbed. During this bullish time, warnings about the risks of borrowing to play the stock market were drowned out by the euphoria of profit-taking. All this changed with the steep fall in dot-com share prices on April 14, and the resulting loss of $2 trillion in shareholder wealth.

In hindsight, the expectation of ever-rising share prices tempted a growing number of Americans to play the stock market. The allure of striking it rich was and is still strong. And some have done well, growing wealthy beyond their wildest dreams by parlaying borrowed dollars into big profits.

Yet other investors haven't reaped such rewards. And having reached for their share of riches on borrowed money, they are on the financial ropes. For such unlucky investors, now is the time to make hard choices about repaying their margin debt, which remains fixed while share prices--and the value of their investments--have fallen.

On one hand, investors can cut back on consumption. They can spend less on housing, transportation, health care, and education. Such a move would give them more money to service margin debt. However, this method of repayment would also leave them less to spend on personal expenditures.

And there's the rub. A slowdown in consumer buying could be a recipe for a recession. Consumption spending, which accounts for two-thirds of the American economy, is vulnerable to the peaks and valleys of the stock market.

An April 22 article in the British Economist explains, "The direct impact of movements in share prices on the economy operates through the wealth effect." Here's one implication. Slowing--or even reversing--the flow of money from the stock market to the "real" economy could be a cure that harms the patient.

Consider another option for some margin traders. They could assume further debt by borrowing more money to buy additional shares in the hope that their value rises. Yet such an investment strategy runs the risk of increasing--not decreasing--margin debt. This could well be a quick way to throw good money after bad. And who could argue?

Lending and spending, of course, have been around since Biblical days. To be sure, much has changed since then. One of the recent changes is margin trading.

With the bloom now off the rose of technology share prices (permanently?), it would seem that there are more than a few margin traders who are caught between a rock and a harder place. If the first 105 days of the new year are an indication of what lies ahead, they should hold on to their financial hats.

But don't bet on more turbulence in share prices. I won't. Remember, I haven't increased my indebtedness to play the stock market.