Bill Gross writes ….. Don’t be allured by the Trump mirage of 3-4% growth and the magical benefits of tax cuts and deregulation. The U.S. and indeed the global economy is walking a fine line due to increasing leverage and the potential for too high (or too low) interest rates (i think he is talking only about debt and not equity) to wreak havoc on an increasingly stressed financial system. Be more concerned about the return of your money than the return on your money in 2017 and beyond.
When interest rates are on falling trajectory then it is not difficult for higher amount of debt to be serviced and even more debt to be raised from market because whoever has bought debt ( bonds) see the value of bonds going up hence willing to fund more debt as capital appreciation is gauranteed. it is only when interest rates starts rising ( i still believe only shorter end rates will rise) then the fun starts if all those debt which has been created is not used for creating earning asset and used only for consumption or buybacks (emphasis Mine).
In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%.
For reference ,in India our total debt ( private + govt) is 150% of GDP mainly because inflation in India has reduced the value of debt and inflation means increased burden of tax on you and me . And unlike both china and US our growth rates are higher.