Businesses, consumers and the federal government have taken on enormous amounts of debt since the Great Recession. Optimists argue that total debt is irrelevant; that is, they believe the only thing that matters is the cost of servicing those debts. Fair enough. Then what happens when interest expense does rise? Assuming total debt remains the same, higher rates would increase the percentage of household income or the percentage of corporate/government revenue that must be allocated to debt servicing.

In earlier commentary, I provided data showing how the total debt of corporations has DOUBLED since 2007. Thanks to seven years of zero percent rate policy, alongside a number of iterations of quantitative easing (QE), the average rate on corporate debt is down from eight years ago. More critically, however,average interest expense has risen substantially. That’s right. Corporations need to assign more and more of their “gross” toward paying back the interest on their loans.

What about households? Well, we’re back to the 2007 record debt level of $14.1 trillion in mortgages, credit cards, auto loans, student loans and credit cards; the typical household has nearly $130,000 in total debt. The good news? Years of stimulative monetary policy has made it easier for households to service these debts.

The bad news? Americans “re-leveraged” rather than “de-leveraged.” Any amount of rate hike activity would damage the ability of average Americans to borrow-n-spend. In fact, recent retail data demonstrate just how little Americans feel they have left over to spend, in spite of massive savings at the gas pump.

Traditional home affordability measures like median sales price-median income illustrate just how dependent we are on ultra-low interest rates. Specifically, the historical home price-to-household income ratio is 2.6. Where are we at today? Back near the housing bubble highs of 4.0.