U.S. corporate debt tops $9 trillion – analysts warn it’s about to explode

Last week, financial experts sounded the alarm about China’s corporate debt problem. It was reported that Chinese corporations that held their debt in dollars will soon experience a tidal wave of defaults within the next two years.

It turns out the U.S. also has a corporate debt problem.

According to a new CNBC report, U.S. corporate debt stands at approximately $9 trillion – and, the analyst say, it’s about to explode. This figure has nearly doubled since the beginning of the Great Recession, when it stood at $4.9 trillion.

While Wall Street believes that it’s manageable in the short-term, it could potentially become a headache within the next two years, as credit spreads blow up and interest rates spike. This would result in attacks on corporate profit margins.

More from the business news network:

Essentially, the situation can break in two ways: a good-news case where companies can manage their debt as the economy stabilizes and interest rates stay in check, and the other where the economy decelerates, rates keep heading up and it’s no longer so easy to keep rolling that debt over.

There’s one worrying trend where companies on the edge of the investment-grade universe lose their standing and turn into high-yield or junk, sending rates — and defaults — significantly higher. And there’s a more positive case where the U.S. continues to outperform the rest of the world and corporate debt problems are limited to overseas and specific companies that aren’t systemically important.

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Over the past decade, companies have taken advantage of low rates both to grow their businesses and reward shareholders.

Debt will likely be the biggest factor in the next financial crisis. Every aspect of life is deeply in debt, from the consumer to the stock trader to the government. Fasten your seatbelts, as Margo Channing says, it’s going to be a bumpy night.