The Bank of England’s base rate sat at 0.1% for twenty months between March 2020 and December 2021, creating a global hallucination that capital was essentially a free utility. During this window, the volume of corporate debt in the United States surged to over $12 trillion, as CFOs from mid-market manufacturing firms to Silicon Valley software houses treated leverage as a permanent substitute for equity. This period of cheap money obscured a fundamental law of commercial physics that is only now reasserting itself with painful clarity. Debt is not a revenue stream; it is a time-machine that pulls future earnings into the present, charging a premium for the privilege.

When the cost of borrowing was negligible, the distinction between productive debt and destructive debt became blurred. Companies like Carvana and Peloton utilized massive debt loads to fund aggressive customer acquisition strategies that never quite achieved the unit economics required to service those obligations once interest rates normalized. By the third quarter of 2023, corporate defaults in the US had risen by 30% compared to the previous year, according to S&P Global Ratings. This wasn't a failure of the debt mechanism itself, but a failure of the intellectual framework used to deploy it. Leverage is a precision instrument.