"increased demand for credit can drive up interest rates"

Noah Williams, Financial Instability via Adaptive Learning, 2015

I have to take something out of context. 

In his PDF, Williams sets the stage by giving a brief summary of Minsky’s financial instability hypothesis. I skip to the point where he writes

the growth of credit expands

He then follows up, saying

Eventually, the growth of demand for credit leads to highly levered positions which can be difficult to sustain if there is an increase in the cost of debt service.

Well said. The funds that go to service debt are largely a transfer of income from the nonfinancial sector to the financial sector. This transfer of income hinders economic growth.

Williams attaches a footnote to that last quoted sentence, footnote 1:

Minsky emphasized how increased demand for credit can drive up interest rates and so increase the costs of high leverage. In this paper interest rates are constant, so this channel is shut down...

 In three bullet points we find a tidy endogenous package:

• "the growth of credit expands"
• "increased demand for credit can drive up interest rates and so increase the costs of high leverage"
• "highly levered positions ... can be difficult to sustain if there is an increase in the cost of debt service"

I accept this as a given. But rising interest rates are not the only avenue by which the costs of leverage increase. As long as credit grows faster than output, the growth of credit itself increases that cost, even when interest rates remain unchanged. The three bullet points can therefore be reduced to one:

• "the growth of demand for credit leads to highly levered positions which can be difficult to sustain"

Everyone on the internet points out the effect of rising interest rates. None of them point out that the same effect is created by the increase of outstanding credit.