How Rising Interest Rates Threaten the Economy and Banking

Dave Collum explains why rising interest rates could put serious pressure on the economy, the banking system and financial markets. He notes that bond yields are continuing to climb, creating a dilemma for the Federal Reserve. If rates rise without clear Fed action, markets may begin to believe the Fed has lost control of the bond market. At the same time, pushing rates higher could cause economic pain. Collum examines how higher borrowing costs affect mortgages, leverage, investment and asset prices. He argues that the current economy was built on years of much cheaper money, so the relative increase in borrowing costs is especially significant. The discussion questions the idea that the economy is simply “overheating.” It asks what breaks first when an economy built on low rates is forced to adjust to a much higher cost of capital. The episode also touches on broader topics such as monetary policy, inflation, recession risk and the role of Bitcoin in financial sovereignty.