Wealthion · Thursday, August 6, 2026
Steve Hanke warns that sustained high interest rates could lead to bubbles popping or deflating. He explains that rising discount rates used to calculate the present value of future cash flows will lead to a decrease in those present values, affecting asset valuations.
“So so what happens just to kind of finish the thing. What happens if you have these elevated interest rates and they keep going up and the bond vigilantes are on guard you you have a situation where invest investing in bonds is not a very good idea because if the yields go up the bond price goes down.”
“They're inversely related and the other thing is that discount rate that's used to calculate the present value of free cash flows or profits or whatever the flow is if the discount rate goes up what goes down down the present value.”
“So this this is kind of a a threat shall we say that might be something that eventually starts either popping bubbles or you know letting the air come out of bubbles so.”