90% Market Crash and the Only Thing That Could Survive | David B. Collum

Mark (0:00)

Brought to you by The Ore Group, connecting people, objects and capital to fund the next generation of mines. My name is Mark and you're watching Resource Talks weekly news roundup for the week ending October the 11th, 2026 This week, US 10-year and 30-year bond yields hit their highest levels in 24 years.

Gold funds took in $10 billion in September, even as the gold price fell. An Anglo-American says politics is complicating its planned $54 billion merger with tech. Joining us to make sense of it all is Dave Collum, Cornell's Betty R. Miller Professor of Chemistry and Chemical Biology, and the writer behind the annual Year In Review Essays on Markets and the wider world. At the end of the show, I'll ask Dave what change he'd make to our $1 million model portfolio. Dave, thanks for joining us.

David B. Collum (0:58)

Ah, my pleasure, my pleasure.

Mark (1:01)

So let's start off with this news item about US long-term yields hitting 24-year highs this week, with the 10-year rising faster than the 2-year. And you've argued previously that the Fed may have to raise rates, to keep raising rates, to restore credibility, even if it's doing so into a weak economy.

But with long-term borrowing costs already rising, why is it that you think the Fed needs to keep raising?

David B. Collum (1:37)

First of all, people should know that I really am a rank amateur at this. I'm using kind of a human game theory model here to explain it. But I think if the Fed starts dropping rates and the long-term rates keep going up, then I think the Fed loses credibility.

And as a consequence of that, if they are not convinced they can get the yield curve to behave itself, I think they will risk economic problems and finance problems and market problems to avoid sacrificing that. So if yields kept climbing and they're dropping, I think people say, oh, the Fed no longer has any ammo.

Mark (2:22)

So tell us more about this game theory approach that you're using. And if it's a question of credibility, what does the Fed actually need to achieve in order for markets to believe that they're still credible in your mind?

David B. Collum (2:37)

Well, they haven't been credible for a long time in my mind. So there's that problem.

What Warsh could do, for the last 15 years, Warsh has been a hawk. And what Warsh could do is continue to sound like a hawk. And he's, I was listening to, I was in Keith McCullough's investing summit yesterday, and I was listening to one of them, I think it was Danielle, and Danielle D. Martino Booth. And she seems to think, and I don't listen to Warsh's speeches and stuff at this point. So she seems to think that he's talking like one of the old school doves now. I'm hoping not, because he literally for 15 years has been militantly opposed to NERP and ZERP and QE and things like that. And so if all of a sudden he just becomes new boss same as the old boss, then the Fed loses credibility.

Mark (3:31)

But if the economy keeps weakening, you know, what would make you change your mind about further hikes being necessary? Because there's sort of a question of the letter of two eagles, isn't there? On the one hand, they lose credibility. On the other hand, they break out a recession.

How do they choose between those two outcomes?

David B. Collum (3:56)

I don't think the Fed should be in charge of recessions.

I don't agree with the dual mandate. I think they're in charge of making the currency stable. And to that extent, if you take that as a sort of like in the constitutional, a literalist, a sort of original document thinker, the Fed's not in charge of recessions at all. And they've also been a disaster because they certainly haven't protected the currency. There's all sorts of reasons why. So I'm not living in a dream world that thinks somehow that that's just, they're going to do that. But I still remember Volcker.

And he certainly wasn't afraid of recessions. And he wrestled, and they were burning effigies, you know. And they were, the world was mad at Volcker. And he teed us up for a long methodical rate reduction cycle by taking a lot of pain upfront. So I have this funny feeling. If you look at Fed Chairman over the years, it looks like they were all put into place to serve a purpose, right? Not just we found out, but so Greenspan looked like he's put into place to be a free market guy. He blew it, in my opinion, but he started out as an Ayn Rand acolyte and stuff like that. So it was perfect logic for Greenspan to be in there in a Reagan era.