Interest Rates Spike, Politicians Take Sides on the AI Safety Debate, Time’s AI Cover | Diet TBPN

John Coogan (0:02)

Top thing on my mind today is figuring out what's going on with interest rates, the high interest rate phenomenon. We had zero interest rate policy, ZERP, the ZERP era ended. Now we're in the HIRP. I don't think we should say that one. That doesn't sound very good, but the high interest rate policies, the high interest rate phenomenons are upon us. What's going on? It's very obvious what's going on. You take one look at the chart, it's the war. You can see the US attacks Iran in the beginning of 2026 Interest rates are low. We should pull up this chart from The Wall Street Journal. It gets more dramatic every time they show this chart, this one right here, Jordi.

Take a wild guess, what's driving interest rates? It is, of course, the war, which starts there, and then boom, up and to the right from then on. But there's other questions about what's going on. Is AI, is the buildout having an effect here? What else is going on within this data? Why is it happening?

Does war always lead to higher interest rates? That was something that was on my mind, so I wanted to get into that. It's obviously bad for everyone. It's bad for the US government, because they have to refinance debt and pay interest, and that puts stress on all the other things that the government wants to do with money, from healthcare, pensions, even funding the military. If they're paying interest, they're not paying for other stuff, that's not good.

Bad for the prospects of the American homebuyer. Interest rates are now above 7%, getting very unaffordable for lots of people, and also a lot of mortgages are rolling over, so the era of the 3% mortgage, less and less people still have those, because people are either moving on to floating rate mortgages, or moving out of interest locked periods. There's a whole bunch of dynamics there, and it's even bad for AI companies, so everyone hates those, because the AI companies, of course, even though they have an ungodly amount of money, they need to raise more money to finance build out and finance data centers and finance expansion. And so, not good for anyone. How do you get out of it? Maybe end the war, but there are other things at work. This war is unique. I mean, it's not that war causes interest rates to go up. It's war causes energy shortages, which causes inflation, and inflation bleeds into everything. So, pain at the pump turns into, I need a raise for this. I need to raise prices on food. I need to raise prices on all sorts of things. Energy is, of course, a key input into everything. Why I am so against pacing the energy rollout. Every year, for the past 10 years, I forget what it is, the IEA or something, there's a body that forecasts energy buildout, specifically in solar, and they've gotten it wrong. Every year for 10 years, they've underestimated the growth of solar. You've seen this chart, right?

Jordi Hays (2:50)

The International Energy Agency.

John Coogan (2:52)

Is that it? IEA? Yeah. Every year, they'll be like, okay, we had a great year last year. We're going parabolic. We're up and to the right, but clearly, we're not going to build more solar. People are going to get sick of this stuff. Then the next year, we build even more solar than we predicted. You can look at this chart of the predictions and then how we blow them out. That is something that we want to clearly keep working on because it will bring down inflation, bring down costs of basically everything. It will be very deflationary, and it will allow us to do all sorts of new things. But this war is specifically driving energy prices because, of course, oil transported through the Strait of Hormuz is a key pressure point for control of the conflict, and that drives up inflation, which hurts the value of treasury bonds, causing yields to spike. And so that's why they're above 5%. It's the first time, I believe, since 2007 that they've been this high, so not good. It doesn't always go this way, though. I wanted to understand, does war or war, even just war in the Middle East, does that always cause interest rates to spike? It makes sense. It's an expensive thing. It's a capital suck. It's depressing in many, many ways. There's a whole bunch of economic reasons why you could think that war would cause interest rates to spike, but does that always happen? So during Gulf War I, which I didn't realize this, but we have a son of a veteran on our team.