The Crackup of Today's "Everything Bubble"

A decade-plus of zero/negative interest rates across the developed world encouraged extremely risky behavior among households and financial market participants. Importantly, this behavior was not limited to venture capital/regional banks. Rather, it touched nearly all areas of the economy, and created what has been termed an Everything Bubble. This bubble is now starting to crack as asset markets reprice to a world of materially higher interest rates.

As the Fed moved to aggressively tighten monetary policy last year, interest rates surged, saddling the U.S. banking system with large unrealized losses ($600 billion to $700 billion). This...