[nprateem]

It's not that 1 causes 2. It's people loading up on cheap debt, and only being able to service it at cheap levels. Interest rates rise, then suddenly people start selling investments and holding back on discretionary spending to pay their (now higher) mortgage costs etc.

So far people are eating into savings or getting pay rises, but as businesses are in the same boat they can't keep paying staff more and raising prices forever.

So at some point the wheels fall off as people and companies need to repay their once cheap debts, or else are just left with very little disposable income/capital with which to operate, reducing spending. This causes a recession.

The government being in the same boat reduces the money available for government spending too.