Banks don't need bailed out if interest rates go up. They have very little exposure to mortgages.

They slice up the loans and sell them as MBSes to the Fed and pension funds.

If interest rates go up ~1% - pension liabilities decrease ~12%: https://www.pentegra.com/wp-content/uploads/2016/12/The-Impa... This is not terrible for pension funds.

The Fed doesn't need bailed out...

> The Fed doesn't need bailed out...

Well, there is sovereign default but if the US does that, then we'd better hold on tightly to our breeches, from Kamchatka to Patagonia.

The Federal Reserve wouldn't default. It doesn't owe anyone money. It buys bonds (printing money out of thin air) at favorable interest rates from the US Government.

The US Government defaulting wouldn't impact the Fed's ability to continue to buy infinite sums of assets.

There's no reason that the US Government couldn't default and the Fed buy absurd amounts of treasuries until interest rates remain low or go even lower.

I think a good amount of inflation would be required. That helps alleviate the debt while also keeping the price of the house stable.

What you can’t have is millions of bag holders underwater with mortgages on homes valuations cut in half.