That's a tough question to answer. I think it will come down to consumer prices but there are a lot of other things that can skew that. For instance, businesses don't want to raise prices so sometimes they'll cut corners to reduce costs. You've seen this in chocolate bars where the typical bar shrinks over the year and then eventually introduce king size to allow for some price inflation.

Measuring cpi is also incredibly complicated. I was shocked it's been so low forever considering over 50% of the index is housing, healthcare and education, three products for which we've seen high price growth for decades. So the official number may be "managed" especially considering that trillions in pensions and social security cost depends on it's reporting.

But the money supply grew so fast, i don't think any massaging of the data will be able to hide it indefinitely

There's no political will for things like higher interest rates or reduced spending, among either political party. The new generation has never seen mortgage rates in double digits

I see future price controls and other draconian measures to try to deal with the fallout. Example is gas lines in 1970s. It'll eventually hurt the real economy as artificial scarcity from price controls hurts business.

Only thing is somewhat certain about is something will happen. This seems insane that a unit of account can just grow 25% in one year with no signs of stopping with no consequences

It's not just politicians and "the new generation" who don't want double-digit mortgage rates. Surely it is also regarded as a present impossibility by the banks.

I mean, barring massive inflation, a double-digit mortgage rate would put so many home owners in default that it would make the global financial crisis of 2008 look like a birthday party for small children.

The "something will happen" part I agree with. I think we will need to come to terms with the fact that our world has crossed the inflection point on the S-curve that all growing populations are confined to. And that will mean dismantling current financial mechanisms such as "interest rates".

I'm dead serious - I don't know how the financial system will look like in 2100, but I'm convinced that "interest rates" as we know and use them today will be something taught only in "history of economics" class.

Most US mortgages are fixed rate mortgages, so increasing mortgage rates would not affect the monthly payments people have to make for their homes, therefore it would not cause home owners to default (in the US).

In May 2019, adjustable rate mortgage applications were only 6.2%:

https://www.mba.org/2019-press-releases/may/mortgage-applica...

Sure, there has been very little reason to take out an adjustable rate mortgage when you can lock in a historically low rate which has been the case the last couple of years. However ARMs were one of the things that caused the market to collapse in 2008 and as rates tick back up over time it's likely that they could become an attractive option again. The other thing is that at some point people need to sell and what is barely affordable to so many now at 3% will surely become unobtainable for many more when rates are 7 or 8%. At some point doesn't it turn into a mobility crisis as there's less and less people who can afford to buy.

If we are asking the big questions, it's worth considering what the macro-economic impact would be if taxation was ended, and the government funded itself solely through printing money. The discourse is all about lowering the tax burden on the rich so they can innovate. But my intuition is without taxes, the rich would be hit harder with inflation than the middle class. So even a strong progressive taxation system can be seen as a giveaway to the rich.

The rich tend to keep their money in assets. Inflation only makes the rich richer.

> I mean, barring massive inflation, a double-digit mortgage rate would put so many home owners in default that it would make the global financial crisis of 2008 look like a birthday party for small children.

Not necessarily. The percentage of new mortgages that are ARMs (adjustable rate) is very low.

> ARMs accounted for just 2.6 percent of mortgage applications in recent weeks and fell to 2.2 percent this week, according to the Mortgage Bankers Association.

Not sure about existing supply but I think it would be single digits as well. And most ARMs are longer (e.g. 7-1 or 10-1) meaning the floating rate portion doesn't kick in until 7 or 10 years in (respectively). Mortgage rates have been low so long I imagine most people with older arms refinanced long ago or built up enough equity where they'll be able to refinance at higher rates if they had to.

So existing mortgage holders wouldn't be hit with higher costs. However the valuation of their home would likely tank making a lot of mortgages effectively underwater (you owe more than the asset is worth). You will see a lot of people do strategic defaults or try to re-negotiate their balance. If I owe 500k on a home worth 450k, I might be fine with it, but if the home was only worth $250k, I would definitely consider a "strategic default", walk away from my mortgage, take a hit on my credit and buy essentially the same home at half the price. But lenders aren't stupid more realistically they'd negotiate down my balance and there would be federal programs to encourage refinancing.

https://www.bankrate.com/mortgages/arms-disappear-from-mortg...

>You will see a lot of people do strategic defaults

Worth noting that not everyplace is California (although half of HN may live in CA, I donno).

There are 12 non-recourse states in the US: Alaska, Arizona, California, Connecticut, Hawaii Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah, and Washington.

Outside of those states, you couldn't necessarily just walk away.

> This seems insane that a unit of account can just grow 25% in one year with no signs of stopping with no consequences

The equation of exchange is MV=PQ, not M=PQ. The velocity of money (V) is falling right now as the money supply (M) is growing, that’s why increasing the money supply hasn’t had consequences (yet).

https://en.m.wikipedia.org/wiki/Equation_of_exchange

Bitcoin will happen. This injection of money can be seen as a cashout of the current system, selling as much USD as the market can take while it is still possible.

My opinion is that the stock market is setting the tone for what is going on and that at some point the major players might want to cash out their position causing stock prices and consumer sentiment to drop. Although I wonder if it’s more profitable for them to cash out slowly as prices keep getting pushed up thanks to the relative lack of a bond market and other manipulations.

Increasing interest rates.

I don't know enough to estimate the likelihood of that happening but it seems like the obvious danger.

Higher rates are the solution, not the danger. The danger is the economic waste from artificially lowering rates, causing bubbles and massive misallocation of resources.

Owners of the stores that sell everyday goods compete for the same housing.