“Milton friedman always said, 24 months after the money supply spikes, we get inflation, “
Don’t be fooled by an apparent increase in the money supply.
The money supply isn’t spiking when bank assets are collapsing. Bad debts are wiping out bank assets as fast as the Fed can shovel money back into the system by buying up troubled assets.
This Fed action is precisely what Friedman faulted Fed for failing to do in 1930. You’ll find that criticism in his Monetary History of the United States. In 1930 the Fed failed to act and bad debts wiped out a third of America’s banks taking with them a third of the money supply. Bernanke has been trying to avoid a repeat of this.
One other reason that inflation is missing is that the velocity of money is low.
America currently has price inflation of over 5%. (http://www.shadowstats.com/).
This is - as you say - with a low velocity of money.
When bank reserves finally mobilise/unfreeze then we can expect 20% inflation or higher. Either that or there will be a sharp devaluation event.
In the end new oil and LNG revenues - and Conservatism - will save America. But the next five years are going to be a roller coaster.
The problem in the real estate industry was that people were consistently paying more for real estate than such assets would be worth five years later.
Now we are to believe that the solution to that problem is for the Federal Reserve to print money and purchase those same assets for more than they will be worth five years later?
I feel like I am looking at the cartoon blackboard with the intermediate step labelled, "And then a miracle happens!"
Peopls in Greece are and have been living beyond their means. They will probably have to default on much of their debt and their credit worthiness will be zero while they are left to their own devices, printing their own money trying to solve the problem of not being fiscally responsible.
People in the United States are and have been living beyond their means and ..." Just what is it that you see happening to the U.S. that will be different from what is happening to Greece?