These are 3-year moving average growth rates. If M2 (blue) and federal expenditures (green) take off, will inflation (black) be far behind? The question is whether the downdraft of debt deflation and unemployment will offset money creation. Both monetary and fiscal policy dials are set to maximum gain, but households are deleveraging and saving more, so debt-financed consumption is now negative, and there are 20 million inflation fighters out there helping Ben out. It will take a while to get an inflation going.
Consumers won't fuel the inflation, speculators and banks flush with TARP money and cheap Fed credit will.
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