What a mad, mad, mad world!

We are at the Miami Airport. In our brief look at Miami this afternoon, we saw so many construction cranes we thought we were in the Far East. What's going on we wondered?

But looking more closely we found that the high-rises were either condo towers…or banks and credit institutions. We've never seen so many banks outside Zurich.

As near as we could tell, the banks must lend money to people so they can buy condos.

Meanwhile, the money continues to flow - uphill, downhill, and around corners.

Goldman has just launched its biggest leveraged buyout fund ever. And private equity firms bought 654 companies last year, for $375 billion. And look at that Shanghai stock market - up 250% since 2005.

Deals…deals…and deals on wheels…and wheels on deals.

Where the money comes from is obvious; there has never before, been such a huge 'wave of liquidity' sloshing over the world. What we wonder is when it will smash into some major low-lying city…and how much damage it will do.

But, of course, we are old fogies. The smart money is betting that this is a wave without end.

And sometimes we wonder, too. There seems to be no stopping it. It is as if the old rules had been, well…waived. Money supplies worldwide have been inflating at three times the rate of GDP growth for years - 10% in the United States…10% in Europe…14% in Asia.

When the old rules were still being enforced, you could inflate for a while…but not for too long. At first, merchants, manufacturers, investors and consumers would be tricked. They'd mistake the new money for the real thing. They'd rush to increase their investments, their capacity, their spending…and their debts. This would create a boom and, usually, get a president re-elected. But then, after a hesitation of about 18 months, monetary inflation would leak into consumer prices. And then there was trouble.

Creditors hate to see consumer prices rise. Because it means that their assets - cash, mortgages, bonds any fixed amount of money or income stream - is becoming less valuable. So, when they saw inflation increasing, the 'bond vigilantes' used to ride out with guns blazing.

"We don't need no stinkin' inflation 'round here," they would say. They would sell bonds to protect themselves. And presto…the problem would take care of itself. Lower bond prices meant higher yields…which meant that fewer new investment projects made sense (since the cost of borrowed money had gone up)…and consumers found it harder to borrow money too…which pushed down sales.

This slump corrected the problem. Bad investments were wiped out…savings increased…inflation decreased.

But now what happens? We live in times that are just too wonderful. The problem of consumer price inflation never seems to come up. It is as if we had robbed a bank and no one called the cops. Heck, where's another one?

Inflation seems to go only as far as the nearest hedge fund…or private equity fund…or Jackson Pollock painting…or Greenwich mansion…or Chinese stock. And then it stops. No increase in the price of toilet paper. No vigilantes getting worked up. No increase in bond yields. No correction. No nothing…except people getting rich without working.

So, please don't take our investment advice, dear reader. We admit that we don't know why this is happening…or when it will come to an end…or how it will end.

But that it will come to an end, we have no doubt. For while the 'old' rules might have been suspended, we will bet that they have not been repealed.

*** "It's dead down here," said a friend and real estate pro, speaking of the Miami property market. "Except maybe at the top end…"

It's dead pretty much everywhere, according to the S&P/Case-Shiller home price index that was released today. Home prices are falling at the fastest rate in 13 years, with 17 of 20 major metro cities seeing lower prices in February compared with January, says the report.

"Declines in home prices are showing no signs of turnaround," said S&P.

From Boston comes word that foreclosures are running four times the rate of a year ago.

And from California's inland empire comes a report that mortgage defaults are 168% ahead of a year ago.

Things aren't looking so great for the bond investors who threw their money into the frothing housing pot, as the delinquencies soar in the subprime sector.

Bloomberg: "They [bond investors] will lose as much as $75 billion on securities made up of millions of mortgages to people with poor credit, says Pacific Investment Management Co., manager of the world's biggest bond fund. Some of the $450 billion in subprime mortgage-backed debt sold last year has lost 37 percent, according to Merrill Lynch & Co."

Bond investors aren't the only ones holding the short end of the stick in the subprime meltdown…thanks to an often-overlooked banking loophole, stock investors can get even more exposure to these bad loans - even more than the banks.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.