Bernanke testified before Congress last week that Inflation remains “quite low”. He explained his measure of “core” inflation which excludes food and energy prices. I do not think Bernanke understands that Americans do not have the option of “choosing” not to eat, heat their homes or drive to work. The fact is that the Federal Reserve has been “cherry picking” the statistics to produce the results they want to see for a very long time. Of course the Federal Reserve always has the support of the both the president and the congress in this deception of the American people, since it is in the interest of the politicians to sweep inflation under the rug and pretend that it does not exist.
Aside from choosing to ignore something as important as food and energy prices that are vital to our survival, the Federal Reserve uses “substitution” to further depress the inflation statistics. As the price of items you normally buy rises, the fed will assume that you will switch to a cheaper substitute. They guess what that substitute might be and use that cost to do their inflation computation.
A true measure of inflation is looking at the same goods year after year and measuring the price difference. It is far more accurate to look at commodities index charts then to trust any figures from the Federal Reserve. Since all prices seem to be going in the same general direction, what you are seeing is not the price of goods going up… but rather the value of the dollar going down. If is no world wide shortage of goods to drive the prices of goods up, it is rational to conclude that the reason for the price increases is because their is new money printed into the market which is causing inflation. Take a look at he following commodity chart and you will see that the rate of inflation over the last six months is close the 30%. If that trend is allowed to continue we will see a 60% annual inflation rate.
This trend is very significant because as a businessman I try to stay ahead of the inflation curve. I am constantly looking at the commodities and futures indexes to see how I should price products that I sell. I want to be sure that I am raising my prices faster then Bernanke is printing new money. The risk of underselling a product is greater then not selling the product at all, since by holding onto the product I still have the option to sell it in the future at a higher price… and this feeds the growing inflation uptrend. I do not think that the Federal Reserve realizes how savvy businessmen are today and how close they follow trends in the money supply. The Federal Reserve is still living in an era before the internet when true and independent inflation numbers were hard to come by. A few quick searches on google and I know that Bernanke is working with smoke and mirrors to deceive the American people.
(Note: Permission to reprint and link with credit to Bill Tsafa is hereby granted)