1. The Fed has convinced the markets that hedonic adjustments were okay.

2. Fed has convinced everybody too ignore monthly increases in food and energy costs.

3. The Fed emphasized GDP growth as the comforting factor against increasing trade deficit and a 8.5 trillion dollar national debt. National Debt accumulation percentage against the GDP was within reasonable historical ranges.

4. The Bond market responds too PPI or CPI values and when better than expected values occur, the bond market goes ballistic. However, the bond market seems disconnected to the value of the dollar and so lost in the bond value is the falling value of the dollar. The dollar is the single biggest determinate of the prices. If prices don’t rise it is the same as selling the commodities at a price reduction. This would mean that increasing supply is the force that keeps prices down or that a financial source is subsidizing the prices to keep them artificially low.

5. Wall Street looks to the bond market as evidence that inflation is well contained. Smart money looks at the foreign exchange at how bad inflation is likely to become. Action in the foreign exchanges will tell how bad inflation is likely to become.

6. The $145 billion dollar stimulus package passed into law by congress will deliver inflation. The Fed makes cheap credit available to the banks. The banks lend the new funds or use them to acquire higher yielding assets. As a result, asset prices, such as stocks, bonds and real estate bid up to bubble levels. The government by printing money and mailing it directly to the citizenry, the stimulus plan cuts out all of the financial middle men and administers the inflation drug directly to the consumer. More money chasing a fix supply of goods only pushes up prices. As the recession worsens the dollar will drop, consumer prices and long term interest rates will rise, and politicians and economist will look for scapegoats. The stimulus package will kill the economy.

7. Five reasons for creating inflation: 1. Inflation makes the national debt more manageable because it can be repaid in cheaper dollars 2. The government can purse monetary policies hospitable to debtors even as it accommodates the special interests that lend to them. 3. Inflation finances social programs 4. Inflationary spending is confused with economic growth: GDP used as evidence that inflation is contained. 5.Inflation causes nominal asset prices to rise, such as stocks and real estate, instilling in the minds the illusion of wealth creation.

8. Five areas impacted by inflation: 1. Interest rates on national borrowing 2. Social security payments and other government benefits that are index on inflation 3. Income tax brackets and personal exemptions indexed for inflation 4. Inflation rate premiums.