2. The Consumer Price Index is sliced into the following percentages: 1% Tobacco, 3% Personal Care, 5% Apparel, 5% Medical Care, 6% Education, 6% Recreation, 16% Food and beverage, 18% Transportation, and 40% Housing.

3. Cost push inflation occurs when rising fuel costs increases product price by increasing the demand for products and reducing the supply. Each item cost more to produce and increases the risk of excess inventory, increases transportation costs, and decreases profit margins because of rising fuel costs. This differs from demand pull inflation. Demand pull inflation works as increased demand signals an increase in production, large supply, and lower product cost.

4. Inflation is in response to a political of printing to much money. Congress and the President can raise taxes or cut government spending in response to rising inflation.

5. In 2010, CPI has deflating housing prices caused from high unemployment rates and overvaluation of home prices caused from low interest loans and non-conservative loan practices; and rising transportation, food, and recreation costs caused from rising oil prices. The CPI does not seem to paint an accurate picture of inflation. The fed claims 2% inflation, fails too buy gold, and keeps interest rates near zero because of the CPI, PPI, and deflator indicators readings. However, 20-30 potential declines in housing prices will keep the CPI indicator showing low inflation while rising energy prices suggest rising inflation. Increased pressure to consume will be limited as real incomes continue to decline.

6. In the 1980s, the Fed raised interest rates six times to fend off inflation as oil prices rose. The Fed reasoned that rising oil prices had the same affect as raising taxes or an interest hike. However, the Fed was not considering the affects on foreign domestic investment. FDI is bond gold. Money flows back into the US as interest rates rise and foreigners begin buying bonds. The dollar increases in value as foreigners buy dollars to buy the bonds. In 2010, rising oil prices and a weak dollar are not being met with rising interest rates. As a result the euro gains in strength against the dollar. Central banks continue to buy up euros. European economics is not exciting and the flight to the euro seems poor. China balances its foreign reserve evenly between the dollar and the euro holdings. The low fed interest rates will allow the euro to gain in strength against the dollar. More yuan will flow to the euro as it gains in strength against the dollar.

7. Higher oil prices mean less money to spend on consumption and less stimulus for the economy. High oil prices work like a tax, both inhibit economic growth.

8. What have been the oil prices per barrel from 2006 through 2010? 2006 ($79) 2007 ($74) 2008 ($125) 2009 ($71) 2010 ($82) (http://zfacts.com/p/196.html/)

9. What makes up the producer price index? 23% consumer foods, 25% capital equipment, 17% consumer durables, and 35% consumer nondurables. PPI reflects the prices of crude materials, such as, grains, livestock, oil, and raw cotton. PPI reflects intermediate goods like flour, leather, autoparts, and cotton yarns. PPI looks at finished goods like bread, shoes, autos, and clothes. The capital goods slice of the PPI includes equipment and machinery and civilian aircraft. Short term, PPI and CPI are not well correlated. PPI reflects the cost of very few services, it focuses on finished goods. However, long term PPI and CPI become high correlated. The food and energy components of the PPI are very volatile, going up and down over a few months period of time.

10. GDP deflators are the broadest measures of inflation. There are three GDP deflators: fixed weight deflator, chain price deflator, and implicit deflator. GDP deflators are lagging and reported quarterly. CPI , PPI, and deflator indicators move in the same direction over time.(http://pages.stern.nyu.edu/~nroubini/bci/PriceDeflatorsGDP.html)

11. Have real wages increased to real inflation percentages? Do we have less real wages to spend?

12. Will currency traders bet against the euror or for it? The dollar should be gaining strength against the euro, but it seems to be weakening. This trend is contrary to the expected performance of US manufacturers and producers.