Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

These two articles ran today (6/15/11) Here is the Reuters article:

May core CPI rises most in nearly 3 years (Reuters)

– Core consumer inflation rose at its quickest pace in nearly three years in May and a regional manufacturing gauge contracted this month, underscoring the headwinds facing the economy.

The Labor Department said on Wednesday its Consumer Price Index, excluding food and energy, increased 0.3 percent, the largest gain since July 2008, after rising 0.2 in April.

Core inflation was lifted by steep rises in motor vehicle and apparel prices and economists had expected the measure, which is closely watched by the Federal Reserve, to rise 0.2 percent last month.

And here is the AP article:

Consumer prices rise by smallest in 6 months (AP)

By CHRISTOPHER S. RUGABER, AP Economics Writer, WASHINGTON – Americans paid more for food, cars and clothing in May. But overall consumer prices rose by the smallest amount in six months, slowed by the first drop in energy costs in nearly a year. Consumer Price Index rose 0.2 percent in May, the Labor Department said. That’s down from April’s 0.4 percent increase. Food costs rose 0.4 percent. But energy costs fell 1 percent.

This is what makes Americans crazy. Inflation is up and inflation is down — in the same month. The reality is that inflation neither is up nor down. It cannot be measured in one-month increments. It barely is measured in one-year increments. The data are too uncertain for finer measurement.

But there is one way to predict inflation: Predict oil prices. As we have seen in previous posts, it is the price of oil, not federal deficit spending, or any other factor, that is the ultimate determinant of inflation.

Here is an interesting graph which seems to show that the year-to-year movements of inflation compares reasonably well with 20% of the energy price movements.


If this relationship were to continue, one would expect that a 10% increase in energy prices would correspond with a 2% increase in inflation. Tell me how much oil prices will rise or fall in the next year, and I’ll tell you how much inflation we’ll have — at least if history is repeated.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.

Remember that the next time you’re tempted to ask a teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it ruined my future.”