The Case For Inflation In One Chart [ProShares UltraShort Lehman 20+ Yr(ETF), iShares iBoxx $ High Yid Corp Bond (ETF)]

economyMichael Lombardi: The Bureau of Labor Statistics just reported that inflation in the U.S. economy increased by 0.3% in the month of December and that the Consumer Price Index (CPI) for the entire year of 2013 increased by only 1.5%. (Source: Bureau of Labor Statistics, January 16, 2014.)

Is inflation in the U.S. economy really this low?

It sure doesn’t feel like it. Every time I buy groceries, go out for dinner, get my car fixed, pay utilities bills, or fill up my car’s gas tank, it feels like I am paying a lot more than I did last year or the year before.

Dear reader, inflation is higher than what the CPI figures say because of the way the CPI is calculated; food and energy prices are taken out because they tend to be more “volatile,” according to the government. That means key items consumers buy on a regular basis—food and gas—are excluded from the official inflation numbers!

While the mainstream fears deflation in the U.S. economy, I’m concerned about an unexpected bout of higher inflation hitting us. Why would I think this?

I can sum up my argument for inflation ahead with just this one chart:

St. Louis Adjusted Monetary Base Chart

The chart above shows the currency (coins and paper notes) in circulation and deposits of banks at the Federal Reserve.

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