Bailing out the economy by printing $s and Inflation reports that make no sense….the US dollar is set for a major slamming.

Some analysts are incredibly impressed by the Federal Reserve’s ability to stabilize the US financial system given the fall out from the real estate bubble including entities such as CDOs and sub-prime in general.  The sophisticated magic however was not so sophisticated as reality entailed the process of printing massive amounts of US dollars to plug the gapping holes of the dikes that were cracked in the US financial system.  This ability to inject massive liquidity into the system however didn’t come at a zero cost, but implied a massive increase in the level of inflation in the system.  This brings us to our second point, and that is the most recent pathetic report on CPI that grossly understated the level of inflation in the US economy, to the point that consumers are now voicing a lack of confidence in the reporting of economic data.  This poses a crucial problem for the US financial system.

As the Doc has mentioned for at least 2 years now, the level of US inflation has been incorrectly stated by official numbers.  Simply put, the level of US inflation has been substantial over the post  two years and 2008 has exacerbated the problem.  US inflation at 3%...this is simply nonsense and is now in the realm of 5 to 6%.

At some point the international markets will realize that the US system is near broken in terms of reliability and stability, the result will be a massive deprecation in the US$.  This move is on the horizon.