There are two main definitions of inflation. The first is the rise in prices, that is noticeable to the consumer, and measured by the Consumer Price Index, or CPI.
The second is excess money without an increase in goods and services.
The first was measured in January 2010 as 1.4%, and we all felt it a little bit at the grocery store. The second came well in advance of the first, as the bailouts and stimulus packages put money in the economy and increased unemployment rate took goods out. In other words, inflation is poised to happen.
If the January rate continues for the next 6 months, we could have 8.4%. That is a rate typical of the 1970s.
Two other things will contribute to the inflation rate. First, China has reduced its holding in US Treasury Bills (our national debt) and interest rates will need to rise to find other buyers. Second, the Fed has started raising rates.
