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By Gary Dorsch

In this age where political parties of every stripe fudge economic statistics to promote their own self interests, it's not surprising that government apparatchniks are presenting inflation data wildly at odds with the reality faced by consumers and businesses, writes Gary Dorsch of SirChartsaLot.

That's why the data are regarded with utter disbelief. More disconcerting, the mainstream media is easily duped by the government propaganda.

Perhaps the most intellectually dishonest statistic is the core rate of inflation, which strips out the basic essentials of life, such as food and energy, and is given special attention by the mainstream media. In turn, the manipulated inflation data provides central bankers with the political cover to covertly expand the nation's money supply and engage in quiet currency devaluations.

Naturally, the politburo at the US Federal Reserve and its closest allies Wall Street and politicians say there is nothing to worry about. The Fed says it can open the monetary flood gates, because a weaker economy will eventually translate into lower inflation. Therefore, the Fed is ignoring such forward looking inflation signals as the sinking US Dollar, and soaring crude oil and Gold Prices.

Instead, the Fed is focusing on misleading indicators such as the rigged core rate of inflation.

The upshot? The US economy lost 232,000 jobs in the first quarter as Americans grappled with the worst housing slump since the Great Depression, and a clogged banking system that is choking on $1.8 trillion of toxic sub prime mortgages.

Under these circumstances, the Fed should err on the side of doing too much, despite signs of rising inflation, said Cleveland Fed chief Sandra Pianalto on March 5th.

Once the US economy recovers, the Fed can reverse course, and tighten the money supply later this year. Or so the theory runs.

That puts a great deal of faith in the Bernanke Fed, whose credibility is running on empty. In fact, the Fed is hinting at deeper rate cuts.

Clearly you can't get interest rates below zero, but we actually have interest rates now at 2.25% and clearly there is some room to lower them if it's needed, the Fed's ultra inflationist Frederic Mishkin told the Senate on April 16th.