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Over the past 12 months, the US Labor Dept. says that consumer price inflation is up 4%, led by higher energy costs (up 17%) and food prices (up 4.4%). But should US consumers and businesses trust the US government's fuzzy math in calculating the cost of living?

Or rather, should we believe the trends in the commodities markets, for a more reliable gauge on inflation expectations?

In the futures markets, crude oil is up 80% from a year ago, unleaded gasoline up 40% natural gas up 39%.

Soybeans are up 83%, corn up 65%, wheat up 95%, sugar up 30%, coffee up 25%, Gold up 36%, and rough rice is 125% higher from a year ago.

The cost of shipping dry commodities across the high seas, as measured by the Baltic Dry Index, is up 43% from a year ago.

Using this simple minded approach, it sure seems like the US government is fudging the inflation statistics. Labor's latest report on the producer price index, which comes closer to tracking raw material prices, showed a 6.9% annual inflation rate, but that's still far short of the 23% annual increase in the Dow Jones AIG Commodity Index, a diversified basket of 19 exchange traded commodities.

However, many big investors are locking in 10 year US Treasury yields, at negative rates of interest when adjusted for inflation, seeking shelter from junk bonds and risky mortgage debt.

Foreign central banks in Brazil, China, and the Arab oil kingdoms have bought a combined $135 billion US Treasuries since August, after purchasing US Dollars through currency intervention in order to manage their fixed or crawling currency pegs to the US Dollar.

The Opec oil cartel could amass $1 trillion of petro dollars this year thanks to soaring oil exports, up 45% from last year's intake of $676 billion

China's foreign exchange reserves mushroomed by $154 billion in the first quarter, and are 40% higher from a year earlier