President Obama has nominated Janet Yellen to replace Donald Kohn as the Vice-Chairman of the Federal Reserve. Ms. Yellen served as a former assistant professor at Harvard during Bernanke's tenure as an undergraduate there and currently serves as the President of the Federal Reserve Bank of San Francisco.

But now Ms. Yellen will most likely garner a more senior position within the dole of doves at the Central Bank. Her confirmation should further cement the Phillips Curve philosophy held at the Fed, that inflation is engendered from too much prosperity and not from too much money creation. Her appointment vastly increases the potential that the Fed will concentrate even more on the unemployment rate and not enough on the inflationary forces that are already at work.

Contrary to what is promulgated by the media, the U.S. is already experiencing a moderately-high rate of inflation even though the unemployment rate in nearly 10%. That's because less people working and producing goods and services actually has a tendency to increase the rate of inflation, rather than rendering it quiescent. But thanks to a monetary base that has skyrocketed to over $2.1 trillion, Americans have had to endure higher prices along with a struggling economy. If the Fed had not exploded their balance sheet, (in order to bail out banks with a record yield spread) we would have at least enjoyed the mollifying effect falling consumer prices have on an anemic economy.

Most on Wall St. and in Washington claim that inflation is not currently a problem. But the fact is that the U.S. has a year over year inflation rate of 2.7%, according to the Bureau of Labor Statistics CPI. What's most interesting is an Inflation rate that is equal to or even less than that of the U.S., is viewed by the Chinese and the Australians as something very troubling.

The People's Bank of China believes a YOY inflation rate of 2.7% is enough to increase reserve requirements twice. The latest such move became effective February 25th, which raised the deposit to reserve ratio to 16%.

Australia has an inflation rate that increased 2.1% YOY, .6 percentage points below that of the U.S. Yet The Reserve Bank of Australia's central banker Glenn Stevens thought the rate was high enough to raise the over-night money market rate to 4%. Compare that to our own target rate of 0-.25%. How can it be that year over year price increases in the area of 2.5% are enough to send some foreign central bankers scrambling to quell inflation, whereas it compels our Federal Reserve to just claim that inflation remains subdued?

China and Australia understand how pernicious inflation can be for an economy. The Central Bankers of those countries are currently taking steps to ensure their inflation rates do not become intractable.

Unfortunately for us in America, the Obama administration is instead ensuring the Fed is stacked with more doves. Our government wants to ensure money supply is growing at a fast enough pace that it can adequately finance its Treasury auctions and also devalue its existing debt. But the big winners in this country will only be the bankers and the Treasury; while the losers will be savers, those on a fixed income and the entire middle class.