M3 is the inconvenient truth that the Labor Department no longer reports. It is the fullest measure of the U.S. money supply… and it is going up three-four times faster than GDP itself.
Mr. Bernanke assures us inflation is under control. Excluding food and energy, he says, the cost of living isn’t going up too much. Hogwash.
I am a consumer thusly I am a little concerned that monetary officials keep dismissing the “food and energy” effect.

I certainly understand their motivation.

Our friends at the Cleveland Fed just reported that energy prices have risen at an average annualized monthly rate of roughly 30% during the first four months of the year and soared nearly 90% in May.
To make matters worse, the World Food Program reports that purchasing costs have risen roughly 50% in the last five years. Corn prices alone have jumped 120% in the last six months…

But the Fed assures us there’s nothing to fear. The CPI excluding food and energy was up a modest 1.8% (annualized) in May, and the median CPI fell to 1%, its slowest monthly growth rate in over four years.
If the CPI (consumer price index) were measured by the same standards used in the 1970s, today’s inflation rate would soar well above the 2.69% stated rate.

How can this happen?

Well, for one, the Bureau of Labor Statistics (BLS) has significantly modified the way we calculate the number. Take a look at this one adjustment.

In 1983, the BLS dramatically changed the way we account for rising house prices, a figure that makes up 28.4% of the CPI . It no longer measures the actual price change of the tangible asset itself (in this case, the house). Instead, it measures rising house prices through a method called “owners’ equivalent rent.”

According to the BLS, “Rental equivalence measures the change in the implicit rent, which is the amount a homeowner would pay to rent, or would earn from renting, his or her home in a competitive market.”

Well, it doesn’t take a Ph.D. to notice that six years of extremely low interest rates have prompted most Americans to buy, instead of rent. Consequently, the demand for rentals has dropped significantly. So when demand for rental properties drops, so does the price a homeowner could earn from renting.

We believe this approach dramatically understates housing price inflation.

So when you exclude energy, food and housing, Mr. Bernanke may have a point: The cost of living isn’t going up too much.
American lawyer, lecturer and author Rene A. Wormser once wrote: “No government can operate with a monetary system consisting only of fiat money without sustaining gross economic turmoil and eventually facing a tragic day of reckoning. A fiat money system prompts legislative profligacy and inevitably produces inflation.”

He has a point. Deficit financing and government intervention have taken their toll. A 1940 dollar is worth only roughly 5 cents today.

Meanwhile, for the second consecutive month, China has been a net seller of U.S. securities. If this move proves to be more than a passing trend, this could put further pressure on the downward slide of the U.S. dollar.

China sold a net $6.6 billion of U.S. securities in May, following net sales of $5.8 billion in April. The last time China sold U.S. securities for two consecutive months was in January and February 2004.

This may have a lot to do with the major slide in the U.S. dollar in recent weeks.

Eventually, the consequence of eternal credit expansion will rear its ugly head. Maybe not today… maybe not tomorrow, but someday the gentle breeze of a butterfly’s wings will shake the thin-veiled foundations on which this fragile house of cards auspiciously rests.

The question is… Will you be the one left holding the mighty greenback?

Moral of the story even if your resource stocks are down this week hang on for the inflationary trend to follow.
Remember the market does not like inflation. That's why the market went nowhere in the 1970's until 1982 when Volcker killed inflation.

Since 2000 the majority of the stocks on the average have gone nowhere due to the inflation of resources.