gly weak. They focused on Congressional efforts to close the door after the horse has bolted, on lending abuses and loose practice in the sub-prime lending industry.

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The crucial issues of inflation were largely ignored. For our readers we now drill in on the issue of inflation, in an effort to expose the truth.

The late Sir Winston Churchill said, "In wartime, truth is so precious that she should always be attended by a bodyguard of lies."

Let us examine how Bernanke appears to have heeded Winston’s advice. But our government has added to the protection of the truth by first hiding the truth and then using deception to protect it from us.

We now examine the truth, the lie, and the deception.

The truth

As far as inflation is concerned, Ben Bernanke inherited a politically "cooked" inflation book. As our readers know, we and our sister publication, Financial Intelligence Report have spoken often of the "cooked" CPI figures and have explained in outline the statistical methods employed in the "cooking!"

We believe the CPI represents a massive lie. We are not alone in our thinking.

We believe that few of our readers, if any, would testify to the fact that, in the "real" world in which we all live, their year-on-year expenses was up by only 2 percent!

This gigantic lie stems from the massive Clinton era enhancement of the distortion of the statistics that go into the calculation of the CPI. Our present government has clearly felt it "politic" to continue this great lie.

Most interestingly, a company called Shadow Government Statistics has calculated the CPI, according to the pre-Clinton statistics and compared it to the calculation of the post-Clinton basis. (See chart 1)

Of note is the fact that the two curves modulate almost identically to reflect changed events, over time. However the pre-Clinton calculation shows current CPI at some 6 percent.

Yes, this is some three times the current official government (post Clinton) rate of some 2 percent!

Can you imagine what would happen if, instead of expressing continued "concern" at the persistence of 2 percent inflation, Bernanke was to even hint at the truth?

[Editor's Note: The Government's Inflation Lies Exposed. Profit From It.]

Interest rates would soar and stock markets would plummet. The housing market would implode. Gold would skyrocket, benefiting our readers who have long accumulated the metal as a basic insurance "store of wealth."

We believe that Ben Bernanke is basically an honest man, who inherited the national inflation lie.

However, faced by the prospect of the election of a Democratic President, we understand both Bernanke’s unwillingness to disclose the truth and the personal agony he goes though in perpetuating the lie.

Body language is important. Today in Congress and even more so last week, when he addressed the National Bureau of Economic Research (NBER) in Cambridge, MA, Bernanke looked and sounded decidedly nervous. It was also reflected in his voice.

(Amazingly, no one, in the sophisticated NBER challenged Bernanke’s revolutionary thesis that it was market expectation rather than governments that caused inflation!)

Now, of course, Bernanke’s nervousness may, in part be a personal trait. He certainly does not possess the confident, authoritative gravitas of a Paul Volcker or an Alan Greenspan.

We conclude however, that Bernanke is now more nervous both because he does not like what he sees as the "inflation truth" and because, as a basically honest man, he abhors lying about it.

So there we have it, the official CPI is a lie — a lie that "protects" us from the truth.

The lie.

Inflation is an old economic disease, dating back to at least Roman times.

In recent times, various measures have become widely recognized as indications and even measures of inflationary pressures.

They include: Money supply; the free market price of gold; the yield on long-term bonds, and the yield spread between normal Treasuries and TIPS (Treasury Inflation Protected Securities).

In order to hide inflation, our readers will not be surprised to be reminded that the Fed ceased the publication of the M3 statistic, widely recognized as a key measure of total money supply!

However, some private enterprise citizens in London, Capital Economics, have, according to Ambrose Evans- Pritchard of the Telegraph, "decided to publish an update of its own…based on the old Fed model."

As of June 2007, they show U.S. M3 continuing to increase at a whopping 10 percent, having "been on a sharply upward trajectory for the last eighteenth months."(See chart 2)

Well done, Capital Economics!

This decision [to abolish M3] now places our Fed, as the Telegraph continues, "completely out of line with the central banks across the world and is perilously close to losing credibility."

So little wonder that our U.S. dollar is out of line!

[Editor's Note: Four Foreign Currency Plays to Beat the Falling Dollar.]

As our readers will know, the market price of gold is not a free market price. It is a price heavily distorted to the downside by the coordinated (anti-trust) action of central banks, led by our government.

Besides talking gold down, our government use two main strategies.

Firstly, as described before in this publication and in FIR, the central banks coordinate massive sales (currently some 500 tonnes each year) of gold through the IMF. These sales are carefully timed to create both volatility and uncertainty in the gold price and so reduce it credibility as a store of wealth.

The so-called Central Bank Gold Agreement (CBGA) is the document that establishes this decidedly anti-trust looking conspiracy. The basic plan is to offset any investment (as opposed to industrial) demand for gold.

Recently, there is rising evidence, provided by KITCO, bullion dealers, of a more sophisticated government method of spiking any major net investment demand for gold by using the options market to destroy any surge in price.

If a major price hike in the price of gold threatens, the Fed or IMF enters the forward market with massive forward sales. (See chart 3)

The spot price rise stalls and tends to flatten and then falls off, as investors lose confidence in a price hike.

Our government seller prefers not to deliver the gold. It merely sells the contracts in the market as the spot gold price falls back. Even if it experiences a loss, it is politically "cheap" in order to avoid any hint of the existence of stealth inflation.

So, we have a false CPI. But most people tend to believe our government, despite the Iraq experience.

The normal indicators of inflation are thus either abolished (M3) of distorted in price (gold).

[Editor's Note: Why the Dollar Will Crash and Gold Skyrocket This Year]

Investors therefore have no reason to fear or expect inflation. As a result, the prices of both bonds and TIPS show little free market fear inflation.

The deception

Most historians and economists agree that inflation is basically a dilution or debasement of the currency and that, as such, it can only be achieved by governments.

Historically, governments have either diluted the precious metal content of their currency or printed more paper money than is warranted by the accumulation of wealth by their nations.

In short, inflation is basically caused or permitted by governments, most often, to secure political popularity.

It was therefore most surprising to see Bernanke seeking, in his speech last week to the NBER in Cambridge, to divert the cause of inflation away from the Fed.

In his statement he made the amazing statement that, "Undoubtedly, the state of inflation expectations greatly influences actual inflation and thus the central bank’s ability to achieve price stability."

Well, well, how’s that for deception?

History shows that to be effective, political deception has to be on a grand scale. This latest deception needed to be grand to be effective in hiding the stealth inflation that now stalks our economy. Its very audacity testified to its grandeur.

In order to protect the Fed, with its hands dripping with stealth inflation and excessive liquidity, as the cause of the real inflation that could soon, we feel, burst upon our consciousnesses, the financial markets, the dollar, and our economy, our Fed must hide the truth, lie about it, and use every deception.

So there you have it. Poor Ben Bernanke has to face the political reality of protecting the great stealth inflation truth with lies and deception.

The political reality is that his political masters insist that the great inflation lie be maintained to avoid an economic and financial panic.

We believe that future historical analysis will show the same sort of political pressure was brought upon our military both to invade Iraq and to maintain the illusion that we committed enough troops to ensure victory, in a war that has drained us politically, economically and financially. Now, it threatens the integrity of our government.

Editor's Notes:

Bernanke Reveals Fiscal Crisis Ahead.

Stagflation Ahead: Protect Your Wealth From Inflation and Recession.

Defeat Stubborn Belly Fat Once and For All

Keep Your Sex Life Sizzling Your Entire Life.

Cancer Can Be Prevented and Defeated.