June 02, 2009 (LBO) – A controversial core inflation index of selected items in Sri Lanka was at 13.5 percent in May 2009, the central bank said, while the country’s headline index rose 3.3 percent, from 2.9 percent. Core inflation is claimed by central banks to better reflect their monetary policy actions, and drops food and energy.
Critics of paper money central banking say when loose policy from reserve currency central banks like the Fed pushes up commodity prices, ‘core’ indices are useful to understate inflation and dupe the public.
But when commodity prices fall under a deflationary collapse ‘core’ inflation overtakes ‘headline’ inflation. The US saw core-inflation exceed ‘headline’ in the mid 1980’s after the US Fed chairman broke the second ‘oil shock’ bubble.
The Federal Reserve is currently printing money to push down the value of the dollar, bring inflation back into the system and prevent further collapses of asset prices.
A deflationary collapse happens when the banking sector is too weak to respond to monetary authority signals, a temporary condition known as ‘central bank impotence.’
“But the U.S. government has a technology, called a printing press (or, today, its electron