America Will Quake When Inflation Emerges

BOSTON (TheStreet) -- There's hardly any consumer-price inflation, according to a report issued today.

That's to be expected, considering the economy is mired in the late stage of a recession or the early part of a recovery. But this time it's different. The Federal Reserve has pumped massive amounts of money into the economy to help stem the crisis. The longer the economy stays inflation-free, the longer the Fed can hold interest rates at close to zero. But we probably won't see rates -- and yields -- this low again. When corporate earnings rise, and the economy grows, inflation will be watched as closely as it was in the 1970s and '80s.

Inflation is like a brick wall at the end of the tunnel we're hurtling toward. Rampant inflation could destroy a recovery or send America spiraling into another recession. While some inflation is unavoidable, a double-digit increase is the concern and part of the reason that gold has been seeing such a bounce lately as investors pile in. In that way, gold is a leading indicator.

The consumer price index rose only 0.2% in September due mainly to the medical-care, vehicle and transportation components, today's report showed. That means prices at stores such as Wal-Mart(WMT Quote), Target(TGT Quote) and Macy's(M Quote) stayed fairly constant, helping consumers get the same goods without a crippling price increase. As a bright spot, the food index actually decreased for the sixth time in the past eight months, enabling consumers to stretch food budgets further.