Excessive Spending - Surprised by inflation?

Reuters reports this morning:

RPT-US consumer prices up more than expected in March

Wed Apr 20, 2005 08:42 AM ET
WASHINGTON, April 20 (Reuters) - Another surge in energy prices helped push U.S. underlying inflation up at the sharpest rate in 2-1/2 years during March, the Labor Department said on Wednesday in a report likely to reignite concerns that inflation is on the rise.

Reuters also reported:

Treasury debt prices dived on Wednesday after a surprisingly (emphasis mine) large rise in core U.S. inflation suddenly revived fears the Federal Reserve might have to be more aggressive in raising interest rates.

My question is: why would anyone be surprised that prices have gone up? Let's review the basics again.

• Import excessively versus export - value of dollar falls relative to other currencies
  
• Dollar value falls - inflation happens

Now some will argue that oil prices have risen independently of the 30% or so devaluation of the dollar in the last two years. Uh-uh. A big "duh" to those people. If we didn't have the "outsourced", hugely excessive, trade imbalance, we could then reasonably expect to be surprised by oil prices going up as dramatically and renewed inflation pressures. But because demand for oil has been high worldwide, oil prices reflect both the demand pressures and the weakness of the dollar.

Still think they are unrelated? Remember those cheap airfares to Europe? They are a fond memory... and that's all. And as soon as China floats its currency, the real impact of the dollar devaluation will hit home.

It's payback time. The economy is sluggish, manufacturing is dormant, cities are struggling... and inflation is getting higher. I suspect the next 5-10 years will be a pretty tough adjustment for many.