The Dow rose more than 90 points yesterday. Oil, gold, the dollar - all held steady.

But here's some good news:

Last month, the price of gasoline went down 2%, says the Labor Department.

Wait a minute. Do you remember gasoline prices going down in April? We don't. As we recall, oil prices were soaring…and so was the price of gasoline.

We're beginning to sniff something funny in the air…a rat.

It was largely thanks to this reported drop in prices at the pump that the Consumer Price Index registered a scant 0.2% increase for the month of April. And it was largely because of this low inflation reading that the yield on the 10-year note stayed below 4%, says Gary Dorsch.

Our view is that higher consumer price inflation is in the pipes and will soon be backing up in the bathtub drains. Dorsch says the U.S. money supply is now increasing at a 16% rate; higher inflation can't be far behind.

Generally, we don't trust numbers. Who can trust a 5 after all - with a bottom like a communist sickle and its top nicked from a swastika? Who can trust an eight - wandering back and forth and never getting anywhere? And what about the zero? What does it mean? You put it in front of a number and it means nothing. You put it behind…and all of a sudden you've got 10 times as many. So, let's look a little more at those numbers - that is, at the crooked 4s, the slick 6s, and the empty 0s - put out by the feds.

Getting back to the price of gasoline, we check the records from NY gasoline futures trading and find the price actually rose 12% in April. How come the feds put it down as minus 2%? Turns out, they made a 'seasonal adjustment.' But turning plus 12 into minus two sounds like more than an adjustment; it sounds like either magic or major surgery…like turning a prince into a frog or a fat man into a slim woman.

Elsewhere, we find the feds working their magic on all the primary numbers. The IMF, for examples, says food prices rose 43% last year. Yet, after the feds waved their wands, U.S. food costs were up only 5.1%. And import costs rose 15% year to year - according to the numbers when they first got off the boat. But by the time the Labor Department statisticians had finished 'adjusting' them, they were down to only 0.2%.

Only investors, of course, are gullible enough to believe the government numbers. Consumers believe the numbers they see at the checkout counters and the pumps. What they see is sharply rising prices. Even newspaper reporters shop…and even they see what is happening.

"Inflation may be worse than the consumer price index shows," suspicions USA Today.

"Food costs jump most in 18 years," notices the Washington Post.

Consumers don't figure out consumer price increases - they pay them. The combination of lower wages and higher prices squeezes them like thumbscrews. What can they do?

Californians may be among the last Americans to wake up in the morning, but they're the first to spot a trend. And the big trend in California today is recession.

House prices have fallen more in California than anywhere - down 29%, according to the California Realtors Association. A thousand foreclosed houses are auctioned every day in the Golden State. And joblessness hit 6.2% in March.

What are Californians doing to cope? They're doing just what you'd expect. "Californians are cutting back on spending," says James Saft in the International Herald Tribune. "Besides causing woes for state and local government, the cutback is giving California's economy another knock and makes further job losses, home repossessions and banking problems more likely."

Nordstrom says a third of its sales come from California and sales overall are down 6.5% in the first quarter. Starbucks says it is just not selling as much mocha in CA as before. Jack-in-the-Box, too, says the Californians aren't buying as much of its dreadful food.

Meanwhile, other towns - such as Modesto, Stockton and Merced - are said to have 60% of their homeowners "upside down," with more mortgage than house. Their unemployment rates are above 10%. And Vallejo, a city in Northern California, is taking the coward's way out. It is slashing its wrists - it says it will declare bankruptcy.

Welcome to California, dear reader. Welcome to the future.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.