The Dow fell on Friday. It was down 37 points. Another day older. Another day not wiser. We don’t know any more than we did the day before.

Oil fell $1. Gold dropped $19.

Hmmm… Inflation? Deflation? Analysts and pundits are trying to look into the future. What’s coming? Higher prices…or lower ones?

Forget looking into the future. It’s hard enough to tell what is going on right now.

Our prediction, years ago, was that we would see BOTH inflation and deflation. But even we didn’t foresee such a mix of inflation and deflation AT THE SAME TIME.

In India, which we left this morning, food prices are soaring.

“Consumer boom drives rapid rise in inflation,” says The Financial Times.

In parts of India, the price of tomatoes rose 200% in just a few days.

The “inflation genie is getting out of the bottle,” is the FT’s comment.

Worldwide, at the wholesale level, there’s plenty of inflation. Oil has gone up 115% since January ’09. West Texas Intermediate is now selling for $85 a barrel. Iron ore is up 95% during the same period.

There’s also something called the Rind Index that measures the commodities that people don’t usually pay any attention to – things like burlap and animal hides. These things are used by industries to make things. There’s not much speculative buying. But there’s plenty of inflation. The Rind Index is up 50% since January ’09.

Prices are rising in China too. Guangdong, a large state in South China, next to Hong Kong, has just raised its minimum wage by 20%. Believe it or not, the papers tell of a labor shortage in China. There are said to be some 2 million unfilled jobs in the Pearl River Delta area, says the FT.

(Dear Readers looking for employment might want to think twice before packing their bags and going to China. After the wage increase, the minimum monthly salary in Guangzhou, the provincial capital, is still only 1,030 renminbi…or about $145.)

Inflation…inflation…inflation everywhere…

But wait. The Fed says there’s no inflation:

“With substantial resource slack to restrain cost pressures…inflation is likely to be subdued for some time.”

The Fed is right…as far as it goes. CPI readings in the US are coming in at their lowest levels in six years. Most businesses have plenty of excess capacity. The labor market has 11 million surplus workers. The dollar is strong. China is desperate for customers. Why should prices rise?

But that’s what they’re doing. Rising. And falling. At the same time. Hot money from the feds – and “growth” in China and elsewhere – drive up prices for raw materials… while the Great Correction drives down consumer prices in the US and Europe.

How will this work out? Which one will dominate – inflation or deflation?

It depends. So far, the feds are winning their battle – at least on the surface. Stocks are up. Commodities are up. Junk bonds are up.

But we’re still betting that the major trend …the deeper and more important trend…is down. You wouldn’t know it from reading the paper or watching the TV. On the surface, the crisis is over. And maybe it really is. But it’s a bad bet. Because the risk is still on the downside.

If the feds succeed, maybe they can keep the credit bubble – now focused public sector credit – pumped up a bit longer. But so what? What can you win by betting on even higher stock, bond and commodity prices? Probably not very much.

The downside, on the other hand, is like the Grand Canyon…deep…and treacherous…

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