The stock market’s persistent strength makes sense to all who believe that the economy bottomed in March, that we will not have a real recession, that the credit markets are healing quickly, that overseas strength will prop our economy and big-business profits, and that the tax-rebate checks will ensure a good summer.

The big unknown is overseas. Retail sales in China rose an annualized 22 percent last month; one-third of that gain was inflation at 8.5 percent, GDP 10.5 percent (after inflation). How long can that oil- and commodity-popping growth continue? Europe is in a worse collision between central banks, inflation and growth than we are, the UK worst of all: inflation out of bounds above 3 percent, house prices and economy crumbling, the Bank of England unable to cut from its 5 percent benchmark, where our Fed was last August.

April CPI rose only 0.2 percent overall, and the core rate just 0.1 percent, as gasoline prices were “seasonally adjusted” to a 0.2 percent decline. That report triggered widespread rage among civilians, and contempt among bond traders (CNBC captured a crew wearing chef’s hats to protest cooked numbers). These objections are foolish. The Fed understands distortions, studies dozens of inflation indicators, and has no interest in political cover from artificially low reports.

Given that argument, and the preserve-economy/fight-inflation conundrum facing the world’s central banks, herewith a brief review of inflation principles.

Classically, inflation is “Too much money chasing too few goods and services.” Note that both “toos” are relative, hence two different kinds of inflation: cost-pushed and demand-pulled. Note further two different sorts of demand-pulled: the money-printing kind (Weimar 1922-23) and the often-associated but different demand from an “overheated” economy. The deadly dangerous inflation virus: when the two forms of demand-pulled combine into a “wage-price spiral.”

Inflation in the U.S. today is cost-pushed. The Fed is not printing money in its efforts to resolve the crunch, nor does its 2 percent cost of money reflect easy credit. Credit today is much tighter than when the wheels came off last August. The exquisite discomfort here is caused by fixed incomes (wages capped by foreign competition) versus rising costs for energy, food and health care. Other than pain, the effect is to force households to shrink spending on everything other than the three pushers. Deflationary!

In mainland Europe and in the UK inflation rates are similar to the U.S., but inflexible labor markets (unions and laws) prop up wages and threaten a wage-price spiral; that threat forces higher central bank rates there than here, ECB at 4 percent vs. our Fed’s 2 percent.

Asia, India, Russia, the Middle East and several emerging nations are in full-blown wage-price spiral and overheating beyond capacity, to a degree and kind making the 1970s U.S. look disciplined. The authorities in none of these places appear to have the political clout to tap the brakes, let alone to stand on them.