Thomas Donlan, a Barron's regular, notes in this week's column that many commodities can be used to measure inflation. Writes Donlan, "Gold bugs say that only gold is real money -- the true means of exchange and store of value. . . Countries on a gold standard must rely on honest money authorities to limit the amount of paper money backed by gold. Fortunately, we cannot really leave the gold standard. From minute to minute, we know exactly how many dollars, pounds, yen, rubles the most active traders will exchange for an ounce of gold, or for specific quantities of oil, corn, wheat, rice and a couple of dozen other actively traded commodities. Hour by hour we find the value of money by observing changes in its time value expressed in market-driven interest rates. Or day by day we measure the value of money by the groceries or cars it buys.

"We don't need a formal gold standard to discover that the monetary authorities have erred on the side of inflation, the markets do that consistently. What we need are monetary authorities and political masters who read the markets and take action to maintain a constant value of money."

Russell comment -- Without the discipline of gold, no monetary authority or political master has the courage or the backing to maintain a constant value of money.

When asked about gold, Alan Greenspan (then Fed chief) answered that the Fed "acts" just as if gold is still the discipline behind the dollar. Nonsense, this is the great lie, and Greenspan knows it. When confronted with a contracting economy or rising unemployment, central banks always fight such conditions by lowering rates and expanding the money supply or at least making money "easier." Thus, the purchasing power of the dollar sinks ever-lower, if erratically. ---Russell's Remarks 6/16/08

Amen to all that! Asking the Federal Reserve to maintain the integrity of the money supply is like asking the proverbial fox to guard the hen house. It's not that the fed's are all evil or even bad people, it's just that they have to many temptations. You stick a group of married men into the red light district and leave them there long enough unsupervised and pretty soon something unsavory will happen. Bull