The American public has no say in Federal Reserve policy.
But the gold market might.
The metal hit yet another record high on Friday, gaining $6.40 to $1,095.10 an ounce. It jumped $55 for the week and is up $211, or 24%, year to date.
This cannot be comforting to Fed Chairman Ben S. Bernanke. The classic view of gold is that it is the best inflation hedge. That's a faulty assumption, but still: Given the record sums the Fed has pumped into the financial system -- and the fear that that money mountain could eventually power a surge in inflation -- Bernanke doesn't need rising gold prices reinforcing investors' doubts.
Coincidentally, gold's latest rally occurred as Fed policymakers met this week to affirm that they expected to hold short-term interest rates near zero for an "extended period."
Early in the week the metal got a big boost from India's decision to pay $6.7 billion to buy 200 tons of gold from the International Monetary Fund's reserves. Instead of keeping that chunk of national wealth in dollars that have been losing value all year, India's central bank opted for something tangible and immutable.
Investors who've been swapping dollars for gold since the start of this decade are a happy lot. After declining for most of the 1980s and '90s, gold finally bottomed in 1999 around $250 an ounce.
Since early 2001 the metal has been on a bull run that has mocked the U.S. stock market. Gold has risen for nine straight years, and is up 300% since Dec. 31, 2000.
The Standard & Poor's 500 index's return is negative since that date, including dividends.
Gold, a silly artifact to many investors in the 1990s, has become the great "if only" investment: "If only I'd bought it nine years ago, or four years ago, or six months ago."
But even now there are plenty of people who can't bring themselves to consider gold as an investment. It pays no interest, and if you're buying bars or coins (versus owning shares of a mutual fund that holds the metal or stocks of mining firms), it costs money to store safely.
And if your reason for owning gold has something to do with the end of the world as we know it, shotguns and canned food probably would be more practical investments.
Yet over the last year or so gold has attracted fans far afield from the lunatic fringe.
Some investors expect rising inflation to be the inevitable outcome of the Fed's policy of incredibly easy money and of the Obama administration's complementary borrow-and-spend strategy.
Those gold buyers are counting on the metal to hold its value against the inflation they believe is on the horizon.
Other gold fans are focused on the risk of another bubble developing in global stock, bond and commodity markets, as investors and speculators borrow at rock-bottom short-term interest rates to take a flier on other assets.
But a large contingent of gold's new champions see it in the role it had played through the ages, until the last century: a form of currency, and one that can't be devalued by spendthrift governments.
So-called fiat currencies, like the dollar, are backed only by the promises of the government that issues them.
"The alternative to fiat currencies is gold," notes Edward Yardeni, an economist and chief of Yardeni Research.
David Einhorn, who as head of hedge fund Greenlight Capital earned kudos for warning of last year's financial mayhem, is among the Wall Street pros who have turned to gold as a partial replacement for cash in their portfolios.
"I have seen many people debate whether gold is a bet on inflation or deflation," Einhorn said in a speech last month. "As I see it, it is neither. Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible.
"Gold did very well during the Great Depression when FDR debased the currency," he said. "It did well again in the money-printing 1970s, but collapsed in response to [Former Fed Chairman] Paul Volcker's austerity. It ultimately made a bottom around 2001 when the excitement about our future budget surpluses peaked."
In Einhorn's view, gold isn't just an antidote for the weak dollar, which has mostly been sliding since 2001. With major governments and central banks worldwide creating money from thin air to try and bolster the global economy, the dollar's chief paper rivals -- the euro and the yen, for example -- might turn out to be more in danger of devaluation than the greenback, Einhorn said.
"So I conclude that picking one these currencies is like choosing my favorite dental procedure," he said. "And I decide holding gold is better than holding cash."
Officially, the Federal Reserve isn't supposed to worry about the dollar. But if faith in the U.S. currency suddenly were to plummet and global investors were to balk at buying Treasury securities, the Fed would be expected to step in and raise short-term interest rates -- the quickest way to defend a fiat currency's value.
With U.S. unemployment now above 10%, the Fed clearly doesn't want to tighten credit soon. And that's why gold's continuing rally is a threat to Fed policy: If investors increasingly see gold's ascendance as a sign of waning confidence in the U.S., it could become self-reinforcing.
Mohamed El-Erian, chief executive of bond giant Pimco in Newport Beach, believes there's little chance of the Fed tightening credit before the second half of 2010. But by keeping short-term rates near zero, El-Erian notes, the Fed is encouraging investors to borrow in the U.S. and buy risky assets around the globe.
El-Erian said he doesn't believe markets are yet in a new bubble phase, but he is worried. "The risk is that the Fed is pursuing short-term stability at the cost of longer-term instability," he said.
Gold may yet prove to be poor insurance against instability, but for now it's outshining many alternatives.