Sir Ben, White Knight

Did you see what happened to the price of gold yesterday? April gold futures were down $59 to $945.30 -- the biggest one day loss in two years. Last I checked, Gold futures were trading down another $31 an ounce. This, in reaction to the Fed's decision to cut interest rates by 75 basis points and a statement that noted an increased threat of inflation. Those bold words from the Fed have begun to rock the commodities markets. Remember two dissenters in Tuesday's meeting were Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Richard Fisher, president of the Federal Reserve Bank of Dallas.

Remember Plosser, in a speech about a month ago, said this about inflation: "Containing inflation is the purpose of the ship I crew for, and if a temporary economic slowdown is what we must endure while we achieve this purpose, then it is, in my opinion, a burden we must bear, however politically inconvenient."

The great irony of both Plosser's speech and the Fed's statement on Tuesday is that they are combating inflation talk which will in effect help lower commodity prices and therefore increase the U.S. dollar. Might the Fed once again be doing what the U.S. Treasury and Hank Paulson are supposed to be doing, supporting a strong dollar? History will look back on this period. Bernanke's decisions have been scrutinized but almost everyone agrees after the past couple of moves to pump liquidity in a coordinated fashion and rescue Bear Stearns that HE is white knight! What will history say about the U.S. Treasury and its leader? Fed to the rescue!!!!