With yesterday’s release of October producer prices, and today’s data on October consumer prices, government and Fed officials, as well as Wall Street analysts, continue to play the “inflation is well contained??? game, despite the fact that so far this year consumer prices are rising at a 4.9% annual rate, and producer prices an even more alarming 6.6% clip.

However, today’s action in gold revels that this charade continues to wear thin. More impressive than its 2.5% rise in U.S. dollars is the metal’s even larger gains when measured in other currencies. In fact, gold traded as high as 410 euros per ounce, above the 400 euro level for the first time ever!

Today we also learned that Americans hocked a record 101.90 billion dollars worth of financial assets to foreigners in the month of September. While the ability to pay one’s Visa bill with a MasterCard temporarily buys a debtor some time, it does so at great cost, and in the long run can hardly be viewed as a positive development.

Now that Bernanke’s appointment has been rubber stamped by the Senate Banking Committee, a few comments on his testimony are warranted.

When asked if he was troubled by foreigners buying all of our debt, his reply was ‘It’s better than the alternative.??? What kind of answer is that? Is he saying that it’s better to dance with the devil than not to be asked? However, at least this “Clintonesque??? response reveals that Bernanke appreciates the precarious nature of America’s predicament, even if he does not come right out and acknowledge it.

He also made clear that he does not regard the Fed’s primary role to be containing inflation, but regarded economic growth and employment concerns to be of equal importance. He even went so far as to criticize other central banks that place too much emphasis on inflation. Such dovish statements will not go over well among America’s creditors once this short-term dollar rally ends.