To paraphrase Karl Marx's Communist Manifesto, the specter of inflation is haunting the financial markets. The dollar is weakening and, with the OPEC cartel showing some unexpected backbone, oil prices are surging higher. The U.S. stock market is down by more than 10% from its July peak, and bond investors are clearly troubled. Perhaps most striking, in the waning days of September the price of gold soared by some $40 to around $300 an ounce. How worried should we all be about rising prices, since gold is a traditional harbinger of inflation?

Relax. An old-fashioned government-sanctioned cartel has come together to prop up gold prices, which have plunged by a third over the past three years. Fifteen European central banks agreed to restrict gold sales from their reserves over the next five years. The International Monetary Fund also abandoned its plan to sell gold to pay for its massive developing-nation debt-forgiveness program. With less supply coming to market, and widespread expectations of increased demand for jewelry from an expanding global economy, the price of gold jumped higher. Gold prices also spiked as red-faced financial gunslingers reversed a big bet that gold was heading lower.

Investors should be wary of studying gold to divine inflation's future course. The ancient form of wealth is less an international currency and stable store of value than ever before. It's just another commodity that swings to the global rhythm of supply and demand. No, the forces constraining inflation remain strong. With the glaring exception of Japan, most central bankers have painfully learned over the past three decades what it takes to maintain a stable value of their paper currencies backed only by the full faith and credit of governments. Instead of a gold standard, we have the Greenspan-standard, the Bundesbank-standard, the Bank-of-England-standard, and the money management policies of other central banks, all backed in their vigilant inflation watch by the $78 trillion global capital markets.

What's more, the gale winds of intense domestic and international price competition are gathering momentum, rather than dissipating as the economy closes in on the ninth year of an expansion. The Internet is a deflationary technological force of unprecedented scale and scope. Internet-dot-com has moved from a colorful tributary of the American economy to the business mainstream in less than a decade. Imagine, no one traded over the Internet as recently as 1994. Yet the high-tech forecaster Forrester Research predicts that by 2003 nearly 10 million households will have online accounts holding more than $3 trillion in assets. The Internet puts the customer in charge, and customers want low everyday prices. Inflation won't take off when companies don't have any pricing power.