But even if the inflation rate is truly only 4%, the Fed’s monetary policy is dangerously inflationary; if it is actually 7%, giving a real Fed Funds interest rate of minus 5%, then prices can be expected to take off like a rocket - as they are already in the commodities market.

Bernanke issued stern warnings before last Wednesday’s meeting of Federal Open Market Committee (FOMC) policymakers, talking about the dangers of inflation and the need to preserve a strong dollar. For the first time, large numbers of mainstream economists echoed his warnings - even Larry Kudlow, one of the strongest proponents of the Fed’s initial rate cuts last September, was spooked by the inflationary prospects.

After the meeting, however, Bernanke did nothing but issue a further warning.

It’s highly unlikely that he’ll raise interest rates before Aug. 5, which is when the Fed next meets. That’s because, having ignored the warning of June’s consumer price index (CPI), Bernanke is unlikely to be pushed into raising rates by a second bad inflation number in July.

In fact, he’s more likely to cut rates than to raise them - but only in the face of a major crisis.

Any “crisis” would probably take the form of a banking collapse, or a serious deterioration in the U.S. economic position, in which case Bernanke might well be forced to cut rates again.

Thus, for the next several weeks, it’s highly likely that the commodities “bubble” - which is clearly what this has become - will grow in both size and scope.

So now that we know that, the question to answer is clear: How do we profit?

Bubbles, Doubles, Oil and Troubles?

It’s fairly clear to me that concerted speculation by hedge funds and pension funds is what’s been pushing up oil prices. But that may be playing out - and reaching its limit - as the huge price increases we’ve seen in “black gold” over the past year is finally dampening consumer spending both here in the United States and in other key markets worldwide. So the oil patch may be too slippery a spot to play right now.

On the gold front, if there is concerted action it is by central banks that are trying to suppress the advance in the price of the so-called “yellow metal.” Unlike oil, there is no natural dampening of demand for gold as the price rises; speculative demand (the major factor) tends to intensify. Moreover, an economic recession, which would probably be accompanied initially by inflation that was still accelerating, could intensify the rise in the price of gold, instead of suppressing it.

Investing in the late stages of a bubble is highly speculative. Nevertheless, I reiterate my prediction of a few months ago that gold will reach $1,500 an ounce. Even if the Fed begins to act against inflation in August, it is very unlikely that its initial actions will be effective. Don’t forget that in the last great inflationary bubble of 1980, gold hit a level that’s the equivalent of $2,300 an ounce in today’s money.

I would consider SPDR Gold Trust (formerly StreetTracks Gold Trust) shares (GLD) about the most efficient way of getting a pure gold play. As an alternative, you might consider a silver investment: The metal is currently trading at less than 15% of its 1980 high, the equivalent of $130 per ounce. If that’s a move you like, the iShares Silver Trust ETF (SLV) seems the best way to play silver directly.