A lot of observers are concerned about the long-term impact of the U.S. government's bailout policies. Count me among the worriers.

Since last September, the Federal Reserve has virtually doubled the monetary base (consisting of currency in circulation, member bank reserves held at the Fed and vault cash).

As Prof. Arthur Laffer pointed out recently in a Wall Street Journal piece, that's the largest percentage increase in the past 50 years — by a factor of 10!

Bernanke's crew promises to reel in this excess cash once the economy picks up. Unless the Fed acts promptly, though, we'll be battling a serious inflation problem two or three years down the line.

So I'm scouring the markets for inflation hedges. Trouble is, however, many of the traditional hedges are expensive nowadays.

The price of gold bullion has more than tripled since 2001. Ditto for silver. Oil has doubled from last December's low. Real estate values are improving, but rental yields (so-called "capitalization rates") for commercial property still haven't reached knock-your-socks-off levels in most parts of the country.

So, what's the solution?

Your Best Bet to Hedge Against Inflation

As it happens, one hard asset is remarkably cheap, both in terms of its own history and relative to its nearest rivals. What's more, it fits perfectly with the Obama administration's goal to curb emissions of carbon dioxide.

I'm talking about natural gas.

After surging to a record $13.50 per million BTUs a year ago, the clean-burning fuel has plummeted to a little under $4 recently. At the April low, natgas had given up virtually all its gains from the energy boom of the past seven years.

Compared with oil, natural gas is a steal. On a heat-equivalent basis, it should take about 6 MMBTUs of gas to buy a barrel of oil. (In practice, because it takes energy to refine oil, a ratio of about 8:1 is probably more appropriate.)

Over the past few months, however, the oil/gas ratio has taken a moonshot up to the 16:1–19:1 range, the lowest relative price for gas since 1992. Gas is now even trading at a heat-equivalent discount to filthy (and superabundant) coal!

Of course, there are reasons why natgas is so depressed.