It's hard to say. But investors haven't missed the fact that there's a lot more money available to buy the same amount or fewer goods. Commodity prices are rocketing. The price of oil has doubled in four months, now trading at $70 a barrel. Commodity prices, in general, were up a record 20% in May alone and headed higher. Gold and silver lead the way.

Bank reserves are another indicator of money in the system. Last year reserves were $11 billion. Today they're $900 billion. Once the banks start lending in volume, the money supply will grow even faster.

Interest rates haven't been ignored by investors either. They're up almost twofold in eight months. The 10-year Treasury note is close to 4%. Five months ago it yielded about 2%. When the 10-year note goes higher, so do mortgage rates. It's the most common benchmark for fixed rate real estate loans. As it goes higher, fewer people qualify to buy homes, reducing an already small universe of buyers. Just when rates need to stay low to help the recovery, they're starting to rise.

The Fed isn't asleep at the switch when it comes to inflation. It's already talking about tightening interest rates. Of course, when the stated yield on three month bills is close to zero it's hard to loosen them any further. On the other hand, tightening will surely slow any recovery.

More money will be pumped into the economy. There is no choice. With unemployment at 9.4%, purchasing power has been greatly diminished, not only by consumers without jobs but by consumers with jobs who are afraid of losing them. The next major push in the stimulus package is to create or save 600,000 jobs this summer. That takes more money. The projects: rehabilitate 98 airports, 1,500 highways, construct 200 new waste and water systems in rural locations, and put 125,000 young people to work in summer jobs through the Labor Department. The administration claims the stimulus act will save or create more than three million jobs over two years.

Republicans are quick to point out that since the President signed the stimulus package, 1.5 million jobs have been lost and the unemployment rate is at a 26-year high.

With more government spending on the horizon, it's impossible not to imagine inflation coming back. Maybe in a big way. Yet the Fed is saying it has a plan that incorporates all of the new funding, and that inflation won't be a problem. One weapon it can use is tightening interest rates. But if it does, that will certainly slow any recovery as fewer businesses qualify for loans and home buyers don't qualify for mortgages.

It's a fine line for the Fed to walk. If it can pump in all this stimulus money and control inflation, it will have accomplished a true mission impossible. In the meantime, investors aren't waiting to see whether it can be done. They're buying inflation resistant assets like real estate and commodities. They may be too far ahead of the inflation curve, but if they're right, these prices will seem like real bargains.