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Remember deflation? The moment the financial crisis began to unfold, it began.

Deflation is protracted contraction of prices - the reverse of inflation. Indeed, during the last half-year, prices did decline. Prices of property, services, products, durable goods, you name it, people expect to pay less for it. When a consumer hears that the price of a given product or service hasn't fallen, he's astonished: "Haven't you heard about the crisis?"

Well, here's the latest news from the United States: forget deflation. That's so yesterday. The latest word in economic circles is reflation.

Reflation is the process of energizing the economy by increasing the money supply, by reducing taxes, or both.

Reflation is the accepted medicine for deflation. It manifests in the marketplace through rising asset prices, usually accompanied by economic rebound.

There is nothing wrong with reflation. On the contrary, it's a sign that a recession is ending. But reflation has a scary big sister - good old inflation.

And that, dear reader, is defined as a rise in price that isn't just a correction of deflation, it's a phenomenon lasting over time.

Based on market figures, deflation isn't dead. But there are mounting signs that the crisis is nearing its end.

Governments around the world have slashed interest rates and pumped unprecedented amounts of money into the markets. And more and more investment managers are starting to prepare for the next phase: rising asset prices, depreciation of the dollar, and inflation.

One such manager is David Swensen, chief investment officer at Yale University. He achieved guru status after the fund he runs outperformed all other university funds, achieving returns of 16.3% a year, on average, in the last decade.

He finds it hard to see how all that cash injected into the system won't create serious inflation. At the least it raises the risk of inflation breaking out, he says. Swensen's advice to the American public is to buy bonds linked to the consumer price index.

Then there's John Paulson, manager of the most successful hedge fund this year. He isn't talking, he's doing. He's buying up gold and raising money to buy real estate. Both are avenues that should pay off in a high inflationary environment.

For months, professors of economics have been predicting that inflation will shoot up the moment the American economy starts growing again.

Nor should Israelis dismiss the possibility of inflation staging a comeback here at home. In April 2009, the CPI shot up by a whole percentage point and the May index is also expected to be high. Oil prices have crossed the $60-per-barrel mark on the upside and nobody's talking about falling prices in the real estate market any more.

If inflation does rise anew in the West, it will come here too. What is a saver to do? Here is a list of assets that do well in times of rising prices.

Europe and Japan are also in trouble, so America's investment managers are eyeing stocks and bonds (government and corporate) in emerging countries in South America, Asia and Australia too.

The matter is a tad trickier for Israeli investors, because if the dollar drops, the shekel will appreciate against it.

Even so, if the American public takes the advice of the experts and invests in these markets anew, these markets can be expected to boom in the years to come, both in the assets themselves - stocks and bonds, and in terms of the currencies in which they're traded.

And that will hurt short-term Bank of Israel loans, bank deposits and unlinked fixed-income bonds (and the longer the bond, the worse the damage).

What about stocks? Companies are tangibles and can protect to a degree against inflation.

But many companies are vulnerable to rising prices, including companies with heavy liabilities linked to the consumer price index. And if the dollar does drop hard, exporters whose products are traded in the dollar can also expect to feel the pinch.