Two things cause real inflation: Too much money or too little goods.
The inflation of the 1970's experienced in the United States had less to do with energy prices than it did with socio-economic changes and baby boomers coming of age in terms of consumption.
We may well be on the precipice of a similar situation, only this will be a global change. China is coming of age. The July 2004 population estimate was 1,298,847,624. The United States population was estimated at 293,027,571 for the same time frame.
So, for every American there are about 4.4 Chinese. U.S. Per capita GDP is $37,800. In China it is only $5000. As the economy grows there, consumption and demand will grow. Social changes are already beginning to take hold.
If (when) China's per capita GDP doubles, it will be only about 1/4 of the United States. Given the vast population, the demand on resources will be great. Higher demand can be a harbinger of higher prices. I think we are beginning to see that right now in the energy markets amongst others.
You want to be on board with entities that will benefit from the changes going on in China. Be cautious about instruments that can be hurt by inflation.
With demand climbing we should see commodity prices generally climb. Along with this, we should see new pricing paradigms for many commodities. We could be at the beginning of a golden age for commodities.