In a recession, the last thing you usually need to worry about is inflation. But ever since the U.S. economy survived the worst of the market meltdown in late 2008 and early 2009, rising prices have threatened the recovery -- and raised the specter of inflation.

Remembering inflation
 High inflation is something that many investors can't really remember. But 30 years ago, inflation was front and center in the economic debate. Then-unheard-of energy costs served as a tax on discretionary spending, crippling business activity and leading to conditions that could have caused a downward spiral for the entire U.S. economy. Inflation reached double-digit percentage rates, and the same Treasury bonds that now pay next to nothing fetched interest rates that would make your mouth water -- rates that only Annaly Capital (NYSE: NLY), American Capital Agency (Nasdaq: AGNC), and other mortgage REITs can match. It's somewhat ironic that today's extremely low rates are what make mortgage REITs' high yields possible.

By contrast, the inflation we've seen lately is only a shadow of those dark days of the late 1970s and early 1980s. Even with prices on food and energy at relatively high levels -- high enough to give companies like McDonald's (NYSE: MCD) some grief -- consumer price index figures have only risen by around 3.5% over the past year. But after seeing essentially no change in the CPI for a number of years, the return of positive price increases -- though beneficial to seniors whose Social Security benefits are indexed to the CPI -- has some wondering if the worst is yet to come.

Fighting the inflation battle
 One well-known investor who's doing something about inflation is Bill Gates. The Microsoft co-founder recently reported a couple of interesting investments among his holdings -- investments that try to track inflation.

The particular investments that Gates chose are closed-end funds: Western Asset/Claymore Inflation-Linked Securities (NYSE: WIA) and Western Asset/Claymore Inflation-Linked Opportunities & Income (NYSE: WIW). The two funds own substantial stakes in inflation-indexed income securities whose prices rise and fall in part with changes in inflation levels.

U.S. investors are familiar with what's known as TIPS -- Treasury inflation-protected securities. These bonds adjust their principal value automatically with changes in the CPI. Moreover, you can get access to TIPS through the iShares Barclays TIPS Bond ETF (AMEX: TIP) as well as some similar funds.

But how the funds that Gates chose differ from TIPS is that they invest not only in U.S. bonds but also similar inflation-indexed investments around the world. By owning foreign inflation-adjusted bonds of the type that the SPDR DB Int'l Gov't Inflation-Protected Bond ETF (AMEX: WIP) gives you, you get exposure to changes in price levels that reflect a variety of foreign currencies as well as differing levels of overall economic activity. The net result is more diversified protection against inflation.

In addition, closed ends have something that regular ETFs lack: the chance to buy at a discount. Currently, the discounts on the two inflation-fighting closed ends he owned are upward of 10%. Discounts not only let you buy shares on the cheap but also boost the effective yield on any interest distributions you receive -- a double benefit for savvy buyers.

Is it too late?
 Surprisingly, the discounts on these two closed-end funds remain unusually wide -- even after news of Gates' purchases became commonly known. If you're looking for a cheaper way to give yourself some direct protection against price increases, then take a closer look at the Western Asset closed ends and see if they deserve a portion of the money you have allocated to fixed-income in your portfolio.

Closed-end funds and ETFs aren't just good for fighting inflation; they can help you make money, too. The Motley Fool's free special report on ETFs has three ETF names you should know; just click on the link to read it with no obligation to do anything more.