Thanks Vit - I had that thought as well. However, I get a slightly different message after adding "gem 'psych'" to the Gemfile, running "bundle install", and then trying the Rails console:
/usr/share/ruby/yaml.rb:6:in `<top (required)>':
It seems your ruby installation is missing psych (for YAML output).
To eliminate this warning, please install libyaml and reinstall your ruby.
/usr/share/gems/gems/psych-2.0.0/lib/psych.rb:1:in `require': cannot load such file -- psych.so (LoadError)
Pete