ANSWER:

I wouldn’t bother setting up a transparent proxy. Instead simply run Squid on 127.0.0.1:3128 and then use the Net::HTTP::Proxy stuff for your API calls. Documentation here. I don’t recommend pumping everything through a proxy to start, but moving over specific calls until you get comfortable with the setup.

In regards to sizing your Squid cache, if you allocate a cache of 128MB Squid will use roughly 196MB total including the cache and overhead. If you think you’re going to get close to the max memory of the machine I’d setup some monitoring of swap space which is usually your best indicator that you’ve oversubscribed memory.

by kashani from http://serverfault.com/questions/393371