"Trees do not grow to the sky," say the old-timers. They don't. They grow about as high as they are supposed to grow. Then, they rot and fall down.

Just as trees, markets have to do what they are "supposed" to do. When things are out of whack, they have to get back into whack one way or another. When they are far beyond the mean, they must revert back to the mean. If not, there would be no mean to revert to. There would be no "normal," no usual, no ordinary, no common, no standard, no regular. That is to say, there would be no familiar patterns to life. Everyday would be a surprise.

But there are patterns.

When markets reach an extraordinary peak, somehow they have to fall down to an extraordinary valley. That's just what they do. But they don't have to do it in a way that suits us. Or even a way we can anticipate. If we could anticipate it, we could take advantage of it. And if we could take advantage of it, we could stop it in its tracks.

Let's suppose, for example, that after the market had reached an epic high at the end of the 20th century, we could reasonably expect the next chapter of the story to tell us how it reached an epic low. So, skipping ahead, speed-reading investors might figure that they should sell their shares. And then, reading between the lines in their concise Book of Market History, they would realize that everyone else would also be selling in anticipation of the next big move and that they should try to sell first!

But then, the book would be open to everyone, so everyone would be trying to sell earlier and earlier than the next person, to avoid the rush...until they had all sold before the big bull market even began. In fact, there would be no bull market. If everyone knew what the future would bring, no one would bother living through it. History would stop.

Fortunately, we live in a world of perpetual darkness, at least insofar as tomorrow is concerned. All we know is that the fundamental patterns of the past will probably repeat themselves; we just don't know how or when.

Many gold bulls, for instance, expect an exact replay of the late '70s, wherein rising inflation rates led to a soaring price of gold. In this, as in so many things, we are less than sure.

We are a gold bull, too, of course, but we have a feeling this bull market in gold may not take the anticipated course. The real danger to the U.S. economy remains deflation, not inflation. Not too much money chasing too few goods and services, but too little money to keep up with the load of debt.

"Fear Grips Phoenix Housing Market," is an actual headline from the weekend press. What people are worried about in Phoenix is what they are beginning to worry about everywhere: how are they going to pay their debts? Nearly $1 trillion in ARMs (adjustable rate mortgages) is scheduled to be reset in the next 12 months. How will people make the higher payments? Meanwhile, the biggest debtor of all time, the U.S. government, has its own ARM. If we read the schedule correctly, a third of the entire U.S. debt burden - almost $3 trillion - needs to be refinanced in the next 12 months.

Where is the money going to come from?

It's not the size of the U.S. debt load that really matters; it's the ability of the debtors to pay it. As debt payments increase, interest rates are rising everywhere. And as they rise, so does the need for cash to make payments. That's why the dollar is not likely to be worthless. Not soon. That is for the next stage...when Bernanke's back is to the wall. For the present, what we are seeing is the need for more cash, and a demand for dollars to keep the system going.

Yes, the dollar is inherently worthless. And yes, it too will eventually do what it is "supposed" to do. It will go away, but nothing happens as simply as you expect.

*** Gold is looking for its bottom. Maybe it has already found it. What will happen to gold in a deflationary, dollar-craving world? It will go up. But it may not go into the rafters right away. In the future, it will go to $1,000 and beyond. But between today and the future there will be plenty of tomorrows.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.