Some people argue there is not enough gold in the world to manage exchange. They seem to believe that there is no self-regulation on the fiat money. There is a self regulation on money. The regulation is the bond market. The bond market works like gold. Here is how. During periods of high inflation, the bond prices climb upward as money flows from foreign countries seeking refuge in long term securities. During periods of deflation, the bond price collapses, the economy slows, interest rates rise, bond yields rise, and taxes increase. The bond market rise follows a power law correlation of inflation=inflow, deflation=outflow. The bond market is not a good replacement for the gold standard because fiscal policy can cause speculative overvaluation that can lead to a bond bubble. We are left to ask ourselves, "Why are we so clueless about the bond market?" [Learn More ...]

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