I've commented that sooner or later the piper will have to be paid with regard to the runaway deficit spending done by our Congresses over the last 10-11 years and the humongous national debt that such fiscal irresponsibility has caused.

But maybe "sooner" will really be sooner. On top of the Chinese beginning to reduce their holdings of U.S. debt, the bond market has gotten very "frothy" in the last week or so. The rates on Treasuries have escalated by almost 4% in a single week. The bond market gurus and traders are now saying that interest rates are on their way up in a big way. In a speech yesterday, Alan Greenspan referred to the interest rates on Treasuries as the "canary in the coal mine"...the predictor of bad things to come.

How does this affect us, you ask? Well, the gross debt of the U.S. is expected to be $14,456.3 trillion by the end of this year. That's about 98% of the total gross domestic product of the U.S. this year. What's most alarming is that the average maturity of all that debt is only 4.2 years! That is, about half of that $14.5 trillion in debt will become due and payable within the next 4.2 years.

The way those simple facts affect all of us is as follows. If our deficit spending continues unabated, economists project that our national debt will be $18.35 trillion by the end of 2014. When that debt comes due and must be repaid or refinanced what happens if...

• Interest rates continue to climb and the U.S. Treasury finds it necessary to replace bills and bonds with interest rates averaging between 2.5-3.5% with new debt instruments carrying rates of 4-5-6%?

• And what happens if China, Japan and Saudi Arabia, the largest holders of U.S. debt decline to buy all the new and increased debt that is needed?

In essence, I'm describing a situation where the U.S. is definitionally bankrupt. It can't pay it's debts when they become due.

What would happen then is that the Treasury would simply print more money--increase the money supply--and use the new money it prints to pay off old debts as well as finance spending that it can no longer finance by selling debt. That would drive the value of the U.S. dollar to unheard of low levels and inflation would skyrocket.

The price of the goods, services and products would increase to reflect the decline in the value of the dollar. The inflation could be pretty bad...$7-8 a gallon gasoline, cars that now cost $20,000 could easily cost $30-40,000, the price of groceries would skyrocket, the cost of services like insurance would escalate to reflect the increased costs of those risks that insurance companies underwrite. Yes, if you think that health insurance is high now, it could appear to be a bargian in only a few years.

If you thought there is public outcry over the healthcare reform bill now, wait until runaway inflation eats away at the purchasing power of every man and woman in the U.S.

Frankly, I thought that these events would occur, but would occur slowly and not really be a problem in my lifetime. I've begun to change my mind. I think these events could easily occur sooner...much sooner than I expected.

Remember that key fact...at least half of the public debt issued by our country becomes due and payable in 4.2 years. The questions are: at what interest rate will be able to refinance that debt as it rolls over? And if the national debt keeps growing as fast as it has, will there be enough money--enough buyers of our debt--to buy all that we will need to sell to finance our spending?

I'll end this note by saying that the situation I've described could actually be a good thing. Given that situation, our elected politicians would have no choice but to drastically cut spending and probably increase taxes. There would be no alternative. No one political party, ideological group or candidate would have to take responsibility for those inevitable actions. The pain resulting from slashing spending and increasing taxes would be less than that resulting from runaway inflation.

The end result might actually be a good thing for the country....really bad for each and every one of us, but good for the country.