For the world's biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the "safe haven" of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase "safe haven". US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

Even according to the White House's new budget projections, the gross federal debt in public hands will exceed 100 per cent of GDP in just two years' time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That's right, never.

The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted - as is the case in most western economies, not least the US.

Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.

But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year. Small wonder Morgan Stanley assumes that 10-year yields will rise from around 3.5 per cent to 5.5 per cent this year. On a gross federal debt fast approaching $1,500bn, that implies up to $300bn of extra interest payments - and you get up there pretty quickly with the average maturity of the debt now below 50 months.

The Obama administration's new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue - from a tenth to a fifth to a quarter.

Last week Moody's Investors Service warned that the triple A credit rating of the US should not be taken for granted. That warning recalls Larry Summers' killer question (posed before he returned to government): "How long can the world's biggest borrower remain the world's biggest power?"

On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.

David Fuller's view I think he is probably right. Fullermoney has held a similar view for some time, as US debt ballooned before 2008, but technical evidence of a base formation in 10-year Treasury yields (historic, monthly, weekly & daily) evaporated with the economic crisis. Now evidence of basing is occurring once again and from a somewhat lower level. Niall Ferguson's point that the crisis will spread from southern Europe to the UK (monthly, weekly & daily) makes sense. I am tempted to short UK Gilt futures (weekly & daily).

Pundits have been forecasting a rise in government bond yields recently. This can be a contrary indicator but I think it would take a significantly bigger correction in global stock markets for yields to fall sharply rather than rise from present levels. Currently, major stock markets are steadying in the manner of a normal correction, near their rising 200-day moving averages.

If Morgan Stanley is only partially right in predicting a rise in US 10-Year Treasuries to 5.5% this year, as reported by Niall Ferguson, then T-Bonds would also be a good short. A sustained break above 4% would signal upward trending action from the present trading range. In this event, the action might be favourable for stock markets, as some investors switched from debt to equity. However, as bond yields continued to rise, this tailwind would dissipate and eventually reverse into a headwind for shares at some point above 5%, as we have seen in the past.

Only a dramatic rise in deflationary concerns and / or further quantitative easing by the US Federal Reserve can significantly postpone an eventual rise in US Treasury yields, in my view.