Two years ago the United States experienced its worst financial crisis since the 1930s. The crisis began on Wall Street, where misguided bets on risky mortgage loans resulted in enormous losses that few anticipated. More than 4 million jobs were lost in just six months after the peak of the crisis. There is hardly one Main Street in America not still feeling its effects.

Even as work continues to repair our financial infrastructure and get the economy moving again, we need urgent action to forestall the next financial crisis. I fear that one will start in Washington. Total federal debt has doubled in the past seven years, to almost $14 trillion. That's more than $100,000 for every American household. This explosive growth in federal borrowing is a result of not just the financial crisis but also government unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit.

Retiring baby boomers, who will live longer on average than any previous generation, will have a major impact on government spending. This year, the combined expenditures on Social Security, Medicare and Medicaid are projected to account for 45 percent of primary federal spending, up from 27 percent in 1975. The Congressional Budget Office projects that annual entitlement spending could triple in real terms by 2035, to $4.5 trillion in today's dollars. Defense spending is similarly unsustainable, and our tax code is riddled with special-interest provisions that have little to do with our broader economic prosperity. Overly generous tax subsidies for housing and health care have contributed to rising costs and misallocation of resources.

Unless something is done, federal debt held by the public could rise from a level equal to 62 percent of gross domestic product this year to 185 percent in 2035. Eventually, this relentless federal borrowing will directly threaten our financial stability by undermining the confidence that investors have in U.S. government obligations. Financial markets are already sending disquieting signals. The cost for bond investors and others to purchase insurance against a default by the U.S. government rose markedly during the financial crisis, from an annual premium of less than 2 basis points in January 2007 to 100 basis points in early 2009, before falling to the current level of 41 basis points.

David Fuller's view Currently, Euroland's sovereign debt problems are making financial headlines but this will not always be the case.

The USA needs a credible, bipartisan deficit reduction programme, preferably sooner rather than later, if America's ballooning government debt is not to be come the focus of attention at a future date.

What about the markets?

With or without a deficit reduction plan, I maintain that the 30-year bull market in US long-dated government bond yields, which was extended by the banking crisis in 2008, is over. If so, yields (historic & weekly) are now in a bottoming out and base building phase prior to a secular upward trend. The main remaining question concerns how far yields rise over the next 30 years. If my assessment proves correct - I am assuming that the USA will not experience a lengthy deflation similar to Japan - then my strategy will remain one of shorting US 30-year Treasury Bond futures (weekly & daily) on rallies. Expecting plenty of ranging, I will continue to do this mainly on a Baby Steps sell-high-buy-low trading basis. I do not have any T-Bond short positions open at the moment.