Europe, Japan and the US cannot try to borrow $5 trillion in the next 2 years without a serious distortion of the bond market, not to mention the entire economic landscape.

I've long thought that "crunch time" -- the end game -- would show up around 2013-14. But I never in my wildest imaginings thought we could run an almost $2 trillion deficit. That crazy guy on the corner telling us "the end is nigh" may be right.

Long before we get to 2015, let alone 2019, I think the bond markets will have called a halt to $1 trillion deficits. There will be a real crisis. The deficits won't be funded at anywhere close to an interest rate that won't break the budget. Taxes will get raised beyond what they were in the Clinton years. And Obama's budget makes some very optimistic judgments about how much will be saved in medical costs - as if no one has tried to rein in medical costs before. The crisis may come much sooner if his universal-health-care bill is passed as proposed without offsetting cuts somewhere else.

Watch the bond market. Rates should be going down, not up. The bond market is telling us the deficit simply can't be financed down the road. Maybe a few cool heads in the Democratic Party will prevail in the US Senate, and the deficits will be brought under control. (The Republicans have so far seemed as clueless as they are impotent.) We could (theoretically) run $400 billion deficits for a very long time, as GDP would be growing somewhat faster.

It would be best to run budget surpluses, but the game doesn't end if there are reasonable deficits. It ends with deficits that cannot be funded except by monetization. And that will tank the dollar, except against all the other countries that are monetizing their debt.

I'm increasingly inclined to think that as the world comes out of its current malaise -- and it will -- US investors should think more globally with their investment portfolios. That's something we will explore over the coming year.