The cap applies to debt owed to the general public, which is anyone who buys U.S. bonds, including foreign countries, and government holdings.

A lot of people out there are very bearish about U.S. bonds.

But if the Chinese stopped buying all those U.S. bonds, interest rates would rise.

"I thought the stock market was extremely overvalued at 2,700 and then the U.S. long-term bonds reached over 10 percent," he said.

"It makes sense that a pullback from glasnost would boost U.S. bond and currency prices."

The attractiveness of the U.S. bond and stock markets makes the dollar attractive.

Many debtors lack the foreign exchange needed to buy U.S. bonds for collateral.

Of course, optimists have a comeback: if things are really that bad, why are so many foreign investors still buying U.S. bonds?

Still, two hundred ninety billion dollars of U.S. bonds were on the market briefly, and undervalued at that.

That's the interest rate on the 30-year U.S. bond.