Since 2000, two important financial “bubbles” have popped. The seeds for the third such destruction are now in progress as government bonds in the United States and overseas skyrocket on deteriorating economic fundamentals. Government bonds love bad news as it suggests lower interest rates lie ahead to fuel an economic recovery thereby sending yields lower.

This decade has already witnessed the death of two asset class “bubbles,” both destroyed by either lax monetary policies or rising interest rates.

Starting in March 2000, the NASDAQ technology and telecommunications bull market came to an end; almost nine years later, the NASDAQ remains more than 70% off its high.

Then there was the Mother of all “bubbles,” U.S. residential real estate.

We all know how this train-wreck is unfolding as nationwide housing values continue to decline since mid-2006. U.S. home prices have shed almost 30% since peaking 2.5 years ago accompanied by surging foreclosures, rising defaults and, in many cases, mortgages now worth more than the underlying value of the property.

Now we face another monster “bubble” in late 2008, although this one was not directly created by central banks.

The culprits behind this round of madness are the banks and mortgage-finance companies together with the regulators and government – all to blame for making easy loans to individuals who had no business buying a home in the first place. This spectacular blowup triggered the subprime crisis and the total unraveling of credit markets since peaking more than 16 months ago.

Growing fear and widespread panic since mid-September have forced more investors to dump stocks and other assets; the only place to hide amid the worst financial storm since the 1930s remains government bonds.

U.S. Treasury bonds are now in a massive bull market. The yield on the benchmark 10-year T-bond sits at 2.72% this morning – the lowest yield since 1955. Shorter maturities yield much less, including the 2-year T-bond at just 0.92%.

But one of the most spectacular rallies over the last two weeks lies in the 30-year T-bond, now trading at just 3.21% compared to 4.37% on October 31. That’s unbelievable because over the next 12-18 months the United States and Europe will embark on massive fiscal expansions to boost growth and finance a deluge of bond issuance. This makes long-term Treasury bonds a great short -- eventually. But for now, it’s a freight-train. It’s probably too early to bet against Treasury debt until stocks finally stabilize and muster consistent rallies, which will be partially financed by Treasury bond sales.

Still, this is developing into a first-class “bubble.” The world right now wants dollars and Treasury bonds. Yet, I suspect that over the next several months we will witness a major reversal and, perhaps, a turning point for bonds as this bull market finally draws to an end. Investors will sell dollars and Treasury bonds again one day. Count on it.