The bond market is a bubble that's headed for a massive burst, says Todd Wood, who worked for more than 10 years as an emerging market debt trader.

"I see that we are paying basically nothing for the almost $20 trillion debt that we have now," Wood told Newsmax TV in an exclusive interview.

"The duration of our portfolio is around five to seven years, and it [the interest rate] is now slightly above 1 percent on that debt."

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That's a recipe for disaster, says Wood, who also is author of the novel "Currency" and was a special operations pilot for the Air Force.

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"At some point, the Fed can't keep growing its balance sheet and keep interest rates so low," he said. "So at some point we're going to have an interest rate shock."

It could be as much as a five-percentage-point move, Wood says. "That could wreak havoc on our economy."

Already, the 10-year Treasury yield hit a 14-month high of 2.29 percent last week. But Wood says the party is just starting.

"I laugh at the reaction of the market, because we're at such low rates," he said.

"People have seen nothing yet. There's a saying in Wall Street: interest rates are low until they're not. And we have no idea when that’s going to happen. So the move is the beginning of a longer term trend."

A bond blowout could have ramifications beyond the economy, Wood says. "Economic weakness leads to military weakness, and that is really what I want to make people aware of," he said.

"This has all happened before. Empires have crumbled over too much debt." The United States could lose its global clout, Wood says.

"As Machiavelli said, it's better to be feared than loved. And right now, my fear is that we're neither, because we're out of money, we're broke. People are not really worried about our reaction from a national security sense."

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The dollar's status as a reserve currency is at risk too, he says. China and Russia are talking about eliminating the dollar from their trading relationship, as are Australia and China, Wood says.

"So this is already happening. The dollar is losing its status, and what the consequences of that are, I don’t think we fully know."

Meanwhile, Wood is bullish on gold, despite its recent drop. "I'm a firm believer that the currency should be backed by something that is real, whether it be gold, whether it be a basket of currencies," he said. "Gold is a heck of a buying opportunity right now."

And why is it so important to have gold or a currency basket behind the dollar? "We have to have something that backs our currency so that governments aren't incentivized to print money to stay in power," Wood said.

Editor’s Note: Put the World’s Top Financial Minds to Work for You