As the debt crisis in Europe has exacerbated in severity, speculation has grown that Japan could soon find itself in the same situation as the indebted euro nations.

That is, facing extraordinary interest rates and the prospect of default.

Kyle Bass of Hayman Capital has spearheaded this thesis, recently sending a note to clients on the prospects of Japan's future. (Readers can view the note on Zerohedge)

Bass draws parallels between Japan and Bernie Madoff's infamous Ponzi scheme, noting that Japan's demographics make its future appear particularly grim.

As Japan's population ages, its ratio of retirees to workers steadily declines. The country has a particularly low birth rate and its society is notoriously resistant to immigration.

Japan already has a horrendous level of debt-to-GDP. As the country has remained in a crippling deflationary period of virtually no growth for the past twenty years, interest rates have remained low. For its part, Japan's government has been able to borrow rather easily from its populace, who maintain a high savings rate.

Yet, as more and more Japanese retire, they will be unable to ...