Lesson Learned: Big is Bad, Very Bad!

The neo-reality of this 22nd century is that big is bad, very bad. Big government, big banks, big bailouts, big leverage, big liabilities and big debt are all very, very bad.

The world has been on a big binge and it is time to pay the proverbial piper.

Europe decided that bigger is better and created the European Union and a new currency, the Euro. What Europeans failed to recognize is that most of the member nation governments were big government socialists. These governments would continue to grow, their programs to help the needy would expand (primarily via the redefinition of needy) and everything would be just fine or so everyone thought until now. Socialism dislikes private property ownership. Central governments took more and more land and property in the form of taxes to expand government.

When these governments ran out of people to tax they began to borrow, and borrow they did in a big way.

The United States is on the same path as Europe. Taxing and borrowing became reelection strategies for both political parties. When the people rejected more taxes, borrowing became the new narcotic or the political class. Borrowing leads to hedging, which leads to leveraging, which leads to the inevitable - bankruptcy. Sovereign nations in Europe are facing bankruptcy.

So where is the money coming from?

From banks of course. Banks were and are still looking to lend to governments and by doing so have leveraged themselves into oblivion. According to Greg Hunter, former investigative reporter for ABC and creator of USAWatchDog.com, "I keep hammering away at the fact the Fed doled out $16 trillion in the wake of the credit crisis of 2008. This is an enormous sum that is greater than the all goods and services produced in the U.S. in a single year. Domestic banks and companies got the money, right along with foreign banks and companies. In effect, the Federal Reserve bailed out the world financial system. Now, we are right back to square one facing another financial meltdown with European banks and sovereign debt. If the Fed spent $16 trillion, why in the heck is this problem not fixed and why isn’t the world economy taking off like a rocket?" [My emphasis]

The simple answer is it wasn't enough money.

Greg reports, "According to the latest report from the Comptroller of the Currency, just four U.S. banks have an eye popping $235 trillion of OTC derivative leverage. (Click here for the complete Comptroller of the Currency report.) As a nation, U.S. banks have a total OTC derivative exposure of $250 trillion. So, the fact that just four U.S. banks have this much leverage and risk is astounding! The banks are listed below in order of size and approximate OTC exposure:

1.)     JP MORGAN CHASE BANK NA OH - $78.1 trillion OTC derivatives

2.)    CITIBANK NATIONAL ASSN - $56.1 trillion OTC derivatives

3.)    BANK OF AMERICA NA NC - $53.15 trillion OTC derivatives

4.)    GOLDMAN SACHS BANK USA NY - $47.7 trillion OTC derivatives

"Considering that the total assets of these four banks are a little more than $5 trillion, I see a frightening amount of risk with a total derivative exposure of $235 trillion! This is nearly 50 to 1 leverage," says Greg.

So who will bail out these banks? Certainly not the United States Treasury given our own increasing debt load and the inability of President Obama and Congress to deal with the long term federal debt and unfunded liabilities of Social Security, Medicare and Medicaid.

There is simply not enough money in the entire world to save us from ourselves. Time to wake up and realize that big is very, very bad.

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Comment by Les Sims on October 8, 2011 at 2:15am: Good post Dr. Swier.

Clarice Davis, you are right...let them fail and start over small. That is how this great nation was built until the progressives starting with Alexander Hamilton got their way.

I am not a Ron Paul groupie, but I would like to see him as the Treasury Secretary with full authority and support to clean up the Fed and monetary mess.

The Federal Reserve and the communists/Marxists/socialists and RINO anti-Americans must go!

Comment by Mindy on October 7, 2011 at 10:29pm: More and more I am beginning to think that only Ron Paul will be able to pull us far enough right to get even close to being in the middle, much less where we should be.

Comment by Gail Naylor on October 7, 2011 at 1:53pm: Herman Cain Cain is the only one with sense and isnt a politician!

Comment by Daniel Dyer on October 7, 2011 at 1:40pm: The Federal Reserve Bank is not federal, it's not a reserve and it's not a bank. It's an international cabal designed in secret, presumably to maintain the value of the dollar, which has declined 96% in value since the Fed was established. The real reason was to protect the largest banks from competition from smaller banks in the South and West that were growing rapidly. The Fed actually facilitates excessive leveraging by member banks, permitting them to make gigantic loans, the interest on which generates huge profits. This "4th branch of the government" is a great partner of big spenders in the three constitutional branches, operating in secret, and enabling massive federal government deficits.

Comment by Al Newman on October 7, 2011 at 12:27pm: "To save us from ourselves?" I remember years ago being dead set against the new laws that were passed to allow big banks to buy up little banks all across the country. I couldn't stop it. I don't remember agreeing to being fleeced by our government and I didn't vote to have a Federal Reserve, but I couldn't stop it. I knew Obama was throwing a trillion dollars at his friends and bosses and NOT stimulating the economy, but I couldn't stop it. This has all be orchestrated by the same MFrs that created the EU, which they created for the same reason. Destroy America, the dollar, and our economy while similtainously trashing the world economy and all the currencies.......so they can institute a one world government and currency. EVERY problem we have today can be tied to certain politicians. They sold us out and were paid well by the enemies of America, foreign and domestic, to do it, and to make it worse, they were usually paid with our tax dollars.

Did you think Glenn Beck was just making this crap up?

Comment by clarice davis on October 7, 2011 at 11:59am: i saw this happening 10 years ago...To Big To Fail..., Victoria you are right...!!!

I say let them fail....start over/small again...and get rid of the Liberal communists..

Comment by Debrajoe Smith-Beatty on October 7, 2011 at 11:42am: We need to shake the asleep congress.

Comment by Victoria Knox on October 7, 2011 at 11:31am: The moment you start thinking of a company or institution as "too big to fail," it has already failed.