The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

Is My Bank Safe?

Like we’ve said earlier, everything that happened in the last crisis still lurks around the corner to be dealt with again. The purpose of much of the emergency lending facilities and bailouts wasn’t to clean up the banks’ act or get more jobs for citizens who want to work. Bernanke was happy to declare quantitative easing—that is, money printing—a success when stocks began to climb.

But bank stocks didn’t get to rally for long, and some are still seething in toxic waste. Bank of America, slipping under $5 as we write, doesn’t look like it has what it takes to survive.

In fact, if you consult recent CMA data and credit default swaps pricing, there’s a 1-in-5 chance that Bank of America will default in the next five years. Old Pierpont Morgan’s namesake is right there along with it. Those are bad odds.

Add to that what could be the biggest financial explosion on earth: The four largest U.S. banks—those most levered—are sitting on about $249 trillion in financial instruments tied to the European banking sector. Those are things like credit default swaps that they’ll have to pay should any of the Eurozone nations default.

And keep in mind that the euro banks are leveraged to the hilt from gorging on sovereign debt. They hold 30 times as much sovereign debt as they do capital. Sure not all of it will default, but all it takes is a nation or two to start a crisis that ripples throughout the entire global finance market. We’ve seen it happen time and again (as we’ll cover ...