At first, the Union Bank of Switzerland, one of the world's three most prestigious, figured it had lost $19 billion. That's when Singapore's pension fund kicked in $11 billion, figuring UBS was still a sound investment over the long haul. UBS then revised its loss estimate to $40 billion -- for one bank!

As Congress debated clamps vs. Band-Aids to stop the hemorrhaging, a downcast U.S. economy in recession became a tempting target for the world's 54 "Sovereign Wealth Funds," a descriptive term for separate pools of government funds, mostly dollar surpluses accumulated from China to Japan to the Arab Gulf to Singapore. Instead of hoarding depreciating U.S. Treasury paper and dollars, SWFs invest in hard assets wherever they see opportunities throughout the world.

Foreign central banks keep looking for ways to unload stockpiles of dollars without disrupting their economies or the global financial system.

Edwin M. Truman, a senior fellow at the Peterson Institute for International Economics in Washington, is the world's leading authority on SWFs. He estimates their total assets today at $5.3 trillion, about $1 trillion of which is invested in the United States. The more financial trouble the United States finds itself in, the better the investment climate as U.S. business and financial entities decide to opt out into the arms of a foreign buyer rather than seek bankruptcy protection.

Treasury Secretary Henry Paulson's financial bailout plan got mixed reviews on Capitol Hill. Republicans, predictably, said it reflected too much government interference in free markets that should find their own bottom, and Democrats said, predictably, not enough. Their bipartisan compromise: a paltry $15 billion over the next 10 years in tax rebates chiefly for the housing industry. Meanwhile, the wrecking ball keeps swinging.

Over the weekend Deutsche Bank said losses from "securitized" subprime mortgages were heading for $400 billion. Wall Street insiders said it would be more than $500 billion. The dollar is being described as the leper at the birthday party. Fear of contagion is everywhere. So when Paulson said, "A strong dollar is in our nation's interest and should be based on economic fundamentals," he looked and sounded like Popeye violently wiggling his buttocks to extricate a can of spinach. But the magical powers of spinach can't stop the train this time.

According to the Bank for International Settlements in Basel, Switzerland, another massive bubble that keeps ballooning is the derivatives market, which has quintupled in five years since 2002 to more than $500 trillion -- not billion.

Like the insurance industry, derivatives transfer risk from those who do not want to bear it to those who do -- for a fee. Blamed for the market's phenomenal growth are (1) the Federal Reserve's cheap money policies that created the subprime-mortgage boom; (2) war budgets that strained the U.S. Treasury and future entitlement programs; (3) trade deficits with China and others that eroded the value of the dollar; (4) oil- and commodity-rich nations moving to equity payments -- and the euro -- rather than U.S. Treasury paper.

Fed interest rate cuts mean to the rest of the world that the Fed continues to print money at an alarming rate. Banks are borrowing from the Fed and then hoarding cash, apparently fearful the worst is yet to come. House prices are still falling -- at the fastest rate on record.

The magnitude of the $500 trillion derivatives bubble is brought home by America's largest dollar figures: GDP ($15 trillion); federal budget ($3 trillion); U.S. government's maximum legal debt ($9 trillion); and also by the GDP for all nations ($50 trillion); and the total value of the world's stock and bond markets (more than $100 trillion). By way of reassurance, BIS' 2007 annual report also says that the $11 trillion "gross market value provides a more accurate measure of the scale of financial risk transfer taking place in derivatives markets" every day.

A snapshot of what is actually taking place is unfettered free market capitalism -- and government spending. A blistering Government Accountability Office report found 95 major defense weapons systems have far exceeded their original budgets by a total of almost $300 billion, bringing their total cost to $1.6 trillion. A 22-year-old defense contractor, operating out of an unmarked office in Miami Beach, landed a $223 million Pentagon deal to supply surplus ammunition for the Afghan army. The ammo delivered was decomposing and made in China 40 years ago.

More serious in the field of mismanagement was the Air Force shipping to Taiwan in August 2006 four electronic fuses designed to trigger nuclear Minuteman III ballistic missiles -- instead of batteries for utility helicopters listed on the waybill -- and not discovering the mistake until 2008. In 2007 airmen from Minot Air Force Base in North Dakota accidentally ferried and lost track of six nuclear warheads that were flown on a B-52 Stratofortress to Barksdale AFB in Louisiana.

Discipline and manners have given way to violence and rudeness. Foreign frequent travelers to the United States have noticed the polite greeting has been replaced by gruff questions. Many TV commercials depict violent or risky behavior in prime time (e.g., Comcastic). Local TV news from coast to coast is mostly about local and national crime. The 10 p.m. and 11 p.m. crime roundups are presumably linked to sleep disorders for America's hardworking millions.

A return to the traditional values that made America the greatest country in the world is not a bad program for our next president.

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