A year ago, Credit Suisse went under. The rescue required 1/3 of Switzerland’s gross national product. CS was about a third as big as UBS. In other words, a new rescue (and most G-SiBs have come knocking in the recent past) would require the Swiss gross national product.
Even our federal government and the SNB cannot afford that. Who can?
- Chinese National Bank: Probably not
- Japanese National Bank: We have other challenges
- Fed: OK, Switzerland is actually a little closer to Washington than Hawaii, but becoming the 51st state of the USA?
- That leaves the ECB. It could probably handle it. Yet we are not a member (yet). But the constraints described above will bring us closer to Europe…
