If you want to be scared—jump-out-of-your-chair scared—you don’t need a horror movie. All you need is a headline from Wall Street. America’s biggest banks are lined up like dominoes, and the first one has already crashed. When the chain reaction is all over, a pile of wrecked and indebted banks may be left in New York, and global banking leadership may have shifted elsewhere.

The world is experiencing a shift in economic power not seen since Great Britain passed the baton to the United States following World War ii. At that time, it was because the two great wars had broken Britain financially. Today, the baton is about to be passed again—and with grim consequences for America.

“The global economic crisis that has generated the collapse of the investment bank Bear Stearns … is almost certain to get much worse before it gets better,” writes the National Post. “But even if it does not, we have reached a turning point in recent economic history. We are witnessing a literal discrediting of the financial community without precedent since the Great Depression. We are experiencing a loss of confidence in our capitalist game and those who play it that will have profound, lasting repercussions” (emphasis mine throughout).

The astounding collapse of 86-year-old investment bank Bear Stearns last week should be a wake-up call to America.

All it took was 24 hours to bring this investment icon, famous for surviving the Great Depression, to insolvency. Investors lost billions, thousands of employees will soon be out of jobs and, worse yet, the damage probably isn’t close to over.

“Never before have banks seen such destruction of their balance sheets in such a short time,” said Switzerland’s central bank governor Philipp Hildebrand. “Moreover, there are signs that the problems are spreading.”

In fact, the whole economic system is at risk.

After Bear Stearns fell apart, it was made public that America’s fifth-largest investment bank had borrowed and invested almost $34 for each dollar in assets it owned. It took only a 3 percent drop in the value of its investments to wipe out its capital base. Similarly, when the $22 billion Carlyle Fund collapsed the week previous, it was revealed that it had bet $31 for every single dollar it had in capital. With that kind of leverage, the managers could have reaped a fortune had their investments turned out. However, leverage works both ways. When the markets disappointed, it didn’t take much at all before the companies were broke.

The point is that Bear Stearns and the Carlyle Fund are not the exception, they are the rule. The whole system of lenders, borrowers, speculators, insurers, stock traders, hedge funds, investment funds, investment banks, banking groups, are all leveraged up to their necks. The whole economic system is built upon speculation and borrowing—debt upon debt, debt upon debt—like a multi-story house of cards. The few banking failures so far are just the apex of the house; now the lower levels are showing signs of buckling.

“Bear Stearns and Carlyle are certainly not alone in massive exposure to bad debt,” confirms Peter Schiff, president of Euro Pacific Capital. “Given the unprecedented leverage that many of the biggest financial firms used to play in this market, there will be many more failures to come.”

As Schiff said, debt is everywhere you look, even beyond Wall Street. Federal, state and municipal governments would shut down if lenders refused to keep lending. President George W. Bush had to borrow the $180 billion for the economic stimulus plan that will give hundreds of dollars to each taxpayer. Personal credit card, automobile and mortgage debt levels are sky-high. Corporate America is saturated in debt.

And because of all this debt, America is becoming looked upon as a credit risk.

Just look at the credit worthiness (or unworthiness) of America’s financial institutions.

According to Reuters (March 18), some Wall Street banks are seen as a greater credit risk than certain dictatorships. For example, prior to its collapse, Bear Stearns was considered so unsafe that the cost of insuring its debt was more than the cost of insuring the debt of Kazakhstan. As of March 18, investors considered Morgan Stanley more risky than Turkey, a nation that has experienced chronic hyperinflation. The 158-year-old investment bank Lehman Brothers was considered more likely to default on its debt than both Turkey and Nigeria. Goldman Sachs, the crème de le crème of U.S. banking, at one point wasn’t rated all that much higher than Brazil, another country that has experienced multiple economic crises.

Astoundingly, “[m]ost banks in the UK and U.S. are trading well below valuations of top emerging markets banks,” said Paul Hollingworth, BB Securities emerging markets research head.

What does it say about America as a whole when investors consider so many of its most prestigious banks more of a credit risk than poor nations in the developing world? Lehman Brothers is more likely to default than war-torn and corruption-plagued Nigeria?

It means we are living through more than just a brutal banking correction. Bloomberg columnist Frederick Kempe says it is increasingly possible that we are witnessing a “historic shift that will leave the global pecking order altered.”

“The current financial crisis in the U.S. is likely to be judged in retrospect as the most wrenching since the end of the Second World War,” warns former Federal Reserve Bank Chairman Alan Greenspan. “The crisis will leave many casualties.”

Nobel Prize winning economist Joseph Stiglitz says the banking crisis is even more serious.

Stiglitz says the current situation is the worst the world has seen since the Great Depression and that moves by the U.S. Fed to fix the system will not make much difference. “It will have some impact—it will do a little bit to stem the blood—but it’s not addressing the fundamental problems underlying the collapse of the financial sector.”

The Federal Reserve has been using every trick in the book since last June in a vain effort to restore order to the markets. It has slashed interest rates, injected hundreds of billions of dollars, relaxed lending standards, and engineered bailouts. Yet the banking sector continues to deteriorate. The wave of bankruptcies continues.

And now the Fed’s failure to restore order is also adding to the problem. Its apparent impotence is threatening its image of invincibility. The reputation of the world’s most important central bank is on the line. Its monetary fixes have come at the expense of the dollar. So now not only is the banking sector in trouble, but now because of the Fed’s failed rescue efforts, the dollar is being devalued and inflation is rising.

Don’t assume that America will bounce back again, that the current crisis will blow over and everything will get back to normal just because it always has. Yes, America bounced back after the Great Depression, the economic impact of the great wars, Black Monday, and other serious economic problems. But America is not the same nation today as it once was. America used to be the world’s largest producer; now it is the world’s largest consumer. Americans used to be savers; now they are spenders. America used to have the world’s most stable, reliable currency; today the dollar’s purchasing power is a shadow of what it once was. And America used to be the world’s biggest lender, but now it is far and away the world’s biggest debtor. America is Bear Stearns on steroids.

This banking crisis, coupled with the current housing crisis, has the potential to be a “standard of living” changer for America. Discredited and teetering on insolvency, America’s financial dominance is ending. And when it does, all the benefits that Americans receive from being the world’s money capital will end too.

“History books may one day mark the frightening fall of the dollar that has accompanied this crisis as the beginning of the end of America’s financial hegemony,” predicts Germany’s Frankfurter Allgemeine Zeitung.

I would have to agree.

But how is it that America came to the position of global financial dominance in the first place? How is it possible that 13 tiny colonies grew into the economic powerhouse that has dominated the world’s money markets for the last 63 years? Where did the billions and trillions in wealth, the literal vaults of gold that are now daily evaporating from Wall Street come from initially? And why are those financial blessings now being taken away? Where will it all end?

For straightforward, fact-filled answers to the above questions, and the easy-to-understand solution to America’s financial problems, read The United States and Britain in Prophecy, especially chapters 3 and 12.