The biggest banks in Europe are getting ready for a debt crisis that spirals out of control. They fear that one or more countries could leave the Euro Zone. They are even stopping their loans to the pigs, questionable countries like Greece, Portugal, Spain, and Ireland. With the Italian bond crisis, people want to add Italy to the roster. No one thinks that Europe’s political leaders have the will to solve the crisis.

What is the nightmare that these banks fear most? They picture a country dropping the euro as their currency, thereby exposing the bank to a big loss and the risk of rapid currency deflation. That and a run on the banks by depositers who want to withdraw their funds all at once. Already the euro has fallen to $1.38 against the American dollar.

America despite all its financial woes can’t go there because it has one thing that Europe and the Euro Zone lacks. It doesn’t have Germany’s superior banking system, but it does have poltical unity. The Fed controls each and every state, and they can’t drop out of the Union unlike the ECB which can issue directives that each country can choose to obey or not. Germany has to somebody get to the same place in Europe. It can’t be Hitler’s way. But it has to be a system whereby all the countries in Europe must obey one economic program, can’t get out of it, and can’t drop out. Then it will truly be a United States of Europe.