German Logo of the ECB.

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It appears that the EU is fast approaching the end-game. The Germans will not allow the ECB to print money and buy bonds. And neither will they allow PIIGS to default and quit. The only thing left on the table is tighter integration where austerity coupled with a transfer union will stabilize the Euro. The Germans seem to be hell bent on a treaty change and a move towards a fiscal union with tighter budget controls, even if that means removing democratically elected governments and replacing them with ‘technocrats’ favorable to Germany.

With Italy in dire straits, it appears that IMF has chalked up a $800 billion loan in case its debt crisis worsens. The funny thing is the largest contributor to the IMF is the US (18%). Wonder how that would go down with the Congress. But rumors of the IMF loan to Italy has sent stocks soaring, for now.

Since the US is going to be on the hook anyways, why not allow Uncle Ben to buy up all Euro debt? Maybe the only response to the current existential threat to Europe would be for the Fed to print dollars and buy up, say, €2 trillion of bonds? If it is presented as a choice between printing and fascism, Bernanke might just get away with it.

The fact remains that the world desperately needs the West to reflate.

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