While the United States continues its domestic quarrel over how to resolve a sputtering economy and deal with large deficits the European Union is showing that division, stupidity and reckless behavior is not limited to American policy makers. With Greece tottering, as it has been for many months, the Europeans continue to bicker, with the Germans reluctant to throw good money after bad by providing additional capital to Greece. The Greeks have been kept afloat by European (German) largess, as well as the IMF. But the loan packages have only managed to kick the can down the road (sound familiar?). The Europeans are rapidly running out of road, and they have not managed to address the underlying fact that Greece is bankrupt and unable to pay it’s sovereign debt obligations. The Greeks need to devalue their currency, but that is not possible since they are a part of the Eurozone and don’t have a currency. So the political stress on the Euro, with taxpayers in Germany rebelling against bailouts, could cause a rupture that leads to a disintegration of the Euro and some major bank failures if bondholders are thrown to the wolves. European banks are major holders of Greek debt, and the ripple effect of a Greek collapse could reignite a banking crisis that reaches the U.S. The impact likely would spread beyond Greece, as the Italians and Spanish are seeing the market force them into higher interest payments on new debt. A Greek collapse could suck those countries into the vortex as well.

The Greek situation shows the utter disregard for basic financial sanity that many countries have exhibited. The financial elite, who run central banks and the major financial institutions worldwide, are guilty of much more than incompetence here. An imbecile could look at the Greek financial numbers and see ruin coming several years ago. And yet the Greeks were allowed to keep going until they crashed, and now may take down half the eurozone with them. We may have problems, but we are not alone. U.S. policy makers should be paying close attention.