When the problems in Euroland are competitive imbalances and record high unemployment, while everyone in power thinks it’s sovereign debt, there’s not much chance that the right answer will appear.

Gorilla says: “Get the Germans out of the 1920s, or the rest will repeat the 1930s!”

The problem isn’t actually Greek debt, it’s the huge competitive imbalances between Germany/Northern Euroland and everyone else.

Until the Germans are willing to both consume far more and finance Southern Euroland debt through the ECB as lender of last resort, Euroland will continue to stagnate.

The further insistence on austerity, at a time when much more stimulus is needed, insures that we’ll be back revisiting the same dilemma in 3 months and in 3 years.

Gorilla says: “Organized default has nothing on disorganized Deutschland!”

Euroland Meltdown: They may be able to muddle through for another year, but the fundamental imbalances between Germany and the rest of Euroland remain unaddressed, while borrowing costs for all continue to rise. Greece will exit the Euro, with the Portuguese, Irish, and Spanish not far behind. All bets are on if both Sarkozy and Merkel lose their elections.

Arab Springing: The real question is whether or not the nascent Arab Spring movements will come to countries where the West has real (read: oil) interests: Bahrain and the other Gulf States plus Saudi Arabia. So far, these nondemocratic countries have been able to buy off their populations, but the combination of aging leadership and vast youth unemployment could well become toxic.

Environmental Change: A major catalyst on the downside for the global economy. It’s tempting to put global warming in the same non-issue category as unemployment, since very little of substance is being done by anyone to address the problem. On the other hand, more violent weather is, like protofascist movements in Euroland, not something that can be ignored without cost.

The Winding Down Of Pointless Wars: It’s clear that there’ll be both negotiations and a swift exit from Afghanistan, on or before 2014. It’s also clear that the US military isn’t ready to overthrow any more tiresome regimes anytime soon. The international community’s policy is evolving from “protecting civilians” to “stand by and deal with whoever’s left”; civil wars will continue but the appetite for involvement in them will decrease.

Wild Cards: The failing states of Pakistan and Mexico. What happens there will intrude, possibly in a more direct and violent way, on the West’s hit, hope, and ignore strategy.

Gorilla says: “Two words that may sum up 2012: Northwest Passage!”

All the nonsense about fiscal consolidation changes nothing.

All the lying by Merkozy amounts to nothing.

All the austerity leads to disaster.

The Fed will soon have to decide (yet again) to do the job Europeans refuse to do.

The Europeans will have to decide whether they wish to do anything about the trade imbalances, ridiculously low inflation, and utterly failed leaders that are destroying their currency.

Gorilla says: “Yet another Nuremburg show trial, this time put on by the Germans!”

The Germans and French remain deeply unserious about solving the sovereign debt problem.

What’s needed is a simple statement: “The ECB will be the lender of last resort and will buy sovereign debt in unlimited amounts until an acceptable interest rate floor is achieved”.

Instead, we get more austerity nonsense, more puritans v. sinners, and the kind of stupidity only previously achieved at international level by various authoritarian states and the Know Nothing Party.

Gorilla says: “KozyMer’s a dozy mare!”

Without this statement, the euro will be history by next week.

It is long past time for liars like Merkel and Sarkozy to get serious.

Their total failure to lead is threatening to destroy the world economy.

The alternative to the idiocy of Merkel and Sarkozy is watching all Euroland banks fail, accompanied by a global economic meltdown greater than the one that occurred in 2008.

Euroland will be cut off by the credit markets unless decisive action is taken.

Gorilla says: “Action this day or at the latest by Sunday!”

And it’s do or die now for Euroland, the Germans can’t keep ignoring reality…

The “crisis” could be over in 5 minutes, with a statement from the ECB backing sovereign debt and a price floor.

Gorilla says: “Merkel is getting her vicious circle!”

What should be happening in Euroland is large scale stimulus, higher inflation targets, price floors on sovereign debt, and the ECB as lender of last resort.

What’s actually happening is a vicious, self-inflicted downward spiral that will cause further social upheaval in every country without exception.

Gorilla says: “It’s hard to set the bar any lower, but these clowns keep trying!”

What will save Italy and the Euro is a clear statement from the ECB that it will back all Euroland sovereign debt with unlimited resources and establish a floor for the pricing of said debt.

Gorilla says: “That’s the only solution, and it should arrive in time for Christmas!”

Today, ECB chief Draghi did one good thing, cutting interest rates, and signalling that more cuts are coming.

But he then announced that ECB bond buying of sovereign debt would be limited and the ECB would not be the lender of last resort for Euroland.

Regardless of whether Greece stays or goes, there will be massive contagion if the ECB continues to remain on the sidelines.

Intervention must proceed on a much larger scale (at least 2 trillion euros), there must be a clear floor established for sovereign debt prices, interest rates need to be cut to zero, austerity programs need to be delayed for at least another 2 years, and a higher inflation target of at least 4-5% must be announced.

Without these absolutely critical steps, steps that every central bank in history has taken successfully, the euro is doomed, and the world economy may well head into a depression.

Gorilla says: “So much stupidity, so little time to overcome it!”