When PIIGS Fly (And By 'Fly' I Mean 'Fail')

Here's my thinking on Greece. All the talk of a Greece bailout misses that point. Greece is only one of the Euro zone countries faced with unmanageable debt loads. Spain is also in trouble and is a much larger and important economy (and don't forget about Italy, Ireland and Portugal). We've seen how this played out in the US. Back in 2008 the first victim was Bear Stears which was sold (for pennies) to JPMorgan with an assist from the US govt. Then Lehman was on the brink but was allowed to fail (somebody had to be taught a lesson...just nobody with ties to Goldman). Then AIG was going down in flames but AIG was too big to fail, so the US coughed up $80 then $185 billion for AIG (a chunk of which went to AIG's counterparties). Then Citi needed help...etc. etc. The point is the US govt was putting out fires as they happened and each crisis placed the entire system in jeopardy. And you never knew when the next fire would start. The difference with Europe is you've got 16 separate countries which would have to be involved in any bailouts...not quite the same thing as having a bunch of ex-Goldman bankers who control the Treasury and Fed engineer a bailout, is it? Say a Greek bailout is announced Thursday...when's the Spain bailout? Keep in mind unemployment in Spain is 20%...you're going to cut spending with 20% unemployment? I don't think so. Yet, Spain will have to cut spending to qualify for an IMF loan or an EU bailout (if possible)...I can picture the riots in Madrid as I'm writing this. Even if the PIIGS can trim spending, their credit ratings have already been adjusted downward so their borrowing costs are increasing...how much of the spending cuts will be offset by higher borrowing costs? Oh and in case you haven't noticed, the same scenario faces the US in the near future (and Japan and Britain). Add in the fact that hedge funds and other speculators are betting against Greece using credit default swaps the same way they bet against Lehman and you know how this ends. As a result, I say short the Euro zone much like I'm shorting the S&P. Here's one option: http://finance.yahoo.com/q?s=epv