This is how the euro ends

The end is nigh.  Really.

If anybody was wondering what the end of the eurozone would look like, here’s the steps that will be taken:

1. European Central Bank (the folks that can print money) demonstrate that they won’t be acting as lenders of last resort. Like they did yesterday:
   

   A Spanish plan to recapitalise Bankia, the troubled lender, by indirectly tapping the European Central Bank for cash, was bluntly rejected as unacceptable by the ECB, European officials said.

2. Everybody runs for cover, sending stock markets down, borrowing costs for the GIIPS (Greece, Italy, Ireland, Portugal, Spain) countries up, and US bond yields down (though its really hard to send them lower than they are now). Like happened today.
3. Everybody wakes up the next day and says “hmm, those GIIPS countries are in big trouble, worse than yesterday even! I better take my money and put it somewhere safe, like US Treasuries” (my money is this happens tomorrow).

If the European Central Bank steps in and says “just kidding, we’ll lend you the money,” disaster can be averted. It’s possible that the ECB will stick to its guns and this particular scare will not be the one that pushes us over the edge. But as long as step 1 keeps happening, steps 2 and 3 will keep happening too, and one of these days, and one of these days soon, 2 and 3 will form a vicious cycle that ends the Euro.

Update: Matthew Yglesisas over at Slate says roughly the same thing, and Atrios points out that this is insane, they could just PRINT FREE MONEY TO FIX IT ALL.  He is, of course right, but this seems to be something that the ECB will not do (and will happily watch the euro break up before they do so).