By Kevin McElroyNEW YORK ( TheStreet) -- Ask anyone on the street if Europe is in trouble, and they'll say "yes!" But ask them exactly why, and exactly how much trouble? They might answer, "Because of debt problems...and I'm not sure." That's about the most information you'll get from any mainstream media source. Most news stories about European debt problems will mention the problem, and then immediately quote a bunch of European central bankers and politicians about who's to blame, and/or why it's not really that big of a deal. For instance
It's like Spain looked at their failing cajas, and seeing that they are, indeed, small enough to fail, decided that the solution was to make them merge together with other cajas, to create bigger institutions that would be too big to fail. By now, we all realize that "too big to fail" is at best a political slogan that gives government permission to bail out any politically expedient or important business or sector. At worse it's a logical fallacy that's tying an anchor around the throats of responsible businesses and citizens. Here's what should happen: weak banks should go under and take all bad inventory with them. Any salvageable portions of those weak banks will get scooped up by the solvent ones. That's how bankruptcy works. Casting the lots of the solvent banks with the insolvent banks is bad news for the whole banking industry. Bailing out those banks with public funds just compounds the problem. Instead of being an isolated, compartmentalized default, Spain, and Europe central bankers are turning the risk into a widespread phenomenon. They're betting the entire solvency of Europe and the very existence of the Euro on the idea that maybe, just maybe, they can paper this problem over. If they're wrong, everyone loses -- not just a handful of bad banks in Spain.