The world's unruly children, namely Ireland and North Korea, dominated headlines this week. Both nation-states are bankrupt and unable to manage their affairs.
Ireland went into receivership this week, and North Korea began lobbing bombs to get attention because it cannot feed its people.
Ireland is simply another sub-prime borrower living beyond its means. The North Korean situation is more dangerous, like a guy about to be foreclosed who has taken millions of hostages and is shooting out his window. The aim is to hurt others in order to get money to survive from South Korea and its Sugar Daddy in Washington.
Both events caused the world's markets to roil as uncertain investors headed for exits. And I believe last week marked the beginning of a Joint and Several World.
This is a lending phrase which imposes the requirement on all partners who borrow money to agree to be on the hook for any, or all, of the others should they go bust.
Now that principle applies to sovereign lending or sovereign failure such as North Korea's.
Bankrupts contaminate all their partners, neighbors, creditors and suppliers too. So do countries that lob bombs.
The Irish contagion came from Greece and will spread across Eurozonia. Bets are that Portugal and mighty Spain, bigger than Canada, will succumb eventually.
That will trigger a continental workout and bring about a dramatic political realignment in Europe.
Germany will bear most of the burden, as usual, and will lean on others to help. This will include nearby, non-Eurozone members of the European Union such as Britain, Norway and Sweden.
Next, Germany will insist that Europe's suppliers also help by lending cash -- on favorable terms -- as lenders of last resort. In this category, I would include Saudi Arabia, Abu Dhabi, Kuwait, Switzerland, Russia and China. All must help bail out the Euro because they are major exporters who profit by selling Europeans their oil, natural gas, secret bank accounts and other stuff. In corporate bankruptcies, they would be asked to take haircuts on their accounts payable. In this case, they will likely be asked to take haircuts pre-emptively on their accounts payable to help keep their Euro customers whole.
The Euro will become a virtual Deutschemark and the EU capital will shift to Berlin. Governments in Ireland, Spain, Greece, Portugal and Italy will be independent democracies in name only and whoever helps, including Russia or China, will also be given a seat at the governance table.
This Joint and Several World also applies in the case of the two Koreas. Clearly, South Korea's prodigal sibling to the North must be fixed. Its people are abused, the country's a shambles and it is run by a dying lunatic. The only way out is a combination of guns and butter: De-fang its nuclear capability, or pay for them to do so, then finance re-unification. North Koreans would welcome liberation and Japan, China and Russia should help South Korea pay for it.
With all the turmoil, Americans finally, by default, had reason to celebrate Thanksgiving. After all, their problems are soluble by belt tightening, slapping taxes on Chinese imports and imposing income taxes on their haves and have-mores.
As for the parties that called themselves countries -- namely Greece and Ireland and others -- the music's stopped and the German burghers who work harder and pay taxes will now permanently call the tune.
Diane Francis is Editor at Large with the National Post
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