We awoke to a blizzard. After a few months away, we had forgotten how miserable London’s weather can be. As near as we can tell, the sun doesn’t reach this part of the world – at least, not in the winter months. And the winter hasn’t even begun.

Snow, sleet, rain – it is all coming down. But Londoners don’t seem to mind. They trudge to work over their slippery sidewalks…march over their frozen bridges…

Seeing them coming over Blackfriar’s bridge, we remembered T.S. Eliot’s line about how surprising it was that “death had left so many undone.”

Eventually, death gets us all. And not just us… Banks. Corporations. Trends. Bull markets. Paper currencies. Monetary systems. Empires…

For example, death seems to be stalking the euro as well as the dollar.

“Irish rescue fails to appease markets,” says the front page of The Financial Times.

Europe’s leaders came up with €85 billion that was supposed solve the Irish problem. It was especially important that it create a buffer between Ireland’s banking and funding issues and those of the rest of Europe.

Well, it took about 24 hours for the buffer to give way. Now, Spain’s bolsa is in freefall. Portugal’s asset prices are giving way. And there’s pressure on Italy and even France. Even the biggest banks are slipping (see below).

Yes, dear reader…and you thought you had problems.

We had not paid much attention to the European financial issues. We thought we had enough to worry about already, what with Ben Bernanke trying to destroy the dollar and the US going broke.

But hey…that’s just the beginning.

Since Bernanke announced his program to undermine the dollar, the old greenback has actually risen against its main rival – the euro. How do you like that? Bloomberg reports:

The dollar gained the most since August against six major counterparts as concern that Europe’s debt problem will worsen and military action in Korea will escalate boosted demand for the US currency as a refuge.

The greenback rose against the yen for a fourth straight week, the longest streak in 20 months, after North Korea shelled a South Korean island and said “escalated confrontation” will lead to war. The euro fell for a third week versus the greenback as investors speculated Portugal and Spain will be the next European countries to need a financial rescue. The US added jobs in November for a second month, data next week may show.

“The euro has further to fall against the dollar,” said Kathy Lien, director of currency research at online currency trader GFT Forex in New York. “If there is a war amongst the Koreas, the yen would fall off aggressively against the dollar.”

The problem with the euro is that it is too good for many Europeans. Everyone wants a flexible currency these days. That is, they want one that will act like a good dog…one that will “get down” off the furniture when it is told to do so.

Alas, all the currencies are unruly mutts. The dollar won’t go down, even though Ben Bernanke pulls the rug out from under it and gives it the old “bitch slap” with the back of his hand. And the euro won’t go down because the Germans don’t want it to go down.

Of course, this doesn’t make the Germans very popular with the Spanish…the Irish…and the rest of the peripheral crowd. They want a cheap currency so they can pay their debts. The Germans, on the other hand, must have a kind of race memory for the horrors of the Weimar days…when you could take a wheelbarrow full of paper money to the store and not be able to buy a loaf of bread.

The more you look at the European banking and sovereign debt crisis the more dangerous and insoluble it seems. Try to fix one part of the problem and you make another part worse.

The Germans don’t want to pay to bailout the Spaniards…and the Italians…et al.

But German banks have nearly half a trillion euros worth of their debt.

The Irish taxpayer doesn’t want to pay to bail out the banks either. He’s already facing austerity measures that would choke and appall Americans.

Yesterday, the Obama team proposed freezing federal salaries – that is, leaving them 50% to 100% higher than private sector wages – for the next two years.

“We are going to have to budge on some deeply held positions,” said the decider.

His proposal would save…are you sitting down, dear reader…$2 billion by the end of 2011. Let’s see, that would cut the deficit by approximately 3 tenths of one percent…BFD.

In Ireland, government workers already agreed to a pay cut. And now the Irish feds are supposed to fire 10% of their public workforce…with another 10%, probably, a few years from now.

How much austerity will the Irish be willing to take in order to protect banks from their losses? They could leave the euro…revive the punt…and shirk their commitments in the old-fashioned way – by devaluing their currency.

But wait… If the Irish opt out of the euro…the whole shebang could come falling down.

“If the euro fails, Europe will fail,” says Ms. Merkel, chancellor of Germany.

And if the euro fails…banks fail…companies fail…trade fails…and then US companies fail…US banks fail…

Who knows where this would lead? And only we seem to want to find out.

But what to do? A colleague warns us:

“It’s time to save every possible penny. Next year is going to be worse than 2008 – a lot worse.

“Here’s why:

1. The euro is going to fail. Ireland, Spain, and Italy’s sovereign debt cannot be financed.

Shares of even the biggest and strongest of Europe’s banks (Deutsche Bank) have begun to “roll-over.”

2. More QE in Europe and America will make it much more difficult for businesses to invest across borders. That will result in massive trade problems and could easily cause a global famine. Most people don’t realize how dependent the world has become on free trade for basics, like food. Here’s what agriculture prices have done since July when QE II began. Vastly higher ag prices are not bullish for financial markets or world order.

3. Housing in the US is going to collapse, again. The various games that have been played to prop up the housing market in the US have failed. Tax credits, etc. haven’t worked…and they never had a chance. I have good contacts in this industry and it is completely bleak. With foreclosed properties making up 25%-50% of the inventories, housing prices will continue to fall 10%-15% a year – or more. There will be no new net demand for homes for a long time. Several major homebuilders will go bankrupt, including the largest, Pulte.

4. Lots of major US corporations – see GE – have unsustainable debt loads. These companies will end up bankrupt and will fire at least 50% of their employees over the next three years.

5. Muni/State finance: You guys have seen all of the numbers. Probably half of the states and munis in the US are being run in a way that’s completely unsustainable. As these cuts are made it will have a big impact on the economy. See what happened to Cisco last quarter, all because of cutbacks at the local government level.

“The problems of 2008 haven’t gone away. We’ve just borrowed a lot more money to make people think everything would be okay. As the veneer wears off, there’s going to be a real panic; and this time it will be worse, because there’s zero trust and confidence left in the government or the bankers…

“If I were in your shoes, I’d make sure every business unit I controlled was being run in a very prudent way, with a big cash flow buffer. I’d make sure they were ready to cut overhead by 50% in 30 days…”

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.