"and the EU leaders insisted that the problem will be resolved and brought up America's $15 trillion debt and the need to focus on that as well."

It depends what the EU leaders meant when they said focus should be placed upon America's $15 trillion in debt.

Obviously a short term non-structural solution would involve massive deficit spending by america to boost aggregate demand and soak up european capacity, the way things are set up, German exports have to be super strong to hold things together.

The actual problem is that European governments don't have a means to get Euro's, so they are not monetarily sovereign.

The fall of the EU is actually the fall of fiscally conservative monetary policy. You look at it and you know this is deficit hawk policy. The Maastricht Treaty tries to hold the line on the extent to which the debt can surpass GDP. All these requirements definately highlight a policy choice, and that policy choice is one that takes a decidedly hawkish deficit view.

Such Fiscal solidity probably requires Goldman Sachs to not have fudged the greek accounting. The deficit hawks aren't so foolish that in a world of virtuous compliance these limits could not result in wise government. Theoretically this could still work, and really the restraint of the European monetary system was intended to prevent the decent into uncontrollable/race to the bottom socialism.

The democractic or technocratic question is really secondary to the public policy advocated by those in charge, since in truth the distinction is rather "gloss".

It sure as hell isn't Keynes who cobbled together the european regulations, but what they really need to do is listen to the post-Keynesians like Warren Mosler. Deficits won't matter if the Europeans can find a way to make the EU monetarily sovereign.

As long as they are trapped into a legal game where deficits matter, they are screwed, or at least at the mercy of being an export nation (which in turn more or less causes us to be an import nation).

"It may be time for the American government and American banks to start taking measures to best protect us from the contagion contaminating Europe in order to try soften the blow when it comes."

Ironically it is Sharia Law which protects Turkish banks:)

And even Turkish shipping was somewhat protected because sharia law prevented them from pooling assets with international shipping companies that invested in Mutual Insurance (the reserves of which are invested in american and european stocks). Mutual Insurance took a big hit, when its capital reserves took the hair cut tied to the overall market, which gave turkish shipping a built in competitive advantage on margins.

Mutual insurance is really part of the idea that started Llyods in a modest coffee shop(turkish?)... and went on to create underwritting...and it was a way to fight contagion... but in almost all schemes to fight risk you take on risk, you just hope you take on a known risk.

Part of contagion is what happens when folks try to avoid risk, you get a self-fullfilling prophecy.

Actually I am not sure what contagion even means, I just know that you can take either side of a particular contract and stand to gain. So the way I see it there is the contagion of folks who are sure that greece and the euro will fail, since if you are sure of contagion or market direction you get others to underwrite a loss you aren't going to take, but you lose the underwritting cost if it doesn't occur.

So my guess is that a great deal of the contagion is simply indemnification.

So contagion is what happens when you have Lloyds of London and Goldman Sachs.

It seems a rather bland and obvious statement that American government and American banks should start taking measures to best protect us from the contagion contaminating Europe in order to try soften the blow when it comes, except that to do so in practice might mean to panic, since "diversification" is really the universal mantra, to amputate europe from a portfolio would be a driver for current prices. The process of doing this has been in the works for a while now.

But the only thing that prevents contagion is sharia law.

Also a note on Insurance in general. It is a clear principle in American and British law and the moto of Lloyds of London is "uberrimae fidei", which means "utmost good faith."

So not only do you have contagion from underwritting on both sides of the Greek question, but you arguably have contagion from potential fraud that was concealed by Goldman Sachs who is also a player in these contracts, so whenever there is fraud and lack of transparency insurance companies might not pay out.

So this also provides a rational of sort for overinvesting in products that insure against the contagion, creating for lack of a better word, a whole new level of contagion.

All of this seems to be a certain critical aspect of capitalism, seeking alpha at low beta. The situation in Europe seems to be a random walk, but at least part of the policymakers who warned against the euro did so from a very dovish/monetary sovereignty basis. In this sense Maastritch is akin to the US debt ceilling, an arbitrary deficit hawk limit on the capacity for deficit spending that was intended to force austerity upon a people in love with the idea of social democracy fueled by deficit spending. (read Boehner, sounds german:)

So if Europe goes down there will be more finger pointing and legal battles...but at least in part it will be the defeat of conservatives/germans/(deficit hawks) to enforce legal austerity by the use of a standard which is not expressly "inflation".

In any case the solution of withdrawing from the Euro will cause untold headaches, in exchange for monetary sovereingty, but again this won't be quite as good for say a Greece as it is for the U.S.

So in addition to being monetarily sovereign the U.S. probably is special.

But I don't think you realize the extent to which the failure of the Euro would be the triumph of Keynesianism. The argument being that lack of monetary sovereignty prevents and contrains governments from using stimulus to fight counter-cyclical downturns. See Krugman.