Probably not too much longer, particularly if Portugal and Spain have to join the bailout queue, too.

What’s increasingly obvious, as I noted in my May 26th blog post, is that the European monetary union is no longer feasible. A monetary union between similar economies, like those of Germany, France and the Benelux countries, is. But clumping fiscally wayward economies with much lower per-capita incomes, like Portugal, Spain, Ireland and Greece, into a common currency union with Northern Europe is no more sustainable than is a monetary union between Mexico and its North American free-trade partners, the US and Canada.

It might have taken an oil-induced financial shock to unravel it, but the euro was an accident waiting to happen. By not allowing their loosely regulated banks to fail, countries themselves are failing as a result. So while Irish banks keep their doors open, schools and hospitals will soon close as the country tries to cope with a public-sector deficit one third the size of its economy. (Curiously, these are the very same banks that only recently passed financial stress tests.)

German taxpayers, who must shoulder the lion’s share of the financing burden for the 85 billion euro bailout package for Ireland, are understandably increasingly irate that they have to dish out billions so that Ireland can maintain a 12.5 per cent corporate tax rate that steals jobs and production from their own economy. And they weren’t any happier when even more of their hard-earned tax dollars were being sent over as welfare checks to Greece, a country where tax evasion is a national pastime.

Taxpayers in creditor countries are starting to ask themselves the same question that bond holders have been troubling themselves over. The burden of reducing a deficit as large as one third of GDP means that the Irish economy, like the Greek one, will be shrinking for the foreseeable future. And shrinking economies, riddled by growing social unrest, are not economies that are able to service gargantuan debt loads. That’s why the bond market was already charging Ireland as much as three times Germany’s borrowing rate.

Chances are that Ireland and Greece (and likely Portugal and Spain) are going to default, unraveling the monetary union. What will follow: a born-again drachma, Irish pound and perhaps escudo and peseta. And as those currencies plunge in value against what’s left of the euro (likely still to be traded in Germany, France and the Benelux nations), even the free trade zone may be up for grabs.

The European monetary union is a vestige of the old global economic model that is becoming unsustainable. It may have taken triple-digit oil prices, and the massive recession they brought, to drive home the point, but Greece and Portugal are no better suited to a monetary union with Germany and France than Mexico is to one with the United States and Canada.

All eyes in Lisbon these days are trained on Athens, as a bankrupt Greek economy clings to fiscal life-support from its richer euro partners. But more Greeks are realizing that they might be better off if they forgo the bailout and the fiscal austerity measures that come with it, and just leave the monetary union. (What particularly irks the Portuguese is that, as members of the monetary union, they too had to shell out for the Greek bailout, when most suspect their country will be the next target of short-sellers.)

The spending cuts and tax hikes mandated by the terms of Greece’s bailout would subtract more than 10 per cent from its economy’s GDP. No wonder traders were shorting Greek bonds. No electorate is going to support that scale of austerity, particularly one that has been weaned on massive public subsidies and systemic tax evasion.

Normally, when countries get into this type of fiscal mess, they invariably devalue their exchange rate. But as a member of the European monetary union, Greece has no national currency to devalue. At least not today.

But bring back the drachma and suddenly Greece doesn’t have to cut off its right arm to appease the wrath of its lenders. The country wouldn’t get bailouts from Germany, but if the drachma falls low enough, Greece’s number one industry, tourism, could be bringing in some of that much-needed cash before too long. And at least then German taxpayers could get a holiday on Santorini for their money, instead of just sending a welfare check.

If Greece bolts from the euro, it will have a domino effect. Like the Greek economy, the Portuguese economy relies heavily on tourism. But how will the Azores or the Algarve compete with much cheaper Santorini holidays priced in drachmas unless Portugal follows suits and brings back the escudo. Would the peseta, and perhaps even the lira, be far behind?

For many, the dissolution or contraction of the European monetary union is out of sync with the imperatives of a global economy. Yet it is precisely these types of economic institutions that will find themselves out of sync with the new smaller world just around the corner.

As I’ve argued before in this blog and in chapter 7 of my book, it wasn’t too-big-to-fail financial institutions but the interest rate shock from soaring oil prices that deep-sixed the economies of both the US and the rest of the oil-guzzling world. Interest rates didn’t just rise from around one per cent to almost six per cent because no one was minding the store at the Federal Reserve Board. It was soaring oil prices that did all that heavy lifting.

Not only is rescuing failed investment banks a total misread of what put the economy into this recession in the first place, but the huge deficits needed to fund those huge corporate welfare checks all but preclude any further economic stimulus in the future.

In fact, they’ll do just the opposite. Reining in the deficits that follow from Wall Street’s bailout will lead to years of fiscal restraint and a burden on future economic growth. Job-creation rhetoric aside, the President is already stepping on the brakes, and Congress will surely want him to press much harder on them over the balance of his term, as Washington struggles to get the nation’s exploding debt under control.

As their taxes inevitably rise and their social security entitlements inexorably shrink, American taxpayers will increasingly wonder what they have gotten for their tax dollars. And they will no doubt ask themselves why it is that, if they have to own Merrill Lynch and Bank of America now, at the bottom of the cycle, they don’t also get to own these same institutions at the top of the cycle.

Henry Paulson, the recent Treasury Secretary, along with all the other ex-Goldman Sachs folks still at the Treasury Department, will quickly chime in that private ownership is essential to encouraging risk-taking.

But what really encourages risk-taking on Wall Street is when the losses from bad bets can be socialized and left to taxpayers, while the gains from good bets can be paid out to partners at bonus time. And it’s precisely this type of risk-taking that will soon bring back the regulatory barriers than once separated brokerage houses and investment banks from deposit-taking institutions.

Wall Street has always eschewed regulation, pointing to the willingness of the rest of the world to fund it. But the only flow of funds coming in these days is from the American taxpayer, and that, in a nutshell, has been the reason for President Obama’s quick fall from grace.

Politicians, local car dealers, parts suppliers and the auto workers’ unions told them it was to protect strategically vital jobs in their economies. But far from being essential to our economic future, those jobs are rapidly becoming obsolete—at least in this part of the world, where they are being funded by taxpayers’ money.

With GM car sales in China up over 60 per cent this year and North American sales still down from last year, I know what I’d be doing if I were running the company.

I’d take the bailout money given by the taxpayers of countries with shrinking auto markets, like the US and Canada, and use it to build new car plants in China and other countries where car sales are booming. (GM already sells almost as many cars in China as it does in the US.)

But I’m sure the company promised not to do that.

Even so, the bailout is a losing proposition for North American taxpayers, who have become the de facto owners of the company. US car sales are a shadow of what they once were, and in a world of triple-digit oil prices, they will become even fainter.

There were four million fewer cars on American roads last year than there were the year before. As oil prices climb ever higher, some 50 million more vehicles will be heading for the exit lane over the next decade.

Is that the kind of market outlook the taxpayer should be investing in?

But invest they have. American taxpayers ponied up some $40 billion last year. The federal government in Canada, along with the provincial government of Ontario, anted up $14.5 billion in direct taxpayers’ assistance to GM and Chrysler—a bailout equal to half those jurisdictions’ entire annual corporate tax collection.

Just think of the public outrage that would follow if the government gave the money directly to the oil industry instead. Yet the auto and oil industries are two sides of the same coin—over half of all the oil used in North America is burned in our cars.

During World War II, Detroit went from manufacturing cars to making tanks and bombers literally overnight. Today, couldn’t all those unemployed auto workers be re-employed to make what their economy really needs—more public transit vehicles—so that when those fifty million Americans get off the road, there’s a bus or mass rapid transit vehicle for them to get on?

That way, if we’re going to spend billions of dollars of taxpayers’ money, we’ll be investing in our future, not in our past.