With less than 48 hours left until Europe's latest and greatest summit on Wednesday (no point in keeping count: it is certain that yet more extensions wil be demanded and granted, letting the EURUSD have just that much more space from where to fall) Europe has, as it usually does in the 12th hour after it whips out the abacus, realized that the EFSF in its latest incarnation is Dead on Arrival (as expected). So what does Europe do? Why come crawling to Uncle Sam of course, only in this case it manages to save face as the uncle is really Aunt Lagarde, one of Europe's own, and ironically up until 4 months ago, the Finance Minister of what has emerged as the most distressed core European country. From the WSJ: "Europe may ask the International Monetary Fund to create and run a special new fund to help solve its debt crisis, according to a person familiar with the matter. The idea is one of several options still in the formative stage that European officials are considering as a way to prevent the crisis from engulfing its largest economies. The IMF and world financial leaders fear that if Europe doesn't act forcefully now, it could push the global economy into a recession and spark another global financial meltdown." And yes, there is a reason why three weeks ago we made big news out of the IMF scrambling to "Double Bail Out Capacity To $1.3 Trillion, May Issue Bonds." Because when in doubt always follow the money, or in this case the US taxpayer bailout, because this is what the IMF's turbo intervention will be: it will always give the right answer.

So what is the latest and greatest that Europe, under the wise alleged tutelage of JP Morgan, has up its sleeve, just two days before it is supposed to have a complete and convincing resolution to the European debt crisis? And why should Joe Sixpack be very angry?

European officials are considering several ways that a newly created fund could buy or insure bonds of ailing countries such as Italy and Spain, and raise money to boost capital levels at weak banks. One option is to ask the IMF to administer such a "special purpose vehicle." The IMF could give such a financing tool more legitimacy than if Europe created and administered it, especially to prospective financiers, the person said. European officials are already assessing interest from potential lenders, including countries such as China and Brazil, the private sector and sovereign wealth funds, the person said. It could also be financed by the Europe's EUR440 billion bailout fund.

Unfortunately, the mere rubberstamp of US taxpayer-backed funding is no longer sufficient:

There are certain restrictions on the use of the IMF's existing resource base. One is that it can only be used to lend to countries, not regions. Another is its financial assistance usually comes with tough conditions and regular reviews. The IMF's lending rules also make it difficult to use its cash in some of the innovative ways that Europe is considering. The E.U. may insure a percentage of potential losses on purchases of state bonds as a way to leverage the impact of its rescue fund, encouraging investor appetite and pushing down the cost of state borrowing. The IMF has created "special purpose vehicles" before. So technically, it wouldn't be very difficult for the IMF to create and administer. But the politics of financing and lending conditions could make the concept challenging to implement.

Said otherwise, while the superficial complexities can be easily overcome, the fund, whether in SPV or otherwise format, will not be able to participate in bank bailouts, which means that the European structured vehicle will need to have a little bit of everything in it: a PPIP, an SPV, a CDO, in fact: any of Geithner's bailout aphabet soup acronyms? You name it- it will have to participate. The only problem is that with the ECB no longer independently credible and capable of operating without Bundestag checks and balances, Europe is scrambling to get the next best thing: the US taxpayer as unlimited backstop, and if the Fed can be avoided in the process to prevent a political backlash in America, so much the better.

So where does Europe go?

Why the IMF of course, which is the US in all but name.

And here is where things get funny, because it was none other than the pathological tax cheat responsible for most of America's current economic disaster who personally was "demanding" Europe fix itself, even as he was quietly promising the moon and the stars to Europe behind the scenes. After all, not even Geithner is that dumb to not realize that if France goes, America is next, even though no bank dares to admit it has any exposure to France - a promise we would test in under 15 minutes when FrAAAnce becomes FrAA+nce.

The U.S., for example, wants to keep pressure on Europe to develop its own solution to the crisis. Treasury Department officials fear that by giving the nod to alternative financing options, European leaders may relax their efforts to craft a comprehensive strategy. Also, offers of funding from emerging markets may come with conditions such as promises for greater power at the IMF. The U.S. and Europe are reluctant to cede more power to emerging market economies at the IMF, particularly after reaching a hard-fought agreement on IMF governance last year.

So while it is certain that no monetary authorities will contest what they will say is an act of emergency, it will be once again up to the massively gridlocked legislative to screw this one up: after all the GOP will have no better opportunity to terminally humiliate Obama than to tie America's IMF-funding hands, in the process accelerating the debt spiral, first in Europe, then in America, and leading to a complete collapse in the US economy, just as the presidential race is really heating up.

And with that, something tells us the balance of the week will be quite thrilling...