Everyone understands the classic bank run scenario. If everyone loses confidence in the future of a bank, everyone will withdraw their money and the bank will fail. Consequently, the mere suspicion that a bank is running into trouble can create a self-fulfilling prophesy. A firm that needs to roll over a large quantity of debt on an annual basis is in the same situation. For that matter, so can a country.

That said, we normally only think of this kind of panic as afflicting developing countries because rich countries borrow in their own currency. If the United States government faces a severe liquidity crunch of some kind, there’s always a Federal Reserve System ready to stand behind it. But one of the things we’ve seen during the current crisis is that the European Central Bank (presumably with the arm of Angela Merkel standing behind it) is unwilling to play this “lender of last resort” role. That’s a problem for Italy right now. But in many ways it’s a much more profound issue. Financial markets are done treating Italy — and today it looks like maybe even France — like a risk-free sovereign. But if the European Central Bank is genuinely committed to this no lender of last resort principle, that means that Germany, Finland, the Netherlands, and everyplace else are structurally more akin to Belize or Botswana than to the United States or United Kingdom. They’re all vulnerable to runs in a way countries backstopped by a lender of last resort aren’t.

Here’s Nouriel Roubini, trying to explain to Italy’s economy minister the problems with the Euro and the possible future need for Italy to leave, and getting shouted down for his trouble. “Serious discussion of the risks and possible downsides was simply not allowed,” recalls Paul Krugman, “If you were an independent economist expressing even mild concerns about the project, you were labeled as an enemy and shut out of the discussion.”

Oddly, though, part of the misconceived nature of the project is that adopting this see no evil attitude toward it is the only possible way to make it work. The whole idea of having a single currency is that 100 Euros in an Italian bank is just as good as 100 Euros in an Austrian bank. It’s all the same money. But if you think there’s some chance that in the future Italian Euros will be converted into Nuova Lira and Austrian Euros will be converted into Grossdeutschmarks, then all kinds of Italian firms and wealthy Italian individuals will be acting to shift as much of their funds as possible into Austria. This action, breaking the Italian banking system and starving the Italian economy of investment funds, is itself going to increase the stress on the economic union and make breakup more likely. What’s more, the main reason to think that leaving the Euro would be disastrous is precisely that it would create bank runs. Once bank runs are already happening, the costs of leaving get lower and the likelihood of even more bank runs increases.

Consequently, for the system to work you need discussion of a breakup to be completely taboo. Once it becomes widely discussed, the mere fact of the discussion becomes a huge problem. But of course rendering a subject taboo and shouting down skeptics produces a kind of insular groupthink, bungling, etc.