The date is May 11, 1931. Creditanstalt, a little-known Austrian bank, suddenly announces it can’t make its debt payments. An unstoppable chain reaction results.

Bank failure, stock market crash, mass business closures, 25 percent unemployment, trade wars, runaway inflation, multiple currency collapses, the Great Depression, World War ii. All of it began with a little-known bank in a small country in the heart of Europe.

That is history. And it is happening again.

A similar epoch-changing event may be about to occur in Europe.

Last week it was revealed that Franco-Belgian banking giant Dexia was virtually locked out of debt markets and in desperate need of cash. Depositors began a run on the bank—withdrawing over €300 million on Tuesday alone. Investors bailed too, sending the bank’s share price plummeting into the penny stock range. On Thursday, its stock was suspended from trading while governments decided what to do.

The announcement sent Belgian and French politicians into a conniption fit. These same authorities spent billions bailing out the bank in 2008. It was supposed to be fixed.

Making matters worse: Dexia passed not one, but two European bank “stress tests” (the latest in July) with flying colors.

So if you can’t trust the banks (because they cook their books), and you can’t trust the experts and authorities overseeing them (because they are either liars or incompetent), who can you trust?

That summarizes the problem at the heart of Europe’s banking crisis: broken trust. If the meltdown of ’08 taught us anything, it’s that confidence and trust is what banks can least afford to lose in a crisis.

Unfortunately, Dexia is far from alone. It is just the most visible time bomb waiting to implode.

On Friday, ratings agency S&P downgraded 12 banks in the United Kingdom and nine in Portugal, including UK government-owned banking behemoths Lloyds and the Royal Bank of Scotland.

The threat to the economy is so great that the UK government announced it would start another round of quantitative easing (QE) to prop up the economy. Seventy-five billion pounds will be electronically digitized and given to troubled banks.

This is Zimbabwe policy. After the panic is over, who will want pounds, when they are simply created out of thin air? Value is determined by its rarity and non-counterfeitability. By repeatedly announcing additional rounds of QE, the Bank of England risks destroying both. The pound will get punished. Add another zero to the cost of a loaf of bread.

Bank of England governor Mervyn King justified his action by saying that this is the most serious financial crisis the world has ever seen, at least since the 1930s, “if not ever.”

The “deterioration in the outlook” means more “quantitative easing” was justified, he said.

In other words, the risk to destroying the pound was outweighed by the risk of the immediate economic collapse. So the pound will be devalued—further destabilizing the international currency system.

Europe is a powder keg sitting on top of nitroglycerin, suspended by spider threads over a furnace. And the furnace is flaring.

If authorities “cannot address this in a credible way, I believe, perhaps within two to three weeks we will have a meltdown … across the European banking system,” warns International Monetary Fund (imf) adviser Robert Shapiro (emphasis mine). “We’re not just talking about a small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread, that will spread to the United States, that will spread to the United Kingdom … it will spread everywhere because the global financial system is so interconnected.”

Two to three weeks of normalcy may be all this world has left. “All those banks are counterparties to every significant bank in the United States and Britain, and in Japan, and around the world,” warns the imf adviser. “This would be a crisis, that would be, in my view, more serious than the crisis in 2008.”

More serious than 2008? Bear Stearns, Lehman Brothers, IndyMac Bank, Countrywide, Wachovia, Merrill Lynch, Washington Mutual, Fannie Mae, Freddie Mac—the list goes on—all went bankrupt or became nationalized. How do you get more serious than that?

Realize: In 2008, the banking system was insolvent. Three years later, the banking system is still insolvent, but now because of the massive bailouts, sovereign governments are verging on insolvency too.

Yesterday, after emergency marathon negotiations, French, Belgian and Luxembourg politicians agreed to put their taxpayers on the hook for 211 billion more euros to prop up Dexia. But how much more debt can these countries take before they are the credit risk? Will this bailout be the last? Moody’s rating agency immediately put Belgium’s credit rating on review for downgrade. France’s won’t be far behind.

But if the Europeans are barely able to keep a handle on their banks, who will bail out Greece? What about Spain and Italy? Who will pay for the war in Libya?

“We are on the brink of structures failing, spiraling the financial world into such a bleak scene comparable with the 1930s and the Second World War are valid,” warns former Chase Manhattan analyst Julian Philips. “The recovery prospects are more than dim. There’s far too much debt for the developed world to repay, so more debt will cripple it.”

Events seem to be spiraling out of control. On Monday, British Prime Minister David Cameron begged European leaders to take a “big bazooka”-type approach to heading off collapse.

Specifically, Cameron wants Germany to take “collective responsibility” for Europe. A single market with a single government is needed, he says. “[Y]ou have to do the whole thing. … Time is short, the situation is precarious.”

More ominous words could hardly be spoken. Time is short. The situation is precarious. But backing Germany to take control of Europe is about the most shortsighted and condemning statement a British politician could make. Echoes of Chamberlain abound.

As Gerald Flurry recently wrote, the current economic crisis could be “the very event” that gives Germany the empire that has always eluded it.

Great crisis present great opportunities. Watch Germany for the solution to Europe’s crisis. And read Gerald Flurry’s article “The Fourth Reich Is Here.”