Forget any talk about Greece leaving the euro zone being a good thing… Five years from now it may look like a good thing. But for the near-to-medium term this has the potential to be a catastrophe many times the magnitude of Lehman.

The timing of the EU’s ultimatum is fortuitous in that global leaders are already gathering for the G20 summit. Expect them to come up with some sort of gargantuan pre-emptive emergency package to try and stem the bleeding that is sure to follow a Greek rejection of the euro. Because if they don’t, the market will immediately turn on Italy first, followed by Spain, followed by Belgium, followed by France.

Once the dominoes start falling, who knows where they will stop.

Look for massive volatility in the weeks ahead with deep dives in the euro followed by face-ripping rallies. Repatriation of offshore assets is likely to cause bouts of euro strength and heavy liquidation of emerging market currencies as subsidiaries are put on the auction block by banks that suddenly have larger holes in their balance sheets then they, or anyone else had bargained for. Those estimates of European banks needing only EUR 106 bln in fresh capital? They are headed up kids. Way up.

On the bright side, the ECB will probably start printing euros in droves and the Fed can’t wait to join in the fun.

So while the markets will dive, we’ll get to pay more for gas and groceries. Oh joy!

Lord knows there will be plenty of opportunity between now and when Old St. Nick boards his sleigh.