A sea of red across the board.
Contagion is setting in as investors in the United States return to the markets after their holiday weekend break. We are witnessing a full blown panic set in as markets around the world are down across the board.
The source of this comes from Italy and their governments inability to form a cohesive government, with the current ruling party, ironically rejecting the offer to form a coalition with the next largest party, of which are Euro Skeptics.
The reasoning for this, is that they believed it would cause unease and chaos in the markets. Humorously, the very thing they were trying to avoid, is exactly what they caused to unfold.
Now, Italy faces a political crisis as the pro EU government begins to lose control and uncertainty gains momentum with each passing minute.
Italian bonds have crashed overnight as investors flee the country and look for safer locations to part their funds. Faith in the current governments ability to restore order is failing.
Once again, we have come full circle, as this story is a familiar one to anyone who has followed the markets for any period of time. Italy faced its last crisis in 2012 and was bailed out by the European Union, as was Greece and Spain, the latter of which has now entered into another crisis as well.
The situation is grim for those who are pro EU and who want to see it succeed, while those who are Euro Skeptics are gaining traction with each passing day.
Contagion is now setting in, and is something that Central Bankers around the world are likely scrambling to stop, as it is the bane of modern banking system and of which has the ability to bring the entire system to its knees, as seen during the 2008 crisis.
The doomsayers are out in full force, predicting once again the shattering of the European Union and I am on board with them. This system is utterly unstable and uncontrollable. Forcing so many countries, with greatly differing economies and political systems under one fiat currency and set of regulations is an abomination and a disaster just waiting to unfold.
As we are now witnessing and as we have seen for many years now, these crises are going to continue to occur and are going to happen at an ever increasing rate, as the fractures in the system continue to spread.
The European Unions days are numbered and despite how many band-aids they apply to the many wounds appearing all over their system, the end will come just the same. It is not a matter of if, but when.
Great change is coming and with it, intense uncertainty and calamity, before eventually order is restored.
- As First Seen on the Sprott Money Blog