This article was written by Michael Snyder and originally published at his Economic Collapse blog.
Editor’s Comment: The rise in populism is now exploding on the global stage. While Britain is far from actually going through with the Brexit, Italy has already resounded a huge battle cry against globalism, and the constraints of its trade deals and financial system.
Where the political future will take us is not yet clear, but the Trump, Brexit and Italy axis will give the reigning global governors plenty to contend with. They still hold the upper hand via the monopoly they have over bureaucrats and policy wonks, but they have lost the good will of the people, who are clearly and resoundingly angry at the status quo and the repeated attempts at domination and bullying.
On the other hand, this conflict does create the perfect recipe for riots and unrest, hence the market rattling. One thing is for sure, this will not stop until it has played out.
Global Financial Markets Plunged Into Chaos As Italy Overwhelmingly Votes ‘No’
by Michael Snyder
Italian voters have embraced the global trend of rejecting the established world order, but the “no” vote on Sunday has plunged global financial markets into a state of utter chaos. The euro has already fallen to a 20 month low, Italian government bonds are poised for a tremendous crash, and futures markets are indicating that both U.S. and European stock markets will be way down when they open on Monday. It is being projected that Italian Prime Minister Matteo Renzi’s referendum on constitutional reforms will be defeated by about 20 percentage points when all the votes have been counted, and Renzi has already announced that he plans to resign as a result. When new elections are held it looks like comedian Beppe Grillo’s Five-Star movement will come to power, and the European establishment is extremely alarmed at that prospect because Grillo wants to take Italy out of the eurozone. In the long run Italy would be much better off without the euro, but in the short-term the only thing propping up Italy’s failing banking system is support from Europe. Without that support, the 8th largest economy on the entire planet would already be in the midst of an unprecedented financial crisis.
I know that I said a lot in that first paragraph, but it is imperative that people understand how serious this crisis could quickly become.
This “no” vote virtually guarantees a major banking crisis for Italy, and many analysts fear that it could trigger a broader financial crisis all across the rest of the continent as well.
Just look at what has already happened. All of the votes haven’t even been counted yet, and the euro is absolutely plummeting…
The euro dropped 1.3 percent to $1.0505, falling below its 1 1/2-year low of $1.0518 touched late last month, and testing its key support levels where the currency has managed to rebound in the past couple of years.
A break below its 2015 March low of $1.0457 would send the currency to its lowest level since early 2003, opening a way for a test of $1, or parity against the dollar, a scenario which many market players now see as a real possibility.
In early 2014, there were times when one euro was trading for almost $1.40. For a very long time I have been warning that the euro was eventually heading for parity with the U.S. dollar, and now we are almost there.
Meanwhile, Italian government bonds are going to continue to crash following this election result. This is going to make it even more difficult for the Italian government to borrow money, and that will only aggravate their ongoing financial troubles.
But the big problem in Italy is the banks. At this moment there are eight banks in imminent danger of collapsing, and virtually all of the rest of them are in some stage of trouble. The following comes from a Bloomberg article about the crisis that Italian banks are facing right at this moment…
They’re burdened with a mountain of bad loans. Their stocks have cratered. And they have to operate in an economy prone to recession and political upheaval.
Signs have been mounting for months that Italy’s weakest lenders, and in particular Banca Monte dei Paschi di Siena SpA, were sliding toward the precipice, threatening to reignite a broader crisis.
And we may get some news regarding the fate of Banca Monte dei Paschi di Siena as early as Monday morning if what the Sydney Morning Herald is reporting is correct…
A last-gasp rescue for Monte dei Paschi di Siena, the world’s oldest surviving bank, has been thrown into doubt after reformist prime minister Matteo Renzi decisively lost a referendum on constitutional reform on Sunday.
MPS and advisers JPMorgan and Mediobanca will meet as early as Monday morning to decide whether to pull a plan to go ahead with a €5bn recapitalisation, the FT reports, citing people informed of the plan.
Senior bankers will decide whether to pursue their underwriting commitments or exercise their right to drop the transaction due to adverse market conditions, these people said. In the event the banks drop the capital plan, the Italian state is expected to nationalise the bank, say senior bankers.
If Banca Monte dei Paschi di Siena fails, major banks all over Italy (and all over the rest of Europe) could start going down like dominoes.
So what were Italians voting on anyway?
Well, the truth is that the constitutional reforms that were proposed actually sound quite boring…
“The changes involve sharply reducing the size of one of the chambers of Parliament — the Senate — shifting its powers to the executive, and eliminating the Senate’s power to bring down government coalitions.
“The amendments also shift some powers now held by the regions to the central government, thereby reducing frequent and lengthy court battles between Rome and the regional governments.”
The reason why this vote was ultimately so important is because it became a referendum on Renzi’s administration. The fact that he announced in advance that he would resign if it did not get approved gave a tremendous amount of fuel to the opposition.
So now Beppe Grillo’s Five-Star Movement stands poised to come to power, and that could be very bad news for those that are hoping to hold the common currency together.
The following is how NPR recently summarized the main goals of the Five-Star Movement…
“It calls for a government-guaranteed, universal income, abolishing Italy’s fiscal commitments to the European Union and a referendum on Italy’s membership in the Euro — a prospect that could unravel the entire single currency Eurozone.”
If Italy chooses to leave the euro, it will probably mean the end of the common currency, and the continued existence of the entire European Union would be called into question.
So this vote on Sunday was huge. The Brexit had already done a tremendous amount of damage to the long-term prospects for the European Union, and now the crisis in Italy is sending political and financial shockwaves throughout the entire continent.
Over the next few weeks, keep a close eye on the euro and on Italian government bonds.
If they both continue to crash, that will be a sign that a major European financial crisis is now upon us.
And what happens in Europe definitely does not stay in Europe.
If Europe goes down, we are going to go down too.
At this point we still have almost a month left in 2016, but 2017 is already shaping up to be a very troubling year. As always, let us hope for the best, but let us also keep preparing for the worst.
This article was written by Michael Snyder and originally published at his Economic Collapse blog.
Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.
Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.
If you want to know what is coming and what you can do to prepare, read his latest book [amazon text=Get Prepared Now!: Why A Great Crisis Is Coming & How You Can Survive It&asin=150522599X].
When Germans rise up and kick the tribe behind these global crimes against humanity into hell then we an expect the real uprising and global cleansing.
Why borrow it when you can just print it yourself? Fook the EU banks.
Coulda, shoulda, woulda. More fear porn. Nothing seems to be happening except continual stories of the end of times.
Check out Sapphic Erotica. Do the three month special. See you at the BOL.
Deutsche Bank is in serious trouble. I wonder how the failure of the Italian banks will impact Deutsche Bank.
This is excellent news,another fuck you to the euro/nwo ect.!We all know a finacial crash is coming,the sooner we deal with it the better,and,this crash will affect the world.
Tis a shame about the Austria vote but with France and Netherlands coming up soon to elections this could be the crash but also the end of euro/nwo as we know it!
The Democrat wipeout:
As Churchill said, this election is not the end, or even the beginning of the end. If we are lucky, it might be the end of the beginning. Or to change metaphors, it is like the ring in the Lord of the Rings. Possessing it will corrupt ANYONE, even a morally strong hobbit. This is the precise time we must re-double our efforts.
Let me tell you a little story. In high school, mid/late-season, we were playing a rival team for what we knew would be the conference championship (no playoffs in those days), both teams undefeated. We scored two touchdowns in the first two minutes (missed an extra point), making the score 13 – 0. We then got lazy and in the second quarter alone, gave up 33 points (almost half of what our top ranked defense gave up all season!). We smartened up in the 2nd half, and gave up no points, but the final score was 33 -13.
I leave you to extrapolate that little story to the election a month ago.
Of course, this is why gold dropped today. I’m sure the PTB were frantically selling paper gold to push the price down.
OK by me. I’ll just get more.
You are buying paper gold for a financial collapse?
Nope, physical. Paper is for gamblers.
Now if you haven’t started stocking up on food and more food. Get started. Your Christmas Shopping needs to be food that does not go bad.
Flours (wheat berries)
Powdered milk, powdered eggs, powdered cheese
Spaghetti and noodles
Canned fruits and vegtables
Canned meat and fish and poultry
Get out your fishing boats and equipment
Plant edible trees, edible shrubs, edible flowers
Buy heirloom seeds for planting a garden in the spring
Buy essentials like toilet paper and basic medical supplies
Buy scissors to cut your hair and beard
Buy tooth care products like floss
Make sure you have a warm coat, hat, and gloves.
Stock up on socks, underwear,
Get clothes for growing kids and shoes too
Make sure you have comfortable shoes.
You may have to stand for hours
Buy one of those folding chairs old people use
Tooth care is often overlooked – but you better be brushing 3 times a day and flossing twice a day if you don’t know where you will find a dentist.
I forgot the beans.
Beans (& lentils)
This is like watching a building fall over in slow motion. A little shaking, then calm, but you can that something is not quite right. As you watch you see a slight lean, then bigger, until it finally goes over.
I don’t click on any link someone posts unless they say at least one thing about it.
Italy will not be allowed to exit the EU and it will be like our brexit vote all over again where judges of the land think they can over rule the peoples decision because our politicians have told them to play along in delaying any exit.
These judges are so good that the can find ten reasons to prevent a brexit but not one reason to jail Tony Blair for his 9/11 war crimes.
Sorry people the system is not working and it won’t work unless we kick over the table and take control of our lives back again.
DUH all this fearmonging . Futures markets were lower overnight but rallyed and finished higher on the day. More gloom and doom that didn’t happen.
My green room garden is up again for fresh winter greens. Added a full metal shelving unit in the breakfast room window for more greens. Garden garden garden! Increase staples like rice, wheat berries, salt, sugar, spices.
I added an 4×16 nuclear shelter. Small but survival.