A showdown between the capital markets and the world’s central bankers.

Tonight is one of the more significant moments in financial history. Certainly at least as much as several of the Sundays in 2008, but in many ways even more so, since the geopolitical stakes for systemic hegemony are much greater and obvious.

While the ECB has just announced Italian bond purchases — and while some are saying they have committed “to do what it takes”, it’s not clear that this is the “bazooka” that the Fed used in 2008. So I’m not sure they got the memo. If they did, and are going to provide an unlimited backstop to the national euro bond markets, then this will set up a large devaluation of the euro, inflation in the several year time frame, and a continuing surge in gold prices. It would also be another salvo in the currency wars, and might over time lead to trade tensions and tariffs and GD 2. Hard to believe the Germans will accept monetization of bad Club Med debt, though, so I suspect this will continue to be a muddle through attempt with ongoing unresolved crisis. Either way it seems that we are looking at systemic crisis either short term or longer term.

Dow futures are down 236 points right now, and the S&P 27 — better than at the open. Expect central bank interventions all night….

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