Since last Friday the world financial markets have taken some major blows.

Those worried about US quantitative easing setting off inflation have been overtaken by fears that China will lose control of its economy as it seeks to control inflation and, of course, the deja vu all over again in the eurozone.  Ireland has replaced Greece (which remains in close contention), with Portugal, perhaps Spain and even Belgium as contenders for the next crisis point to tear apart the EU.

This has led to major commodities such as gold, copper, other metals, oil, sugar and some grains to lose from 5% to 20% in value, plus last night’s worldwide sell-off (led by China, which is now down more than 8% in three trading days), should have registered in the minds of Australian investors, politicians and commentators who are still obsessing over a juvenile (and now almost puerile) argument over banks, competition and interest rates.

In fact, after Friday’s rattling and the eruption of concern about China and Ireland, the question has to be asked; would the Reserve Bank have lifted interest rates if its November 2 board meeting had been held yesterday, two weeks after the one on Melbourne Cup day?

We will never know, but it did and ensured (with the help of some clumsy banks and bankers) that the ignorant argument over banks and interest rates would go on.

So rapid has the situation changed that reading yesterday’s minutes of the Reserve Bank meeting that stuck up interest rates on November 2, you are struck by how little impact Europe’s then re-emerging pressures had on the central bank’s thinking.

“In Europe, confidence and activity indicators pointed to continued strength in Germany, and September quarter GDP in the United Kingdom had again surprised on the upside. Elsewhere in Europe, consumption growth and labour markets remained weak and the planned fiscal consolidation was weighing on the outlook.

“Data to the end of September showed a rise in borrowing from the ECB by Irish banks, but modest falls in borrowing by some of the other smaller countries. Spreads on Irish government bonds had widened recently.

“Also, there were still fragilities in Europe relating to banking sectors and fiscal positions.”

In hindsight, the minutes make clear that it was a combination of China’s solid economic performance in not experiencing a sharp fall in growth (but a slowdown is under way) and the expectation of rising inflation next year in Australia, that produced the surprise Cup day rate rise.

But even there, the central bank was comfortable with the knowledge that the banks would lift their lending rates by more than the RBA’s increase. But after the shaking since Friday and the intensifying battle in Europe centred on Ireland, would the central bank have lifted rates if the meeting was held yesterday?

But if the Europeans can’t sort out Ireland, Portugal and Spain as well as backsliding Greece, then we may well be glad we have a banking system that’s strong enough to withstand the second shaking in as many years, led by the Big Four. With global banking now under pressure, will the federal government and the regulators want the taxpayer support for our banks removed, now?

And where are the moaners about the strong dollar?

The currency dollar is less than 98 US cents, with parity a memory of last week. That’s a fall of nearly 3% in as many days. The US dollar has firmed sharply against other currencies, especially the euro, which is now less than $US1.35. US interest rates were driven higher in the past two weeks by the worryworts concerned about inflation. America’s producer prices for October were much less than expected and now some investors are back worrying about deflation (go figure) in America.

China’s inflation surge and fears of rising asset prices were noted by the RBA, but it will be getting a little jumpy if the Chinese CPI is running at 4% annual or more next March because the whole of its economic forecast is built on successful Chinese management of their economy (as is the federal budget and a lot of corporate plans).

China went through the same concerns in 2008, but rather than controlling it through policy moves such as rate rises and asset reserve ratio increases (as was being attempted at the time), the global credit crunch and then very sharp recession from the last quarter of that year quelled the inflationary pressures (as they did everywhere).

Now China is facing the same problem, but with the pace of economic growth slowing, which could help control inflation, if only food prices (up 10.1% in October alone and 62% in a year) would stop rising and start falling. So there’s been the re-emergence of dire warnings about speculation and hoarding (hoarding was rampant in 2008), reports of consumer subsides and other moves. That’s also why the Chinese are belabouring the Americans over the Fed’s spending, because the Chinese know they can’t control hot money inflows by their own banks and companies, despite having some of the toughest financial controls in the world.

And then there’s Ireland. The government says it’s not broke, it’s  the banks that are the problem, the same ones bailed by a desperate government in October 2008. Ireland can’t convince the world that it has staunched the losses in the banks, which continue to bleed and are borrowing billions of euros a day from the European Central Bank (as are banks in Portugal, Greece and to a lesser extent Spain).

Ireland’s desperate bailout of its banks forced governments the world over to guarantee their banks (leading to the problems we have in Australia and the current illogical debate). Besides Ned Kelly, the well-known bank robber, we have a lot to thank the Irish for at the moment in banking. Their slack regulation and cronyism added to the subprime disaster in the US and helped it go global. For example, Germany’s biggest bank collapse, Hypo Real Estate, had its origins in Dublin.

While Ireland is paying the cost of that with an impending bailout,  we in Australia are also paying with our reduced competition and illogical arguments over the extent of interest rate rises and silly point scoring on funding costs.

Just look at the damage done overnight to metal prices. March copper futures in New York fell 4.9% overnight, the biggest fall since the end of June, while in London it plunged 5.1%. London prices hit an all-time high last Thursday of close to $US9000 a tonne, last night the price was $US8150 and wanting to go lower. LME zinc fell 8.5%, lead, 8.1% and nickel, aluminum and tin all fell more than 5%. These were all larger than the falls seen Friday in the first day of the sell-off.

Wheat fell more than 6% and copper is now down more than 8% in two days. Oil is down more than 7% since Friday after hitting a 25 month high on Thursday in New York. Gold, which should be attracting investors in times of uncertainty, has been unwanted since Friday and is off 6%.

Mining stocks around the world have been hammered. The easy-money hurrahs following the Fed’s easing earlier this month, no longer look as assured.

China’s battle against inflation is the easiest of the concerns. It’s Europe and the future of Ireland, Greece, Portugal, Spain and perhaps Belgium that we should be really worried about.

Germany triggered much of the concern by trying to boss the rest of the eurozone around for domestic political reasons. Now it has to back-track and lead the stabilisation efforts.

We had better hope it all works, because if the incipient contagion spreads, there could be more damage, much of it in unexpected places. Who wants to go through the last quarter of 2008 again?