Just when sharemarkets seemed to be moving on from the Global Financial Crisis, Ireland has jolted the world back to reality and the prospect that it could take years to sort things out.

Most Australians have been blissfully unaware of the continuing problems overseas and, while our economy appears to be sound at the moment, we won’t be insulated from any future global financial setbacks. We’ll be cushioned but not completely insulated.

Investors have turned against Ireland because of the parlous state of their banks. There is a major push for the Irish Government to do a deal with the European Union and access emergency funds to bailout its banks.

Over the last decade the Irish banks fuelled a major residential property boom which dominated their balance sheets. When that property bubble burst it hit those banks hard and have brought many of them to the brink of collapse.

Yes, it sounds eerily familiar but that is a whole different subject. We’ve constantly warned about the Australian property bubble over the last year and will continue to monitor it over the next few months as property sales and values soften.

But back to the global situation.

What is spooking financial markets is that if Ireland goes to the European Union and International Monetary Fund for help, will it be the trigger for other European countries to follow?

The rest of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) of Europe are in a similarly fragile economic state.

There is about 700 billion Euros in emergency funding earmarked by the IMF and EU. That sounds a lot but it’s going to take a lot of cash if these countries start to ask for it.

Analysts reckon there’s enough to cover the bailout of, say, Ireland and Portugal but not for all five and any other which may want a hand.

Ireland has been reluctant to ask for help because it will come with strict economic reform strings attached and the psychological damage to markets could be devastating.

Remember markets are made up of living, breathing human investors who are influenced by their emotions. It’s all about confidence. If investors lose confidence and panic, that fear spreads like wildfire and can be difficult to stop.

The next couple of months in Europe could be very challenging as these economic basket cases try to introduce the reforms needed to get their finances back in order. We’re already starting to see the social unrest such as the riots in France against lifting the retirement age from age 60 to 62 years. Hard to believe when Australia is calmly lifting our retirement age to 67.

Across the Atlantic, the US is stumbling through a very lacklustre economic recovery even though the Federal Reserve has been printing money to try and kick it along.

Big US companies are making profits again but largely from cutting costs. Major retailers like Walmart and Home Depot have put out warnings that they’re foreseeing a slow Christmas sales season.

Then there’s China, our economic saviour. Inflation is starting to become an issue and the Chinese authorities are starting to talk about tightening policies to slow the pace of economic growth.

It is a very interesting time.

Concerns about Europe, the US and China could combine to turn around the recent strong trend in share prices.

On the flip side, uncertainty means a flight to safety for many investors. We’ve already started to see that happen with the Australian dollar dropping below parity.

The US dollar is seen as the biggest, safest and most liquid market in the world. So when there’s a scare, investors fly to US dollar investment. The greenback then goes up in value and the Aussie goes down.

Gold can also be a beneficiary as a safe haven both against uncertainty and also the prospect of inflation. Yes, gold has recently breached record highs in pure dollar terms, but in real adjusted terms it is still well below the peaks of the early 1908s.

So the pressures are building again. Economic recoveries in many countries have stalled and hard decisions have to be made to get things back on track.

Watch and follow what happens carefully and understand the consequences.

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