The More You Tighten Your Grip, Merkel...

And Angela Merkel will not be pleased. Catalonia has issued an ultimatum to the Spanish government. Allow and respect the results of our secession referendum or we leave now.

The last time Catalonia held a referendum the Spanish government rolled tanks into Catalonia and then refused to accept the results. Since then the locals have been doing the ground work to declare independence from Spain -- drafting constitutions, setting up parallel institutions, etc.

Markel cannot allow this. She's all for Scottish Independence, though she hasn't said so overtly, because the Scots want to leave the U.K. post-Brexit to join the EU. But, Catalonia wants out of Spain because, as its richest state, it is no longer willing to be turned into debt-slaves to Brussels, a la Greece.

As she works overtime to batten down the political hatches more secessionist movements spring up across Europe, invoing Princess Leia's great line in the original Star Wars, "The more you tighten your grip, Tarkin, the more star systems will slip through your fingers."

That Catalonia has scheduled this referendum in September is a direct challenge to Merkel's re-election as the German elections are then as well. Watch the G-7 meeting this weekend very closely to see how far Trump goes to protect U.K. Prime MInister Theresa May from the Germans, who are out in full throat trying to deny Brexit by any means necessary.

Expect Trump to defend the dollar and U.S. interests and threaten serious protectionism against the EU if Merkel tries to get the rest of the Group to sanction or rebuke Brexit. That will be bearish for gold and the euro which will likely stoke more capital flight from Europe into U.S. assets and Bitcoin.