A commenter named Mark Sadowski sent me this very useful info:
Another piece of the puzzle is core eurozone bond yields. If one looks at 10-year bond yields for Austria, Belgium, Finland, France, Germany, Luxembourg, and Netherlands you will observe that all have fallen by about 70 basis points since last June and about 30 basis points in just the last three weeks. For example the German 10-year bond was trading at only 2.78% as of today. I take this as a sign of falling inflation expectations in the eurozone. (The original comment included Sweden, but he later noted it was not in the eurozone.)
Now think about the media narrative. There is supposedly a collapse of confidence in the euro that is making the euro very weak. But here’s what puzzles me. When there really was a collapse in confidence in the Mexican peso or Thai baht during their crises, I don’t recall yields on long term Mexican and Thai bonds falling to 2.78%. Maybe the media narrative is worth reconsidering.
This reminds me of the international economics experts who told us that the US had to have a severe recession after our banking crisis, because most other countries have had severe recessions after their banking crises. Yes, but in the 1990s did Thailand and Mexico and Sweden see their currencies appreciate strongly in the teeth of their crises, as the dollar appreciated strongly from July to November 2008? To paraphrase James Carville–It’s the tight money stupid.
I know it’s hard for institutions to admit mistakes, but we need coordinated easing from the Fed, ECB, and BOJ. Blame it on Greece.