European financial markets have gotten very strange. Greece’s one-year government bond yield hit 376% yesterday, while Germany, Switzerland and the U.K. sold short-term debt this week at yields below 0%. That means investors are effectively paying the latter governments for the privilege of lending to them. Reuters also reported Monday that blue-chip firms like Johnson & Johnson and Pfizer are lending to struggling European banks, turning the usual creditor-debtor relationship on its head.
At this point, flying saucers over the Eiffel Tower or the Colosseum in Rome wouldn’t surprise anyone.
There’s a serious point here. The longer Europe’s crisis lumbers on, the more distortions it creates in credit markets across Europe, not merely in the distressed South.