Germany sold six-month treasury bills with negative interest rate.
European banks are hoarding cash with ECB, trying desparately to manage their liquidity and balance sheets.
All these are evidence of a "liquidity trap" situation that Europe is in. By Paul Krugman's account, about 70% of the world is in the trap. The strange things going on now in Europe are just some latest evidence.
The concept is not hard to grasp, but the mainstream news media and investment community seem slow in catching on. It's nice to see Paul McCulley on CNBC today talking coordination between monetary and fiscal policies in such a world:
Wednesday, January 11, 2012
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