My chart of the day, illustrating a pretty brutal reversion to the mean:

Of course, all interest rates in a fiat system are artificial. Interest rates are the price of money, and if a central bank is determining the level of money, then they are in effect determining the level of interest, which is one reason why sovereigns who borrow in their own currency do not tend to face a danger of rising interest rates even at high levels of borrowing.

The post-Euro low-rates euphoria was a cunning trick: the single monetary policy disguised each state’s true fiscal picture. Fiscal union might have prevented this blowup, but introducing it now seems unlikely given Germany’s severe aversion to such a thing.

If AIG is considered ‘too big to fail’ what does that make the Eurozone given the very high levels of integration across the global economy today? (I don’t have the answer, but I think we can all guess).