Europe Straitened - Barrons.com
Speaking of "mispricing", sometimes little tidbits tell a lot.
What I'm talking about is the old "free-lunch school" of endless government borrowings at low rates (negative real rates) without consequences - and, especially when used to support socialist ideals, unions, abundant entitlements, etc.
As a result, the banks here in Europe (Portugal was noted in a recent article) are now paying savers 4%. Clearly not the 7% plus that lenders to many sovereigns demand; but, still, far more than where the ECB set the borrowing rate.
Portent or not, the logic that money grows on trees to support unaffordable and socially demanded benefit programs ad infinitum may not be true seems to be such anathema to most that they patently dismiss it. Thus, they want the ECB to keep the party going. (Might we say as Uncle Ben is doing in the US.)
An interesting suggestion this week (can't recall by whom) was to allow Southern Europe to have two currencies. Let the governments pay their benefits and workers in a local euro and let two prices co-exist. They can keep the standard euro and depreciate their local euro. Who knows, it's another option where at least the ECB doesn't have to run it's printing presses.
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