The world just gets weirder every day. Today, France, Germany, and the Netherlands all sold government bonds at a negative interest rate. Such a rate means that investors are actually paying the states to hold their money safely. The following data are from “Mish’s Global Economic Trend Analysis.” The blog is supremely pessimistic on European economic affairs, but it has almost invariably been accurate in its assessments.
- Germany: Germany sold 3.290 billion euros of six-month Treasury bills, known as Bubills, at an average yield of -0.0344%. The record lows was previously -0.0122% seen at an auction Jan. 9.
- France: France sold EUR 3.917 billion of 13-week Treasury bills at an average yield of -0.005%, down from 0.048% a week ago, and it sold EUR 1.993 billion of 24-week Treasury bills at an average yield of -0.006%, down from 0.096% last week.
We should take this development as a fear index: investors are truly worried that bad stuff is happening and they simply want security, and they are willing to pay for such security. The reason? Investors are convinced that both Spain and Italy are close to a sovereign debt default.
- Yield on 10-Year Spanish Government Bond closed at 7.062%
- Yield on 10-Year Italian Government Bond closed at 6.015%
Yields of 7 percent on 10 year bonds are almost impossible to repay–at the end of 110 years, the state essentially has to pay back twice what it borrowed.
To make matters worse (and even more complicated), China is experiencing price deflation, a phenomenon usually associated with a serious recession or depression. This chart gives a good idea of how prices are following the pattern of 2007-08.
The global economy is getting difficult to interpret.
World Politics News 
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