The biggest news of the day was that the yield on the US 10-year bond fell an almost impossible 0.35 percentage points in a matter of minutes to under 2 percent, before bouncing back a little, as investors elbowed each other out of the way for the safety of Uncle Sam.
What's going on?
Well, after betting that 2014 would finally be the year that the global economy broke out of its post-crisis doldrums, investors are waking up to the fact that it hasn't. Europe is still stuck in its depression, and even Germany seems to be stalling out after some ugly export and industrial production numbers. Japan's big sales tax hike has taken some of the wind out of its nascent recovery. China's era of hyper-growth was already over, but now there's concern that its housing bubble might burst and slow it down even more. And the U.S., which has been just about the brightest spot in the global economy's dull picture, might not be as strong as we thought after some weak retail numbers showed that consumers are still working their way back to health.
In other words, the global economy still hasn't recovered from the financial crisis. And this time, policymakers don't look as ready to ride to the rescue. The Federal Reserve is about to finish winding down its bond-buying program and is beginning to talk about when to raise rates. The European Central Bank is debating whether it should do too little too late or too late too little about Europe's lost decade. And China's central bank is reluctant to open its monetary spigots any further for fear of fueling an even bigger bubble. This means that the world's central banks are all either pulling back or not pushing ahead despite weak growth. And that's why inflation is disappearing everywhere.
And I really mean everywhere. Inflation is just 1.5 percent in the U.S., 1.2 percent in the U.K., 1.6 percent in China, 1.1 percent in Japan adjusted for its sales tax hike, and 0.3 percent in the eurozone. That might sound like good news, but when stocks and inflation are both falling, it means, as economist David Glasner has shown, that the economy doesn't have enough demand.
Markets, in other words, are screaming that it's not time to declare mission accomplished on the recovery.