Everything is ... not going according to plan. (EPA/Sergio Garcia/ ECB)

Remember 2012?

It seems like only yesterday that the Supreme Court was deciding Obamacare's fate, Chris Christie was in political trouble for hugging someone, and investors were pushing U.S. borrowing costs under 2 percent as they sought a safe haven from the euro crisis. Maybe because it was? Some things, you see, haven't changed, especially in Europe.

Europe's problems can be summed up in five words: the ECB isn't doing enough. That was true two years ago, when it let a self-fulfilling panic almost push the crisis countries out of the euro, and it's true today, when it's let inflation fall so far that their already nonexistent recovery has stalled out even more. Indeed, the latest news is that, with prices falling 0.2 percent the past year, Europe has officially gone from "lowflation" to deflation. The first is when inflation is a too-low but still positive number, and the second is when inflation is a too-low but a negative one. Now, this doesn't mean that Europe has crossed some bright red line from being okay to being doomed. It's been doomed for a long time. These are, as the IMF points out, a continuum of the same problem: debts are harder to pay back and wages have a harder time adjusting whenever inflation is well below target, whether it's 0.1 or -0.1 percent. And besides, its inflation is falling now because oil prices are, which is actually good news that, who knows, might not last.

Still, the now-tangible Ghost of Deflation Present has made investors more worried that Europe is stuck in a Japanese-style lost decade, but also more hopeful that this will finally force the ECB to do what it hasn't wanted to: buy government bonds with newly-created money, aka quantitative easing. Both this optimism and this pessimism, though, have pushed people into government debt that they think is either a safe haven or a sure bet if the ECB starts buying it. That's why investors are actually paying Germany to borrow money now—its two-year bond yields just hit an all-time low of -0.11 percent—and why borrowing costs across Europe are the lowest they've ever been. And that's going back centuries. It's even made U.S. borrowing costs fall even as its recovery has picked up. It hasn't hurt that the rest of the world, whether it's China slowing down, Russia imploding, or Japan dealing with a self-inflicted quasi-recession, is making the U.S. look like the only good place to park your money right now.

In any case, as you can see below, yields on the benchmark 10-year Treasury bond have fallen back below 2 percent. That wasn't what was supposed to happen after the Federal Reserve started ramping down its bond-buying in late 2013, and growth eventually started ramping up. Indeed, 67 out of 67 economists in Bloomberg's April poll thought that rates would rise in the second half of 2014. Well, at some point rates have nowhere to go but up, right? Right?


Maybe not. As long as the rest of the world, and Europe in particular, isn't looking so hot, then U.S. long-term borrowing costs could stay low even as short-term borrowing costs start to rise. That's not as good as it might sound, because long-term rates that are lower than they "should" be can, for example, inflate a housing bubble, like they did ten years ago.

Blame the ECB. (Well, at least in large part). Its problem, which, again, is really Europe's, can also be summed up in a few words: it's acted like Germany has a veto over, and not just a vote on, monetary policy. And Germany has been opposed to doing anything more than the bare minimum to keep the common currency together for the next five minutes, because it wants to keep the pressure on everyone else to cut spending. So Europe has careened from one catastrophe to the next as it's semi-deliberately let its financial crisis turn into an economic crisis that is now morphing into a political one as people are slowly beginning to realize that the euro isn't the solution to their problem. It is their problem.

Actually, it might be all of ours.