In an free-setting market for interest rates, the Eurozone has no clothes.



As the ECB tapers bond purchases, some other buyer must step in to fill that position. Supposing the market itself proved apt for the task, market participants would have to regain risk pricing discovery.



Who in the private sector would lend zillions at near zero interest rates to countries like Portugal, Italy, or Spain? No one. Risk repricing could mean 7% interest rates, nothing outlandish in historic terms. And no government would outlive a single quarter with such a level of interest rates.



Don't worry. Well before we reach 7% rates a (conveniently induced) huge financial panic will justify the return of the reserve creators.

