"Disaster economics" is also a consequence of regulations that push the banks into what is officially deemed “infallible”.

Sir, Gillian Tett writes “We have entered the world of disaster economies” July 24, in which she analyses investor behavior, safe assets and sovereign bonds, and finds that in the case of for instance US and Germany, even though credit default spreads might be increasing, bond yields can fall. 

Amazingly, nowhere in her analysis, does Ms. Tett take into account the fact that one of the major financial actors, the banking system, has to operate under a regime of capital requirements based on risk, and therefore, lacking capital, has no choice but to park their liquidity where the least capital is required, like in US and German bonds.