There HAS to be something up. All of a sudden there is all this talk of sharing the pain. What about this Al Erian chap:http://www.bbc.co.uk/news/business-11835044
WTF? He holds trillions of € of goverment debt. This is all very odd.
Mr. El Erian's comments were made a couple of days ago and reported here. There are two points to note:
1. Pimco are very long sovereign bonds and so very short inflation. Haircutting bank debt would generally be good for sovereign bonds and deflationary.
2. If Pimco are saying this publicly, they and other buyers of sovereign debt must also be saying it privately. This has big implications for larger states with big banking systems. If the bond markets start to make judgements on sovereign risk based on the size of the banking sector, it could increase costs to states whether their banking system goes bust or not. The pressure is on and not just from the left...