A global shaking from tremors in a small country

So something else must be happening. Let's leave aside the Greek business for the moment, except perhaps to reassert my own view that the conditions being urged on the country are unrealistically harsh. Of course, the previous generation of politicians should not have got the country into this mess in the first place but punishing ordinary people for the transgressions of those politicians cannot be right. So why have the troubles of one small country loomed large enough to dent what is now technically a bull market?

Well, after a serious economic downturn, especially those associated with a collapse in financial confidence, you always get a decent recovery in share prices. Because you have gone down so far, the only way is up. If you look at Wall Street, this latest recovery has run rather ahead of the average. But this itself leads to a puzzle: this has been a scruffy economic recovery but it has been a strong share recovery.

Why might that be? The one-word answer is: liquidity. The world is experiencing extraordinarily loose money conditions as the main central banks pump out the cash. The additional £50 billion of quantitative easing agreed by the Bank of England last week will mean that a quarter of British government debt will be held by the central bank.

That has never happened before in peacetime. What we have been doing is in addition to the similar policies of the US Federal Reserve and the European Central Bank. The technical methods employed are different. For example, the ECB is not allowed to fund national governments directly in the way the Bank of England can. But the effect is the same, with at least part of the 500 billion of three-year money it has lent to the European banks ending up in sovereign debt. It is questionable whether what the ECB has been doing is legal, and it will be interesting to see whether someone in Germany seeks to bring a test case. But for the time being, the printing presses keep running.

That money has to go somewhere, and shares are one place where it has gone. This excess liquidity may well support share prices for some months yet but, as Simon Ward at Henderson warns: "Another wrenching correction is likely when monetary conditions tighten, either because central banks dial back on stimulus or stronger economies divert liquidity away from markets - a possible scenario for later in 2012."

That brings us back to the debate as to the relative value in equities and bonds. George Soros, among others, has been warning of a bear market in bonds and the equity-risk premium, the gap between the return you get on bonds and on shares is at its highest for at least a quarter century.

If you want to go back further, look at the Equity-Gilt Study, now published by Barclays Capital. This looks back over more than a century of returns on different types of investment, and should remind us that over the past century equities have been the much better investment. But in recent years they have not. That leads to the killer question: are shares too cheap or bonds too expensive?

Maybe both. Come back to the implications of the Greek disaster. Almost all the comment has focused on the implications for the eurozone economy, European banks and the future of the euro itself.

There is nothing wrong with that, for these are the front-line issues. But perhaps explaining (though not excusing) the way Greece is being savaged is the much wider concern about sovereign debt itself.

At some stage, the debt held now by the Bank of England will have to be sold to real savers. But before that happens, there is likely to be a bear market in bonds, for the present values are way out of line with their historical performance. The present equity risk premium cannot be sustained.

The Government has been pretty good at persuading financial service companies to buy gilts, while poor retirees are being coerced into buying annuities that deliver disgraceful returns. But this cannot continue indefinitely. Similar concerns apply to holders of US and European national debt too.

So behind all this pressure on Greece is not just the European financial establishment wanting to buy time so it can create a firewall behind Greece, stopping the run before other countries are sucked in. It is also a wider fear that all European sovereign debt, including even German debt, will come under suspicion. Meanwhile, just keep printing the money.