Germany has to decide what to do with Spain -- and soon.
I've got some shocking news for you. Things are going badly in Europe.
The big story is Spain's borrowing costs. On Thursday yields on 10-year Spanish bonds touched the dreaded 7 percent level -- which they have continued to flirt with on Friday. What's so important about 7 percent? Two things. First, banks have to post more margin -- i.e., cash -- if yields cross that threshold when they use bonds as collateral. A downward spiral awaits. Banks might sell the bonds off because they aren't as useful -- leading to higher yields and worse margin requirements. And so on, and so on. But it doesn't even really matter. Borrowing costs of 7 percent are already ruinous for Spain. As Brad Plumer pointed out, inflation is so low in Spain that its economy would have to grow at a 4-5 percent clip to not fall into a debt trap with yields that high. But Spain isn't growing at 4 or 5 percent. Spain is in a recession.
So yes, it's fair to call the week-old bailout of Spain's banks afailout. The putative bailout has 1) Added to Spain's public debt, 2) Made that debt riskier, and 3) Likely made it harder for Spain to pay back its debt. The euro zone can hardly take any more such successes.
But the financial apocalypse isn't here yet. Just close. Spain relies on a lot of shorter duration debt to fund itself too. The borrowing costs on those bonds are still semi-manageable -- for 2-year bonds, if not 5-year bonds. Still, Spain is far too close to insolvency for comfort. Unless the European Central Bank (ECB) pushes down yields, Spain will need another bailout. And soon.
That brings us to the most interesting euro development of the past week. German bonds started to sell off -- before rallying recently. This was ... odd. German bonds never sell off when things look bad in euroland. The opposite. There's usually a flight to safety to them. If there's one euro zone country that won't go bankrupt, it's Germany. But things are getting so bad in Spain that Germany might have to cross the financial Rubicon it's so far been unwilling to countenance: joint debt.
Spain is too big to save. But that's almost irrelevant. The bailout status quo is toxic. It hasn't solved anything for Greece, Portugal or Ireland. It won't for Spain either. Southern Europe needs to reduce its debt and reduce the interest it pays. Bailouts do the latter, but not the former. But mutual debt -- so-called "eurobonds" -- would work. There's a problem. Germany doesn't want to give southern Europe a credit card with no limit. Germany wants there to be a very specific limit. That's where the so-called "sinking fund" comes in. The idea here is that each country would dump all of its debt in excess of 60 percent of GDP into a single fund. Each country would have to pay its own portion back over 20 years, but Europe would issue debt jointly.
This isn't a fiscal union. It's not an open-ended bailout of Spain by Germany. It's a one-time bailout of Spain by Germany. It's not perfect, but it could work. And it would cost Germany a good chunk of change. That's why Germany's borrowing costs surged at the beginning of the week. Of course, Angela Merkel gave her best Herman Cain impersonation later -- Nein, nein, nein! -- which is when German borrowing costs receded.
Germany will have to make up its mind soon. Markets don't have much patience for its Hamlet act. Time to decide whether the euro will be or not be.
More on the F-16 and Cessna crash, and whether the collision of a military and a civilian aircraft was also a collision of cultures
Early this month an Air Force F-16, under the command of an experienced Air Force pilot, rammed into a small-civilian Cessna 150 propeller plane, not far from Charleston, South Carolina. The Air Force pilot ejected to safety; both people aboard the Cessna were killed.
The next three paragraphs are background for the pointed and interesting reader-messages I am about to quote. If you’re already up to speed with previous installments (one, two, three), you can skip ahead to the messages. They highlight an aspect of the modern military-civilian divide I had not considered before this episode.
In an original item on the crash, I noted some of the perils civilians could face when flying near designated military areas—even though this crash happened in ordinary uncontrolled airspace. That is, it occurred when neither plane was within a Military Operations Area (MOA), where civilian pilots are warned about risks from high-speed military aircraft, nor inside the controlled “Class C” airspace that surrounds Charleston’s airport. (Medium-sized commercial airports like Charleston’s typically are ringed by Class C airspace, so the controllers can sequence in the airline, cargo, civilian, military, and other traffic headed toward their runways. The very busiest airports, like LAX or JFK, are surrounded by larger zones of Class B airspace for their more complex traffic-control jobs. In case you’re wondering, Class A airspace is the realm above 18,000 feet where most jet travel occurs.)
The paper of record’s inaccurate reporting on a nonexistent criminal investigation was a failure that should entail more serious consequences.
I have read The New York Times since I was a teenager as the newspaper to be trusted, the paper of record, the definitive account. But the huge embarrassment over the story claiming a criminal investigation of Hillary Clinton for her emails—leading the webpage, prominent on the front page, before being corrected in the usual, cringeworthy fashion of journalists who stonewall any alleged errors and then downplay the real ones—is a direct challenge to its fundamental credibility. And the paper’s response since the initial huge error was uncovered has not been adequate or acceptable.
This is not some minor mistake. Stories, once published, take on a life of their own. If they reinforce existing views or stereotypes, they fit perfectly into Mark Twain’s observation, “A lie can travel halfway around the world while the truth is putting on its shoes.” (Or perhaps Twain never said it, in which case the ubiquity of that attribution serves to validate the point.) And a distorted and inaccurate story about a prominent political figure running for president is especially damaging and unconscionable.
A newly discovered artifact buried with one of Jamestown’s most prominent leaders suggests he could have been a crypto-Catholic.
After 400 years in the Virginia dirt, the box came out of the ground looking like it had been plucked from the ocean. A tiny silver brick, now encrusted with a green patina and rough as sandpaper. Buried beneath it was a human skeleton. The remains would later be identified as those of Captain Gabriel Archer, one of the most prominent leaders at Jamestown, the first permanent English colony in America. But it was the box, which appeared to be an ancient Catholic reliquary, that had archaeologists bewildered and astonished.
“One of the major surprises was the discovery of this mysterious small silver box,” said James Horn, the president of the Jamestown Rediscovery Foundation. “I have to say, we’re still trying to figure this out. You have the very strange situation of a Catholic reliquary being found with the leader of the first Protestant church in the country.”
The new version of Apple’s signature media software is a mess. What are people with large MP3 libraries to do?
When the developer Erik Kemp designed the first metadata system for MP3s in 1996, he provided only three options for attaching text to the music. Every audio file could be labeled with only an artist, song name, and album title.
Kemp’s system has since been augmented and improved upon, but never replaced. Which makes sense: Like the web itself, his schema was shipped, good enough,and an improvement on the vacuum which preceded it. Those three big tags, as they’re called, work well with pop and rock written between 1960 and 1995. This didn’t prevent rampant mislabeling in the early days of the web, though, as anyone who remembers Napster can tell you. His system stumbles even more, though, when it needs to capture hip hop’s tradition of guest MCs or jazz’s vibrant culture of studio musicianship.
The agreement doesn’t guarantee that Tehran will never produce nuclear weapons—because no agreement could do so.
A week ago I volunteered my way into an Atlantic debate on the merits of the Iran nuclear agreement. The long version of the post is here; the summary is that the administration has both specific facts and longer-term historic patterns on its side in recommending the deal.
On the factual front, I argued that opponents had not then (and have not now) met President Obama’s challenge to propose a better real-world alternative to the negotiated terms. Better means one that would make it less attractive for Iran to pursue a bomb, over a longer period of time. Real world means not the standard “Obama should have been tougher” carping but a specific demand that the other countries on “our” side, notably including Russia and China, would have joined in insisting on, and that the Iranians would have accepted.
Has the Obama administration’s pursuit of new beginnings blinded it to enduring enmities?
“The president said many times he’s willing to step out of the rut of history.” In this way Ben Rhodes of the White House, who over the years has broken new ground in the grandiosity of presidential apologetics, described the courage of Barack Obama in concluding the Joint Comprehensive Plan of Action with the Islamic Republic of Iran, otherwise known as the Iran deal. Once again Rhodes has, perhaps inadvertently, exposed the president’s premises more clearly than the president likes to do. The rut of history: It is a phrase worth pondering. It expresses a deep scorn for the past, a zeal for newness and rupture, an arrogance about old struggles and old accomplishments, a hastiness with inherited precedents and circumstances, a superstition about the magical powers of the present. It expresses also a generational view of history, which, like the view of history in terms of decades and centuries, is one of the shallowest views of all.
U.S. officials are turning to Russia for help with Iran and Syria, even as the Ukrainian conflict persists.
If you believe all the talk out there lately, Vladimir Putin is not only duplicitous and hypocritical—the Russian president’s also been pretty damn busy recently. Busy cutting secret deals with the same Europeans and Americans he has been vilifying for years. And if you believe the rumors, the Europeans and Americans have also been busy selling out Ukraine to the Russians.
Not that any of this would be unusual or particularly surprising. Cynicism, duplicity, and hypocrisy are often the reserve currencies of politics, where interests tend to trump values.
There have long been suspicions that the United States and Europe might give Ukraine up in exchange for Russia’s support in securing a deal to curb Iran’s nuclear program. Additionally, Washington has been seeking Moscow’s backing in securing a managed, orderly, and negotiated exit for Syrian leader Bashar al-Assad, which would go a long way toward ending the conflict in that country.
Even with the overwhelming recent New York cover story, the women pay a price for speaking out.
Who still defends Bill Cosby? After newly unsealed depositions revealed that the comedian admitted to acquiring sedatives to give to women he wanted to have sex with, his longstanding backer Whoopi Goldberg recanted her support for the man accused of dozens of rapes over the years. The singer Jill Scott, too, said she was wrong when she suspected a media conspiracy against him. And if Cosby’s former costars, including Phylicia Rashad, still believe him to be the target of an illegitimate smear campaign, they haven’t spoken up to say so in a while. Cosby’s lawyer is currently making the rounds in the media to say his deposition has been misconstrued—but that argument, even if believed, doesn’t refute the idea that he used drugs to take advantage of women.
Orr: “Sometimes a thing happens. Splits your life. There’s a before and after. I got like five of them at this point.”
This was Frank offering a pep talk to the son of his murdered former henchman Stan in tonight’s episode. (More on this in a moment.) But it’s also a line that captures this season of True Detective so perfectly that it almost seems like a form of subliminal self-critique.
Remember when Ray got shot in episode two and appeared to be dead but came back with a renewed sense of purpose and stopped drinking. No? That’s okay. Neither does the show: It was essentially forgotten after the subsequent episode. Remember when half a dozen (or more) Vinci cops were killed in a bloody shootout along with dozen(s?) of civilians? No? Fine: True Detective’s left that behind, too. Unless I missed it, there was not a single mention of this nationally historic bloodbath tonight.