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.
By antagonizing the U.S.’s neighbor to the south, Donald Trump has made the classic bully’s error: He has underestimated his victim.
When Donald Trump first made sport of thumping Mexico—when he accused America’s neighbor of exporting rapists and “bad hombres,” when he deemed the country such a threat that it should be contained by a wall and so clueless that it could be suckered into paying for its own encasement—its president responded with strange equilibrium. Enrique Peña Nieto treated the humiliation like a meteorological disturbance. Relations with the United States would soon return to normal, if only he grinned his way through the painful episode.
In August, Peña Nieto invited Trump to Mexico City, based on the then-contrarian notion that Trump might actually become president. Instead of branding Trump a toxic threat to Mexico’s well-being, he lavished the Republican nominee with legitimacy. Peña Nieto paid a severe, perhaps mortal, reputational cost for his magnanimity. Before the meeting, former President Vicente Fox had warned Peña Nieto that if he went soft on Trump, history would remember him as a “traitor.” In the months following the meeting, his approval rating plummeted, falling as low as 12 percent in one poll—which put his popularity on par with Trump’s own popularity among Mexicans. The political lesson was clear enough: No Mexican leader could abide Trump’s imprecations and hope to thrive. Since then, the Mexican political elite has begun to ponder retaliatory measures that would reassert the country’s dignity, and perhaps even cause the Trump administration to reverse its hostile course. With a presidential election in just over a year—and Peña Nieto prevented by term limits from running again—vehement responses to Trump are considered an electoral necessity. Memos outlining policies that could wound the United States have begun flying around Mexico City. These show that Trump has committed the bully’s error of underestimating the target of his gibes. As it turns out, Mexico could hurt the United States very badly.
“Somewhere at Google there is a database containing 25 million books and nobody is allowed to read them.”
You were going to get one-click access to the full text of nearly every book that’s ever been published. Books still in print you’d have to pay for, but everything else—a collection slated to grow larger than the holdings at the Library of Congress, Harvard, the University of Michigan, at any of the great national libraries of Europe—would have been available for free at terminals that were going to be placed in every local library that wanted one.
At the terminal you were going to be able to search tens of millions of books and read every page of any book you found. You’d be able to highlight passages and make annotations and share them; for the first time, you’d be able to pinpoint an idea somewhere inside the vastness of the printed record, and send somebody straight to it with a link. Books would become as instantly available, searchable, copy-pasteable—as alive in the digital world—as web pages.
Will you pay more for those shoes before 7 p.m.? Would the price tag be different if you lived in the suburbs? Standard prices and simple discounts are giving way to far more exotic strategies, designed to extract every last dollar from the consumer.
As Christmas approached in 2015, the price of pumpkin-pie spice went wild. It didn’t soar, as an economics textbook might suggest. Nor did it crash. It just started vibrating between two quantum states. Amazon’s price for a one-ounce jar was either $4.49 or $8.99, depending on when you looked. Nearly a year later, as Thanksgiving 2016 approached, the price again began whipsawing between two different points, this time $3.36 and $4.69.
We live in the age of the variable airfare, the surge-priced ride, the pay-what-you-want Radiohead album, and other novel price developments. But what was this? Some weird computer glitch? More like a deliberate glitch, it seems. “It’s most likely a strategy to get more data and test the right price,” Guru Hariharan explained, after I had sketched the pattern on a whiteboard.
The early results out of a Boston nonprofit are positive.
You saw the pictures in science class—a profile view of the human brain, sectioned by function. The piece at the very front, right behind where a forehead would be if the brain were actually in someone’s head, is the pre-frontal cortex. It handles problem-solving, goal-setting, and task execution. And it works with the limbic system, which is connected and sits closer to the center of the brain. The limbic system processes emotions and triggers emotional responses, in part because of its storage of long-term memory.
When a person lives in poverty, a growing body of research suggests the limbic system is constantly sending fear and stress messages to the prefrontal cortex, which overloads its ability to solve problems, set goals, and complete tasks in the most efficient ways.
Thursday’s terrorist attack in Paris did not “help” Marine Le Pen.
Following Thursday’s terrorist attack on the Champs-Elysees in Paris, which killed one police officer and wounded two others, Donald Trump made a prediction. “The people of France will not take much more of this,” he wrote on Twitter. “Will have a big effect on presidential election!” It seemed like the American president was implicitly backing one of the leading candidates in that election, the National Front’s Marine Le Pen, who has campaigned on rooting out Islamic extremism from the Republic and practices a Trump-like brand of populist-nativist politics.
Then Trump dispelled any doubt about his message. The attack, for which ISIS has claimed responsibility, will “probably help” Le Pen’s chances, the American president told the Associated Press, “because she is the strongest on borders and she is the strongest on what’s been going on in France.” (This despite the fact that the Champs-Elysees attacker was a French citizen ensconced well within French borders.) Trump didn’t explicitly endorse Le Pen. But he effectively endorsed her sales pitch to voters. “I believe whoever is the toughest on radical Islamic terrorism and whoever is the toughest at the borders will do well at the election,” Trump said.
A boring juice product sold itself as the next great technology phenomenon. There was only one way things could go.
Juicero is a startup that sells a $400 machine that squeezes packets of diced fruit and vegetables to produce fresh juice. A person might assume that a product so simple and boring, yet weirdly expensive, couldn’t possibly attract the entire internet’s derision. A person would be wrong.
It’s best to begin this story in March of last year, when the New York Timespublished a profile of the company’s founder Doug Evans, a former Army paratrooper who had already started and sold the successful Organic Avenue line of cold-pressed juices and healthy snacks. Evans was not a Silicon Valley veteran, but he spoke like one, rhapsodizing his product with quasi-religious grandiosity. “Not all juice is equal,” he told The Times. “How do you measure life force? How do you measure chi?”
Inside Walmart’s curious, possibly ingenious effort to get customers to build up their savings accounts
Late last summer, Dawn Paquin started keeping her money on a prepaid debit card from Walmart instead of in a traditional checking account. The wages from her factory job—she works from 9 p.m. to 5 a.m., inspecting blades on industrial bread-slicing machines—now go directly onto the Visa-branded card, which she can use like a regular debit card, though unlike most debit cards, it is not linked to a checking or savings account. She made the switch after a $4 check she wrote to buy coffee for herself and a friend tipped her checking account below the required minimum and triggered $100 in overdraft fees.
This was before she got the factory gig, and she wasn’t working full-time. Paquin lives in Salem, Illinois, where, she told me recently, if you don’t have a college degree, your job choices are “fast food or factory.” Money was extremely tight. “I kind of had a bit of resentment about banks after that,” she said dryly.
Tracking the controversies, allegations, and investigations into the president and his administration
Donald Trump entered the White House as one of the most scandal-tarred presidents in American history—what his imbroglios may have lacked in depth, they made up in variety, encompassing legal, ethical, and sexual controversies. (In a twist, one of Trump’s few competitors for the crown was his rival, Hillary Clinton.) They ranged from race discrimination to mafia connections, from petty hypocrisies to multimillion-dollar alleged frauds.
Now that Trump is president, some of those controversies have continued to shadow him. But the presidency has also occasioned a whole new set of disputes. Looming largest is the question of whether his campaign colluded with Russian agents to interfere in the election, a question being investigated by the FBI as well as panels in both houses of Congress. They also include ethical and legal questions surrounding members of his cabinet, his allegation that Barack Obama spied on him before the election, and various conflicts of interest.
Neither Emmanuel Macron nor Marine Le Pen is from one of the two political movements that have dominated the country for decades.
Emmanuel Macron and Marine Le Pen have little in common on the face of it. Macron, who exit polls project as the winner of Sunday’s first round presidential election in France, is a political neophyte. His centrist, globalist, pro-EU policies, are antithetical to the populist movements sweeping the West. Le Pen, who finished second in Sunday’s election, is an embodiment of that movement: Her far-right National Front (FN) has festered on the fringes of French politics for decades. She is against immigration and the EU, and a strong advocate for nationalism and borders.
But what unites Macron and Le Pen, who will face off in a second round on May 7, is that they each represent a backlash against the political movements that have dominated modern France. For the first time in a recent presidential runoff in the country, neither of the two candidates will be from the traditional center-left and center-right movements.
Last month, my wife and I found ourselves in a disagreement about whether or not our apartment was clean enough for guests—the type of medium-sized disagreement that likely plagues all close relationships. In the midst of it, there was a lull and, feeling exhausted all of a sudden, I got up and left the living room. In the bedroom, I immediately fell face down into the sheets. The next thing I knew it was 20 minutes later and my wife was shaking me awake. I hadn’t meant to fall asleep; I just felt so fatigued in that moment that there was nothing else I could do.
This wasn’t new for me. A few weeks earlier, I had come into conflict with an acquaintance over some money. We were exchanging tense emails while I was at my office, and I began to feel the slow oozing onset of sleep, the same tiredness that came on when, as a child, I rode in the backseat of the car on the way home from some undesired trip. A sleepiness that overtakes the body slowly but surely and feels entirely outside of your control.