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.
Most of management theory is inane, writes our correspondent, the founder of a consulting firm. If you want to succeed in business, don’t get an M.B.A. Study philosophy instead
During the seven years that I worked as a management consultant, I spent a lot of time trying to look older than I was. I became pretty good at furrowing my brow and putting on somber expressions. Those who saw through my disguise assumed I made up for my youth with a fabulous education in management. They were wrong about that. I don’t have an M.B.A. I have a doctoral degree in philosophy—nineteenth-century German philosophy, to be precise. Before I took a job telling managers of large corporations things that they arguably should have known already, my work experience was limited to part-time gigs tutoring surly undergraduates in the ways of Hegel and Nietzsche and to a handful of summer jobs, mostly in the less appetizing ends of the fast-food industry.
Michael Anton actively courts controversy with his extreme views. But how much influence does he have in the White House?
Michael Anton warned last year that 2016 was the Flight 93 election: “Charge the cockpit or you die.”
Americans charged. Donald Trump became president of the United States. And Anton, the author of that now-notorious essay, is helping to fly the plane—running communications for the National Security Council.
Anton cuts a curious figure through the Trump White House. A thoroughly educated dandy, his writings are at the core of an effort to construct an intellectual framework around the movement that elected a president who has shown no inclination to read books and who speaks in an unpretentious New York vernacular.
"I’m a huge admirer,” White House chief strategist Steve Bannon said. “I think Michael is one of the most significant intellects in this nationalist movement.”
At the president’s behest, House Republicans will render what might be a final verdict on the Affordable Care Act in a high-stakes vote on Friday.
On Thursday, the Affordable Care Act celebrated its seventh birthday. On Friday, it just might celebrate a most unlikely reprieve.
In a take-it-or-leave-it message delivered by his senior advisers to Capitol Hill, President Trump late Thursday told bickering House Republicans they had one final opportunity to repeal and replace the health-care law they have decried since its enactment. At the president’s behest, Speaker Paul Ryan on Friday will call a vote on the American Health Care Act and dare recalcitrant conservatives to defeat it. If the bill fails, Trump plans to keep Obamacare in place and move on with other parts of his agenda—a move that would enrage conservative activists while conceding an enormous defeat for the new administration.
Comprehensive insurance, with benefits like maternity or mental-health coverage, could become unaffordable—if not unavailable—under the GOP’s replacement plan.
Get ready for the “mommy tax.”
One of the most powerful arguments against House Republicans’ embattled legislation to repeal the Affordable Care Act has been that it imposes an “age tax” by raising health-insurance premiums and out-of-pocket expenses for older, working adults.
More broadly, many health-insurance experts say, the latest round of revisions—which are still under negotiation—would undermine Republican promises to protect consumers with preexisting health conditions and could leave comprehensive health insurance virtually unavailable at almost any price on the individual market.
Party leaders postponed a House vote Thursday after President Trump and Speaker Paul Ryan failed to win enough support.
Updated on March 23 at 4:28 p.m. ET
Lacking the majority needed to pass their bill to replace the Affordable Care Act, House Republican leaders have postponed a planned Thursday vote, imperiling President Trump’s first major legislative priority.
The move was an indication that a series of meetings Trump and Speaker Paul Ryan had with reluctant members in the party’s conservative and centrist wings had failed to achieve a consensus. Members of the House Freedom Caucus left a meeting with the president early in the afternoon saying there was “no deal” as they pushed Ryan to move the bill further to the right. And for Trump and Ryan, the delay dashed their hope of voting to dismantle the law on the seventh anniversary of its signing by former President Barack Obama.
Donald Trump flaunted his elastic conception of truth in an interview with Time—but he may yet learn that facts are stubborn things.
How can anyone convince the most powerful man in the world of something he does not wish to believe?
It’s not an idle question. In a remarkable interview with Time’s Michael Scherer, President Trump flaunted his elastic relationship with truth. Instead of weighing evidence, he explained, he prefers to trust his gut. “I’m a very instinctual person,” he said, “but my instinct turns out to be right.”
Trump unrepentantly rehearsed his litany of false or unsubstantiated claims with Scherer. Was Ted Cruz’s father linked to Lee Harvey Oswald? “Why do you say that I have to apologize? I’m just quoting the newspaper.” (The newspaper in question is the National Enquirer.) Had the president tapped his phones? “A lot of information has just been learned, and a lot of information may be learned over the next coming period of time. We will see what happens.” Were there 3 million fraudulent votes cast in 2016? “Well I think I will be proved right about that too.”
The arrest of an Israeli American for making bomb threats points to the flaws in the narrative that many Jews have constructed about President Donald Trump and his supporters.
At a press conference in mid-February, Donald Trump said something that was, even for him, astonishing. He predicted that when authorities discovered the perpetrators of the anti-Semitic attacks that had broken out since his election, “It won’t be my people,” who had committed them. “It will be the people on the other side.” He repeated the thought later that month, reportedly telling state attorneys general that the bomb threats against Jewish Community Centers across the country may be “the reverse” of what they appear and may have been committed “to make others look bad.”
Democrats and officials of Jewish organizations officials were appalled. Jonathan Greenblatt, chief executive of the Anti-Defamation League, declared: “We are astonished by what the President reportedly said.” Steven Goldstein, executive director of the Anne Frank Center, which combats bigotry, asked, “Mr. President, have you no decency? To cast doubt on the authenticity of Anti-Semitic hate crimes in America constitutes Anti-Semitism in itself.” When the Trump adviser Anthony Scaramucci repeated Trump’s claims, Democratic Senate Minority Leader Charles Schumer called them “absurd and obscene.”
Two Princeton economists elaborate on their work exploring rising mortality rates among certain demographics.
Two years ago, the Princeton economists Anne Case and Angus Deaton published an alarming revelation: Middle-aged white Americans without a college degree were dying in greater numbers, even as people in other developed countries were living longer. The husband-and-wife team argued, in a study in the Proceedings of the National Academy of Sciences, that these white Americans are facing“deaths of despair”—suicide, overdoses from alcohol and drug, and alcohol-related liver disease.
The paper caused a stir in academic circles and in the media, and has remained in the public discourse following Donald Trump’s win partly on the strength of his support from these same middle-aged white Americans (the alive ones, to be clear). The paper, however, couldn’t answer the question everyone had: Why was this demographic in particular struggling? It couldn’t be purely the economic pain they faced in the wake of globalization; after all, European countries are also affected by globalization, and their residents are getting healthier and living longer. And non-whites in the U.S. are living longer than they used to as well, and they are subject to the same economic forces as middle-age whites and are struggling, at least in economic terms, even more.
The Wellesley professors find that status quo too permissive.
So they urged new norms that would eschew invitations to speakers like Kipnis. Their premise: “There is no doubt that the speakers in question impose on the liberty of students, staff, and faculty.” Knowing many will be skeptical of that premise, I present their argument at length, in their words, in the order that they appear.
After years of reported airstrikes in Syria, the Israeli ambassador in Moscow was suddenly summoned to explain his country’s recent attack.
In the fall of 2015, Russia and Israel held their first talks on “deconfliction,”a disconcerting, vague military arrangement, the aim of which was “preventing misunderstandings” in the Syrian civil war. Russia had just formally entered the conflict, and Israel had already been informally participating through occasional strikes on Hezbollah targets in Syria and some cross-border exchanges of fire. The purpose of deconfliction, it seemed, amounted to a diplomatic version of Ma$e rules: Stay out of my way.
But late last week, something changed. As Israeli jets returned from Syria after bombing a weapons convoy reportedly bound for their foe Hezbollah—allied with Syrian dictator Bashar al-Assad and Iran—Syrian forces fired missiles at them, sparking the most serious incident between the two countries in the six-year war.In a first, the Syrian anti-aircraft missiles triggered Israel’s missile defense system, which intercepted one of the rockets, causing debris to fall over neighboring Jordan. Last Friday, following the incident, an Israeli army official confirmed the Israeli strike on the convoy publicly for the first time.