As the euro debt debacle unfolded, Germany benefited from a reputation as safe haven: yields on its 10-year bonds dropped below the rate of inflation while yields spiked in other countries. So when it offered €6 billion in 10-year bonds at a record low yield of 1.98%, it expected them to fly off the shelf. They didn’t. “Disaster,” the media screamed worldwide. But….
The Supercommittee did what it was expected to do. They dug in their heels. Why? They didn’t have to make painful choices. Unlike Greece, the US has a miraculous money machine that takes care of the deficits. The emasculated credit markets watch nervously.
My German contacts want to keep the euro. They’ve gotten used to it. They like it in their wallets. It’s so convenient for cross-border travel and commerce. And it has been strong. But now that the European bailout fund has descended into irrelevance, they fret about the euro’s future. They want it saved. And they’re increasingly willing to pay a price.
But not in the US.
Just in time to make you feel better about holiday travels: airport security scanners that use X-ray technologies are acknowledged to cause cancer. No problem in the US; but now they’re banned in the EU.
The ink wasn’t dry yet on the European bailout fund when it paid $1.3 billion to bail out Proton Bank in Greece. Turns out, Proton had siphoned off $1 billion in a scheme of fraud, embezzlement, money laundering, and offshore front companies. Galling: the Bank of Greece knew of the criminal activity before the bailout. And then a bomb exploded….
The Postal Service announced a staggering loss for fiscal 2011: $5.1 billion. Plus $5.5 billion for retiree health benefits that it should have paid in 2011 but deferred to fiscal 2012. Now it’s due. But there’s no money. Default? Nope. Congress will find a way to stick it to the taxpayer. But amazingly if run right, the Postal Service could be a decent business.
Timothy Geithner, already out on a limb, said today that Europe’s response to the debt crisis is “obviously not fast enough.” But he hasn’t been listening. Europe is responding fast, or at least Germany is. In the opposite direction. The massive cornerstone of support for the euro, German exporters, just cracked: “We need a common market, not one currency.”
In his “enough’s-enough” speech in Hawaii, Obama castigated China for its currency peg, a perennial complaint. Congress too regularly hyperventilates about the yuan being “artificially undervalued.” If China just allowed the yuan to trade freely, they say, it would solve the U.S. economic quagmire. Cheap political posturing—and full of bitter ironies.
Judging from the stream of rumors and energetic denials, German bureaucrats, experts, and politicians are furiously working on dozens of projects that all deal with the debt crisis, and they go off in as many directions. But at the end, there is what they call in their inimitable German a Worst-Worst-Case-Szenario.
For months, rumors China would use its foreign exchange reserves to bail out the Eurozone with the stroke of a plastic pen goosed financial markets. But China has a list of demands. German industry refuses to cede ground. People shudder at becoming dependent on money from the communist regime. Clearly, the debt crisis isn’t deep enough yet.