The Man Who Rescued the German Economy

"Reform yourselves, and ye will grow out of your debt."

The last Social Democrat chancellor talks about how he cut   taxes and reformed labor markets—and how it cost him his job.

 By RAYMOND ZHONG

'Reform yourselves, and ye will grow out of your debt." So goes Germany's unwritten mantra for the European crisis. Chancellor Angela Merkel is urging Greece, Spain, Italy and the rest to shape up their economies and pay down their obligations—and withholding German money until they do.

The Berlin road to economic righteousness is no mere sermonizing. Germany itself has gone down it and grown stronger. Gerhard Schröder, a Social Democrat, was German chancellor from 1998 to 2005, and during his second term his government lowered taxes, revamped unemployment benefits and streamlined labor laws. Mr. Schröder's shakedown of the welfare state—dubbed Agenda 2010 when it was launched in 2003—has been credited with insulating Germany against the debt mess that would later befall Southern Europe.

The Euro Crash Refuses To Go On Vacation

Disaster under the mantel of solidarity

By Wolf Richter   

Finnish Finance Minister Jutta Urpilainen set the scene for the long European summer break when she declared that Finland was a dedicated member of the Eurozone, eager to solve the crisis, but “not at any price”; it wouldn’t agree to take on “collective responsibility for debts and risks of other countries” via a banking union. And if push came to shove: 

“We are prepared for all scenarios, including abandoning the Euro.”

A spokesperson had to do some furious backpedalling: Finland wasn’t planning to abandon the euro; such assertions were “simply wrong,” her words had been misinterpreted. Nevertheless, this was the first time ever that a government official of a triple-A rated Eurozone country publically admitted that they were making contingency plans for ditching the euro—and worse, that there was a desire to do so under certain conditions.

The road to hell, I mean the road to the euro, was paved with good intentions—and signposted with lots of warnings that at the time were ignored, downplayed, or ridiculed. But one by one, they turned out to be correct. The warnings continue, along with efforts to sweep them under the rug which is more difficult now as the dimensions of the debacle have become apparent for all to see.

Structural Pliancy

Back to the basics

Don't be fooled—it's flexible at the top

By Gonzalo Lira

A lot of people—and I am one of them—claim that personal and business freedoms are being eroded as never before. They show as evidence the roll-back of civil liberties, the over-regulation of business, the insistence on “compliance” by the various security agencies of every little rule, no matter how trivial—in short, the over-regulation of American life. 

They are right: The U.S. government is guilty of over-regulating individuals and businesses—egregiously so. 

On the other hand, a lot of other people—and I am one of them too—claim that certain persons and corporations act lawlessly as never before. They show as evidence the abuses of power of those in leadership—be it business, government, the military, or the intelligence/security aparatus—and they insist that something has to be done about it, some regulations have to be imposed. 

Progressives Vs Humans 1-0

What price clean air?

By George F. Will

The federal government is a bull that has found yet another china shop, this time in Arizona. It seems determined to inflict, for angelic motives and progressive goals, economic damage on this state. And economic and social damage on Native Americans, who over the years have experienced quite enough of that at Washington’s hands.

The gain from this pain? The most frequently cited study says “research to date . . . is inconclusive as to whether” there would be “any perceptible improvement in visibility at the Grand Canyon and other areas of concern.” The Environmental Protection Agency says that the Navajo Generating Station (NGS) is “near” 11 national parks, several of which are 175 miles distant.

The NGS on Navajo land in northern Arizona burns coal from the Kayenta Mine, which is co-owned by the Navajo and Hopi nations. The EPA is pondering whether all three units of the NGS should be required to install the “best available” emission-control technologies, perhaps costing more than $1.1 billion. More than 80 percent of the power plant’s employees are Navajo, many of whom speak Navajo to help preserve the nation’s culture. In 2007, the percentage of the Navajo Nation’s population living in poverty was 36.8.

But the Navajos, the plant and the mine that powers it may be sacrificed to this dubious environmental crusade. The new technology would reduce nitrate aerosols. They, however, are responsible for just 4 percent of what is called “light extinction” over the Grand Canyon.

Cold Turkey

Krugman Redistribution or Ponzi Scheme

by Chidem Kurdas

A nice thing about Paul Krugman, he does not mince his words. Thus his new book, End This Depression Now!, repeats as boldly as possible the central point he’s repeatedly made in hisNew York Times columns and blogs for years. Namely, governments have to spend a lot more. They have to run gigantic deficits, much more than they’re doing now. His penchant for going straight for the jugular means that the full implications of the scheme he advocates are crystal clear.

What he’s pushing is in fact an arbitrary redistribution of income and wealth. The plan is not just to suck in people’s savings but to cause the debt to disappear, as many have suspected all along. This is a scheme that would make any con man green with envy. It is as if Bernard Madoff were able to go puff! and make his customers’ claims evaporate into air, with no adverse consequence for him.

Krugman is witty, attacking “austerian” arguments for government austerity. Mario Rizzo and others have presented the “Austrian” or Hayekian reply to  the Keynesian deficit spending case made by Krugman and Brad DeLong, for instance.

Pon Zi

Meet China's new leader

By Raul Ilargi Meijer

Well, attention for the reality behind China's growth picture is finally heating up, and I would say that's definitely a good thing. It will allow everyone to take a second look and wonder what is real and what is not. It will also allow countries like Australia and New Zealand to rethink their all-out economic dependency on China. Not to mention Mongolia; Michelle Yun had this for Bloomberg:

Mongolia Mining Bets China Will Double Coal Imports

Mongolia Mining Corp. is betting there’s enough demand from China to support the construction of an $800 million railway that will double export capacity to the nation that counts Mongolia as its biggest coal supplier.

Expanding transportation links between the adjacent countries "will improve the position of Mongolia as the leading coking coal supplier to China," Battsengel Gotov, chief executive officer of MMC, as the company is known, told reporters in the Mongolian capital of Ulan Bator.

The Dark Side of Envy

Game Theory and Oskar Morgenstern

By DR. RICHARD M. EBELING 

Economist Oskar Morgenstern is best known as the co-developer, with mathematician John von Neumann, of game theory. Game theory emerged out of curiosities about the logic and strategies of games such as chess, where each player must take into consideration the plans and possible moves of an opponent if he is to have any success in winning the game. It culminated in the 1944 publication of Morgenstern and von Neumann’s book, The Theory of Games and Economic Behavior.

It has been applied to the planning of military strategy, as well as for attempting to design or anticipate competitive moves by rivals in the marketplace. Its most famous construction is what is called “the prisoner’s dilemma,” in which two suspected criminals are offered, separately, a lower sentence if one of them confesses and “rats out” the other first. Neither could be convicted if both of them kept their mouth shut, but since neither one can be sure that the other won’t take the deal, they both end up confessing.

It has also been used to explain the logic of cooperative behavior in the marketplace of exchange. In his 1984 book, The Evolution of Cooperation, for example, Robert Axelrod, explained that when people participate in or anticipate multiple trading opportunities with others, there emerge incentives to neither cheat nor deceive. Game theory experiments showed that most people implicitly operate in terms of a psychology of “tit-for tat.” That is, each trader will be honest and reliable in his dealings as long as his trading partner acts the same way. If “Sam” cheats or is in any way dishonest, then “Bob” will “retaliate” in kind. But if “Sam” learns his lesson and starts acting honestly again, then “Bob” will reciprocate, and mutually beneficial and honest trade will be restored.

Discovering risk, value and return on investment

Stockton, Calif. and All the Cities to Follow

Government promises to public employees have created "zero-risk" Wonderlands protected from the market forces of risk and consequence. These islands of privilege are snapping back to join the real economy.

by Charles Hugh Smith

Every government entity that reckoned it was moated from the market economy will be snapped back to "discover" risk and consequence. Let's lay out the dynamic:

1. Every government can only spend what its economy generates in surplus. 

2. Every government transfers risk and consequence from itself, its employees and its favored vested interests to the citizenry and taxpayers. 

3. Every government collects and distributes the surplus of its private sector to its employees, favored constituencies and vested interests. 

4. Since the government (State) promises guaranteed salaries, benefits and entitlements to its employees and favored constituencies, these individuals believe they are living in a risk-free Wonderland that is completely protected from the market economy. 

5. Risk cannot be repealed or eliminated, it can only be masked or transferred to others. 

6. The Federal government and the Federal Reserve have pursued a policy of inflating serial speculative credit-based bubbles. 

7. These bubbles inflated assets, profits and taxes, creating the illusion that blow-off speculative tops were "the new normal." 

A Shattered Society

Liberalism, Right and Left, has made lonely serfs of us all 

By PHILLIP BLOND

We live in a society of decreasing circles. More and more of us know fewer and fewer of us. We live alone and eat by ourselves, often with a TV or computer rather than a human being for company. If we do marry, the time an average relationship lasts decreases with each passing year.

In the Anglo-Saxon world, we abandon our old and increasingly care badly for our young. Our grandparents can recall a vivid life in which aunts and uncles, nephews and nieces wove together the social fabric of a stable, mutual society. Nearly half of all children are born out of wedlock. Many grow up without a father, some without any loving parent at all. The young people emerging from this background, denied any real education in public and private virtues, are easily seduced by glamorous dreams that promise consumption they cannot afford. Untouched by ideals of love and fidelity, they operate free of commitment, discipline, and responsibility. These unreformed teenage idioms become adult habits and ruin lives by creating people unable to bond or relate.

For men, especially those at the bottom of the social scale who are increasingly losing out in education and career advancement, an emasculated life at the margins of society awaits. For successful young women, having a degree is fast becoming an indicator of a childless future. No one would choose this outcome nor wish it upon anyone else, not least because it drains the energy from domestic life and compounds the terrifying fate of getting old alone. Everywhere we look, the ties that bind are loosening, and the foundations of a secure and joyful existence are being undermined.

Euro Crisis from Long Perspective

Free trade and markets matter much more than the euro

by Chidem Kurdas

The European crisis, in progress for years and still showing no sign of resolution, is largely the result of elite hubris. To create the euro and ram it down the throats of populations that, left to their druthers, would have stayed with their old currencies—this was a massive, top-down social engineering project.

There is no end to the harm done by the mindset that Hayek called constructivist rationalism—the delusion that smart aleck  bureaucrats and politicians can redesign societies from scratch like engineers constructing a machine from a blueprint. The lure of social engineering to government elites is such that even the dramatic collapse of communism has not been enough to drive home the Hayekian lesson of humility.

American Twilight

The road to hell isn't paved at all, and the street lamps went out long ago

By MARK STEYN

This weekend, I am thousands of miles from home in a remote and isolated part of the world with erratic communications and lack of basic services. No, not Washington, D.C. Things aren't that primitive, thank God.

I'm in a rude Highland croft way up a far Scottish brae, enjoying the simple life by choice, rather than because the capital region of the global superpower is incapable of turning the lights back on within a week.

Which is by way of saying that news from the imperial metropolis has reached me in fits and starts.

The other morning it was the intriguing tidbit that Chief Justice John Roberts had written both the majority opinion in the ObamaCare decision and the dissent. He is literally his own worst enemy. He's apparently the Mike Myers of the Supreme Court, able to play both Austin Powers and Dr. Evil, although it has to be said that he seems rather more at home as the bumbling swinger.

Stones into Bread

The Keynesian Miracle

By Ludwig von Mises

The stock-in-trade of all Socialist authors is the idea that there is potential plenty and that the substitution of socialism for capitalism would make it possible to give to everybody “according to his needs.” Other authors want to bring about this paradise by a reform of the monetary and credit system. As they see it, all that is lacking is more money and credit. They consider that the rate of interest is a phenomenon artificially created by the man-made scarcity of the “means of payment.” In hundreds, even thousands, of books and pamphlets they passionately blame the “orthodox” economists for their reluctance to admit that inflationist and expansionist doctrines are sound. All evils, they repeat again and again, are caused by the erroneous teachings of the “dismal science” of economics and the “credit monopoly” of the bankers and usurers. To unchain money from the fetters of “restrictionism,” to create free money (Freigeld, in the terminology of Silvio Gesell) and to grant cheap or even gratuitous credit, is the main plank in their political platform.

American Medical Care: It's Terminal

The patient has expired

by Jim Karger

The final nail has been driven into the coffin of America's medical care system (note it's not healthcare because the system has nothing to do with health).

With the Supreme Court decision last week on ObamaCare, the US has taken its failed venture into socialized medicine, i.e., Medicare, and foisted it upon the general public, most of whom really believe they are going to get something for nothing.

It is as if the U.S. government doesn't understand that doubling down on a losing bet doesn't make it a winner. And let's not forget that Medicare, which came to America as part of Lyndon Johnson's "Great Society," has been a tragic, unmitigated failure.

US medical care is the most expensive care in the world. Some say that is because it is the best. Nonsense.

How does one pay for something he will never be able to afford?

The Socialization Of America Is Economically Impossible

by Brandon Smith

I understand the dream of the common socialist.  I was, after all, once a Democrat.  I understand the disparity created in our society by corporatism (not capitalism, though some foolish socialists see them as exactly the same).  I understand the drive and the desire to help other human beings, especially those in dire need, and the tendency to see government as the ultimate solution to all our problems.  That said, let’s be honest; government is in the end just a tool used by one group or another to implement a particular methodology or set of principles.  Unfortunately, what most socialists today don’t seem to understand is that no matter what strategies they devise, they will NEVER have control.  And, those they wish to help will be led to suffer, because the establishment does not care about them, or you.  The establishment does not think of what it can give, it thinks about what it can take.  Socialism, in the minds of the elites, is a con-game which allows them to quarry the favor of the serfs, and nothing more.

The Cacophony Of Markets

Middle Earth is in trouble

by Mark Grant

The Rhapsody of the Markets
Recently I was on CNBC and Steve Liesman, who I know personally and is a very thoughtful fellow, made the comment that I had called the events right but I had not gotten the market right. It was a fair remark as related to the stock market. My reply was that while I thought that he was correct about the stock market that I thought I had been correct about the bond market which was leading the way and that the stock markets would catch up. Since then I have given our conversation some more thought.

The Real-World Middle Class Tax Rate: 75%

If we include all taxes, the real-world tax rate is much higher than the "official" income tax rate

By Charles Hugh Smith

For those Americans earning between $34,500 and $106,000, the real-world middle class tax burden in high-tax locales is 15% + 25% + 5% + 15% + 15% = 75%. Yes, 75%. Before you start listing the innumerable caveats and quibbles raised by any discussion of taxes, please hear me out first. Let's start by defining "taxes" as any fee that is mandated by law or legal necessity. In other words, taxes are what is not optional.

If we include all taxes, the real-world tax rate is much higher than the "official" income tax rate. These "other taxes" vary from nation to nation. France, for example, has a "television tax." It is mandatory, and since virtually every household has a TV this operates as a universal tax. The argument that this is "optional" is specious.

The Morality of Choice

Choice itself is really an extension of the moral basis for capitalism

by James E. Miller

Picture yourself walking into a department store to purchase some laundry detergent.  As you approach the aisle stocked full of brightly-labeled containers, you come face to face with a crucial decision.  Which detergent do you choose?  Do you go with the tried-and-trusted brand?  Do you save money with the generic variety?  What’s on sale?  What about the high-efficiency kind?

The choice between something as inexpensive as laundry detergent seems trivial in a modern economy marked by mass production and the division of labor.  But the large selection of goods that consumers are faced with today is an incredible betterment relative to the past thousand years of human existence.  Indeed, the lives of even the most impoverished in Western economies far surpasses that of kings centuries ago.

Germany’s economy is only king in the blind valley of the Eurozone

Like most other ‘mature social democracies’ Germany is slowly but surely going broke

by DETLEV SCHLICHTER

In the present debate on the Euro crisis, Germany is frequently portrayed as a model of economic strength, a beacon of fiscal prudence and a proponent of structural reform. Her resources seem endless and her government debt an indisputable ‘safe-haven’. If only Germany shared her strength and resources more generously, the Euro debt crisis could be solved. But this is an optical illusion. Sooner or later, markets will wake up to the reality of the country’s fundamental weaknesses and grave challenges.

Over the 13 full calendar years of the life of the Euro, Germany accumulated an additional €900 billion in public debt. The overall debt load rose from €1,200 billion in early 1999 to €2,100 billion at the end of 2011, or from 61 per cent to 81 per cent of GDP. Remember that it was Germany that pushed through the Maastricht criteria, among them a debt-to-GDP ratio of no more than 60 per cent. Germany met this benchmark – barely – in only 3 of 13 years and presently has little chance to get there ever again. Only for 4 of those 13 years did Germany’s deficit stay within the Maastricht Treaty’s recommended limit of 1 percent, and on 7 occasions it exceeded the ‘maximum’ of 3 percent.

Is Marxism Coming Back?

More and more people may come to blame markets and freedom for the problems of corporatism and statism

by John Aziz

It is true that as the financial and economic crises roll on, as more and more disasters accumulate, as more people are thrown into unemployment and suffering that more and more of us will question the fundamentals of our economic system. It is inevitable that many will be drawn to some of the criticisms of capitalism, including Marxism.

The Guardian today published a salutary overview of this revival:

In his introduction to a new edition of The Communist Manifesto, Professor Eric Hobsbawm suggests that Marx was right to argue that the “contradictions of a market system based on no other nexus between man and man than naked self-interest, than callous ‘cash payment’, a system of exploitation and of ‘endless accumulation’ can never be overcome: that at some point in a series of transformations and restructurings the development of this essentially destabilising system will lead to a state of affairs that can no longer be described as capitalism”.

John Roberts Makes His Career Move

For John Roberts, it is Palm Sunday

by Patrick J. Buchanan

Out of relief and gratitude for his having saved Obamacare, he is being compared to John Marshall and Oliver Wendell Holmes.

Liberal commentators are burbling that his act of statesmanship has shown us the way to the sunny uplands of a new consensus. If only Republicans will follow Roberts’ bold and brave example, and agree to new revenues, the dark days of partisan acrimony and tea party intransigence could be behind us.

Yet imagine if Justice Stephen Breyer had crossed over from the liberal bench to join Antonin Scalia, Sam Alito, Clarence Thomas and Anthony Kennedy in striking down Obamacare. Those hailing John Roberts for his independence would be giving Breyer a public caning for desertion of principle.

Even The Beatles understood this

A Vast New Federal Power

               If you drive a car, I’ll tax the street,

              If you try to sit, I’ll tax your seat.

             If you get too cold, I’ll tax the heat,

            If you take a walk, I’ll tax your feet. 

                                               —The Beatles in “The Taxman”

by Andrew P. Napolitano
Of the 17 lawyers who have served as chief justice of the United States, John Marshall—the fourth chief justice—has come to be known as the “Great Chief Justice.” The folks who have given him that title are the progressives who have largely written the history we are taught in government schools. They revere him because he is the intellectual progenitor of federal power.

Marshall’s opinions over a 34-year period during the nation’s infancy—expanding federal power at the expense of personal freedom and the sovereignty of the states—set a pattern for federal control of our lives and actually invited Congress to regulate areas of human behavior nowhere mentioned in the Constitution. He was Thomas Jefferson’s cousin, but they rarely spoke. No chief justice in history has so pronouncedly and creatively offered the feds power on a platter as he.

Now he has a rival.

Public Choice Theory

Not the Whole Story

by Tibor Machan

ln October 1986 Professor James M. Buchanan was awarded the Nobel Prize for economics. He received the award for his pioneering work in public choice theory, a branch of economic analysis that studies the behavior of politicians and bureaucrats, especially in a representative democracy such as the United States.

Professor Buchanan, who now teaches at George Mason University in Fairfax, Virginia, developed his theory in cooperation with several other economists, most notably Professor Gordon Tullock. (During the development of public choice theory both of these economists taught at the Virginia Polytechnic Institute and State University, Blacksburg, Virginia.) Their book, The Calculus of Consent (University of Michigan Press, 1962), pioneered this new application of economics. Since its publication, other books and journals have followed, including the scholarly journal of the Center for Study of Public Choice, Public Choice, which published extensive and complex studies on a great variety of topics of concern to public choice theorists. Professors Buchanan and Tullock also have inspired numerous other economists, philosophers, political scientists and legal theorists to explore various implications of the public choice approach.

Living the dream

Carlo Marx Meets Mario Tse Tung

by Nicholas Farrell

Italian communists always wanted a revolution in Italy, but I do not think that this is quite what they had in mind: A Chinese man has just bought the bar at their party headquarters in the city of Forlì in the “red” Romagna region where I live.

Attached to the party’s headquarters, the bar is called the Carlo Marx, and the name is written in huge red letters on an enormous white billboard above the terrace outside.

Will the new owners, hailing as they do from the world’s most powerful remaining communist country, change the name to the Mario Tse Tung?

Will they construct suicide nets like those erected around Foxconn’s factory in China to deter the bar’s depressed clients from throwing themselves off the roof? Or maybe banners that warn, “Work hard on the job today or work hard to find a job tomorrow”?

Until the Berlin Wall fell in 1989, Italy’s Communist Party—the Partito comunista italiana (Pci)—became proportionally the largest in the capitalist world after World War II and Italy’s second-most-powerful party, polling about one-third of the vote in its 1970s heyday.

“You try to explain that communism and fascism have much more in common with each other than either does with freedom and democracy, but you waste your time. Their faith blinds them to the facts.”

Scientists and science are not so immune to ideology, after all

Environmentalism was an ugly experiment

Mark Lynas has converted from being an eco-alarmist to a pro-growth rationalist. But he still doesn’t get the problem with green thinking.

by Ben Pile 

Since becoming an advocate of genetic modification (GM) and nuclear power, Mark Lynas has drawn increasingly hostile criticism from his erstwhile comrades in the green movement. In turn, he has sharpened
his criticism of environmentalists for their hostility to technological and economic development. In his new book, The God Species: How the Planet Can Survive the Age of Humans, he attempts to reformulate environmentalism to overcome the excesses that have so far prevented it from saving the planet. This book will no doubt provoke debate, but what is this transformation really about, and is it really based on new ideas or merely the revision of old ones?

Last November, Channel 4 aired What the Green Movement Got Wrong, which featured prominent environmentalists, including Lynas, reflecting on the failures of environmentalism. The film claimed that environmentalists’ opposition to technologies that offered environmentally benign methods of energy and crop production had impeded their aim of creating an ecologically sustainable society. Since then, the debate between pro- and anti-nuclear environmentalists has deepened, exposing the many divisions that exist within the green camp.

What the hell is wrong with bankers?

They’re all Barclays bankers now…

Depicting Barclays’ Libor-fiddling staff as uniquely corrupt overlooks what they share in common with the rest of the reckless ruling class

by Brendan O’Neill 

What the hell is wrong with bankers? That’s the question on the lips of every commentator and politician in the wake of the Libor rate-fixing controversy. The hunt is now on to find the root cause of bankers’ aberrant behaviour, whether it’s in the nerve endings of their heads (they have greed ‘hardwired into their brains’, says one observer) or in their cushioned, value-lite upbringings (apparently they come from ‘the most privileged backgrounds in Britain’). Everyone agrees there must be some mental or lifestyle cause of bankers’ deviancy, which so shocks ‘decent Britain’.

The tyranny of green do-gooders

Rio+20

The latest ‘save the planet’ shindig provided yet another chance for political poseurs to dictate our future.

by Ben Pile 

Some 50,000 delegates and 100 world leaders met at the Rio+20 ‘Earth Summit’ last month to settle on ‘the future we want’. They failed.

‘Let me be frank. Our efforts have not lived up to the measure of the challenge’, said UN secretary-general, Ban Ki-moon, at the opening ceremony. What ‘we want’ turned out to be the opposite of what he thought we wanted. Ban continued: ‘For too long, we have behaved as though we could… burn and consume our way to prosperity. Today, we recognise that we can no longer do so. We recognise that the old model for economic development and social advancement is broken… Our global footprint has overstepped our planet’s boundaries.’

Calvin knew what Roberts pretends to forget

Cool with Coolidge

By James Dewars

Calvin Coolidge was assailed as “silent Cal”—though who wouldn’t wish more a relatively more silent president these days?—and ridiculed by fashionable people everywhere for saying “the business of America is business.”  I’ve got a long passage in the second volume of my Age of Reagan recalling liberal outrage when Reagan put up Coolidge’s portrait in the White House cabinet room in place of Jefferson.

Germany will walk

Germany Will Choose to Bail on the EU Rather Than Bail It Out

By Graham Summers

It all boils down to Germany.

I’ve been forecasting for months that the country will increasingly focus on domestic interests and that it will ultimately opt to leave the Euro rather than prop up the EU.

The former (focusing on domestic issues) is already underway.

Germany Plans Joint Federal-State Debt in Merkel Fiscal Deal

Chancellor Angela Merkel agreed to share borrowing costs with Germany’s states to help ease their budget squeeze, completing a deal the opposition said will help secure German ratification of the European Union’s fiscal pact.

The party has run out of booze

Germany Backtracks On Last Week's Summit

by Tyler Durden

Those curious why peripheral European bond yields have once again resumed their levitation creep higher, it is because not only did yesterday the key Merkel coalition partner, CSU, threaten to leave Germany's ruling party hanging "if further euro zone states secure bailouts, saying there were limits to how far his party was prepared to go", but today we have gotten even more furious backtracking on Mario Monti's history "success" less than a week earlier, after on one hand German opposition SPD has said it opposed Direct ESM aid to banks, but more importantly, the German Finance Ministry itself said that the entire bailout timeline is now in question, saying that it "remains unclear if Eurozone finance ministers will decide on Spain's request for banking sector aid at their next monthly meeting on July 9." The ministry also added that a decision could only come once the report on Spain by the troika - the European Commission, the ECB and the IMF - had been finalized. In other words, that much maligned Troika, which Monti had supposedly exorcised from intervening in the economies of Spain and Italy, will, after all be very much present, which also means that all the media spin about last week's "gamechanging" and unconditional bailout summit resolution, has been for nothing, in line with all the skeptical expectations.