A new development in the euro crisis. The European Central Bank is lending money to European banks at an interest rate of 1%–a half trillion was lent out today. In theory, the banks are turning around and buying sovereign debt (the banks are actually free to do whatever they wish with the money). The increased demand for sovereign debt reduces the interest rates of the governments, in the Spanish and Italian cases dramatically (from about 5% to around 2%). So the banks make a hefty profit (borrowing at 1% and getting 2% in return) and the ECB gets around the prohibition against lending directly to sovereign governments. A very nice strategy as long as none of the governments default, in which case both the banks and the ECB take it on the chin. The other concern is whether this scheme will reduce the incentives toward austerity programs, a development that would discourage the Germans.
Climate change is unquestionably one of the most important issues facing the world in the long run. Its effect over the short-run is less certain, but there are a number of new studies that link violent conflict with patterns associated with climate change. Obviously more work is needed in this area, but we should treat climate change as a national security issue as well as an environmental issue.
Foreign Policy has some interesting videos from North Korea on the death of Kim Jong-il. Some interesting windows into the closed society.
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