Wednesday, the German 10-year bund yield tacked on 30 basis points, or .3 percentage point, largest move ever. From John Rubino at rubino.substack.com:
Euro death spiral?
Germans are known for their aversion to monetary instability, with good reason. They were victims of an epic hyperinflation in the 1920s, and don’t want to go back there. See: Rhyming History: Weimar Germany’s Hyperinflation.
Now fast forward to the 2010s, when Germany was widely seen as both the best-run major country and the financial bedrock of the European Union and euro common currency. From The Euro is Doomed if Germany Fails:
Since the creation of Europe’s common currency in 1999, Germany has been the key to the whole project. The European Central Bank stood ready to buy up all the (for instance) Italian debt that the markets couldn’t or wouldn’t absorb, and Germany stood ready to back the ECB with its industrial might and financial wealth. So in effect, Italian (and Greek, Spanish, and French) bonds were viewed by the markets as German bonds, super-safe and therefore worth owning even with low yields.
Now fast forward once more to…this week. The US is threatening to leave NATO and abandon the proxy war in Ukraine. And Europe, after decades of sheltering under the umbrella of US military subsidies …
