President Obama gets this exactly right: "When some people question why I would challenge [Mitt Romney's] Bain record," he told CBS News on July 13, "the point I've made there in the past is, if you're a head of a large private equity firm or hedge fund, your job is to make money. It's not to create jobs. It's not even to create a successful business -- it's to make sure that you're maximizing returns for your investor."
A country is not a company -- and it's definitely not a private equity firm.
And here's the thing: Mr. Romney is running for president entirely on the basis of his business success. In a better world he could be running on the basis of his successful health reform, but now he's condemning that very achievement.
In a better world he could actually be running on the basis of coherent policy ideas, but instead he's offering nothing but a mix of tax cuts for the rich and benefit cuts for the middle class so extreme that focus groups refuse to believe that this is his actual proposal.
Once the Bain Capital record becomes a liability instead of a strength, there's nothing there.
No Bain, No Gain
There is, predictably, a mini-backlash against the Obama campaign's focus on Bain. Some of it is coming from the Very Serious People, who think that we should be discussing their usual preoccupations. But some of it is coming from progressives, some of whom are apparently uncomfortable with the notion of going after Mr. Romney the man
and wish that the White House would focus solely on Mr. Romney's policy proposals.
This is remarkably naive. I agree that the awfulness of Mr. Romney's policy proposals is the main argument against his candidacy. But the Bain focus isn't a diversion from that issue, it's complementary. Given the realities of politics -- and of the news media, as I'll explain in a minute -- any critique of Mr. Romney's policies has to make use of his biography.
The first point is that voters are not policy wonks. They do not go to the Tax Policy Center Web site to check out distribution tables. And if a politician cites those distribution tables in his speeches, well, politicians say all kinds of things.
Nor, alas, can we rely on the news media to get the essentials of the policy debate across to the public -- and not just because so many people get their news in quick snatches via TV. The sad truth is that the cult of balance still rules. If a Republican candidate announced a plan that in effect sells children into indentured servitude, the news reports would be that "Democrats say" that the plan sells children into indentured servitude, with each quote to that effect matched by a quote from a Republican saying the opposite.
Remember, Republicans have already voted for a plan that would convert Medicare into a system of inadequate vouchers bearing no resemblance to the program we currently have -- yet Politifact declared Democrats' claim that this ends Medicare as we know it the "lie of the year."
So running on the real policy issues by itself isn't going to work.
By all means, run on the real issues -- but do so by creating a narrative, a pattern that registers with the Public.
And Mr. Romney's biography offers a golden opportunity to do just that. His policy proposals amount to a radical redistribution of income away from the middle class to the very rich; he's also being highly dishonest about budgets and just about everything else. How to make those true facts credible? By associating them with his business career, which involved a lot of profiting by laying off workers and/or taking away their benefits; his personal finances, which involved so much tax avoidance that he's afraid to let us see his returns before 2010; his shiftiness over when exactly he left Bain.
You could criticize the biographical focus if it were being used to convey a false impression of where Romney stands, but that's not what's going on here; instead, it's being used to get the truth about the candidate past the noise and the media barrier.
The truth is that the Obama campaign would be doing the American people a disservice if it didn't make the most of Bain.
The Curious Case Of Denmark
Last fall, when the first wave of speculative attacks on the euro system was under way, I noted the peculiar safe-haven status of Denmark, which was able to borrow at much lower rates than seemingly comparable euro countries like Finland, even though Denmark's currency is pegged to the euro.
I argued that this reflected the extra flexibility Denmark gains from having its own currency. Even though it has no intention of printing money to finance the government, the fact that it could do that in the face of a liquidity squeeze is apparently worth a lot.
The first wave of attacks subsided after the European Central Bank began lending large sums to banks with sovereign debt as collateral, an indirect way of buying the debt itself. This bought the euro around seven months, which European leaders squandered. And now we're back in crisis -- and Denmark's safe haven status is even more extreme. How extreme? Nominal interest rates are now negative! The central bank charges private banks 0.2 percent to hold deposits, and the interest rate on two-year government debt is -0.23 percent.
The first question to ask here is why everyone doesn't just hold stacks of currency instead, to achieve at least a zero yield? I guess the answer must be storage costs -- the cost of renting a vault to hold all that paper, plus I guess there's the risk of mice eating the stuff or something. Those costs can't be very large, but I guess they're enough to make a small negative yield possible.
The other question is why Danish yields are even lower than German yields. I'm not sure that anyone really thinks Germany could face a liquidity squeeze -- any situation in which that might happen is also probably a situation in which the euro is gone and Germany has its own currency again.
But maybe not; also, maybe there's some concern about Germany's having to cough up a lot of money to save the euro.
Anyway, what's happening in Denmark is an indication of just how severe the euro crisis is -- so severe that people are willing to pay to have their money stored somewhere else.
Sinners, Repent!
Earlier this month, 160 German economists, organized by Hans-Werner Sinn -- call them Sinners -- signed a manifesto opposing a European banking union.
On July 9, VoxEU, the online portal run by the Center for Economic Policy Research, put up a counter-manifesto, signed by more than 100 economists in the German-speaking world, arguing in effect that the euro cannot survive without such a banking union.
"In the course of the crisis, fiscal budgets are being tapped to refinance systemically relevant financial institutions," the manifesto reads. "At the same time, financial institutions continue to play a central role in financing national governments, lending money to them and holding their debt. An unavoidable consequence is that bank failures have led to sovereign debt crises and sovereign debt crises have led to banking crises, leading to growing mistrust of both national banking systems and government finance. The situation is aggravated by the fact that international investors, driven by fear of total collapse, have withdrawn funding to struggling countries, both for governments and for banks."
It continues: "Only by breaking the link between the refinancing of banks and the solvency of national governments will it be possible to stabilize the supply of credit in crisis countries."
They're right, of course. But the Sinners clearly have the upper hand in German public opinion.
I'm finding it ever harder to spin out plausible scenarios in which the euro survives.
IN EUROPE, A SAFE HAVEN
On July 5, Denmark's central bank cut the interest rate paid to private banks for deposits to -0.20 percent shortly after yields on some short-term Danish bonds also turned negative. According to Nils Bernstein, the central bank's governor, the rate cut was implemented in order to maintain Denmark's currency peg to the euro (the European Central Bank also lowered rates earlier that day).
It was the first time that this rate had dropped below zero in Denmark, and officials predicted that it would cost banks there about $33 million a year.
In an analysis for Reuters, John Acher and Ole Mikkelsen pointed out that the need to move this rate, which is called the certificates of deposit rate, into negative territory is a symptom of Europe's economic woes. "Banks must pay the Danish central bank for the privilege of depositing money with it, which is a reflection of the high uncertainty in financial markets as Europe's debt crisis has deepened," the reporters wrote.
Some economists have suggested that investors' willingness to pay to keep their money in Denmark has further solidified the nation's status as a safe haven amid increasing worries that the euro could collapse.
"For an international investor with euro-zone exposure, buying Danish assets can be a hedge against the extreme scenario of the euro breaking up," a Morgan Stanley economist, Ian Stannard, told Bloomberg in an article published on July 11. "In the event of a breakup, he said, "you don't really know what you're left with if you own a euro-zone, and even a German, asset."
In 2000, Danes voted against dropping the krone for the euro. Because it is not a member of the euro zone, Denmark did not have to make bailout payments to countries whose economies have been ravaged by the crisis.
