What are Zee Germans Sinking?

If the cliche "all politics is local" holds true, then its inverse has increasingly become "all policy is global." Angela Merkel, Germany's Chancellor, single-handedly sent European stock markets tumbling today with the announcement of a ban on naked short-selling and credit-default swaps, instruments which essentially let investors bet on or insure against further weaknesses in the Euro Area economy.

The reason she made this decision (along with her previous dithering in committing to a Greek bailout) is because she is facing domestic political pressure -- average Germans don't want their tax dollars going to bailout the Greek government. And they let her know about it by handing her party a loss in regional elections on May 9, causing her to resort to what looks like domestic political desperation.

Most of us probably don't care about regional German elections. Most of us don't even care about our own local or regional elections. But whether or not anyone takes note of these votes, local decisions increasingly have repercussions for on the global economy.

For starters, the German decision adds to overall uncertainty in global financial markets -- the Dow is off 0.75% so far today. That's right -- local German elections just gave a hit to your retirement fund. In contrast, the current Euro calamity could be a net positive for recovery in the U.S. because it is helping to lower energy prices.

The scary thing here is that as governments have become more economically active because of the financial crisis, the political risks to the global economy have proliferated in number, and likely grown in size, and these risks will likely shape the post-crisis economic landscape -- both in America and internationally. Next up on the reading list, Ian Bremmer's End of the Free Market.