Google Searches and Government Regulation
In 1170, Henry II of England, vexed by the then Archbishop of Canterbury, famously asked: “Who will rid of this troublesome priest?” The subsequent murder of the Archbishop had widespread consequences.
Entirely coincidently, President Donald Trump yesterday tweeted displeasure at the popularity-based results of Google’s search engine and said in remarks at the White House
: “I think what Google and what others are doing, if you look at what’s going on with Twitter, if you look at what’s going on with Facebook, they better be careful because you can’t do that to people.”
Larry Kudlow, Trump's chief economic adviser, then told reporters outside of the White House that the administration is “taking a look” at whether Google searches should be subject to government regulation.
Why does this matter to economists?
Aside from the fact that Google should give higher prominence to someone’s personal researches, rule of law is one of the most vital conditions for successful innovation and higher productivity in any economy. If there is a random process of punishing companies on the whim of an individual in some country, then the incentives to invest and to innovate in that country can fall dramatically.
A single tweet and a set of comments are not, of course, enough to change investment and innovation in the United States.
However, the direction of this discussion has economic consequences, which should be set against whatever advantages the U.S. president perceives could be achieved through regulation.
Brexit Gets a Somewhat Longer Timeframe
On the subject of random processes, quote, people familiar with the interminably tedious process of separating the European Union (EU) from the United Kingdom (U.K.) are now suggesting that the tedious process will remain interminable for longer. Hopes for a deal by October are now being pushed to November.
This is not necessarily shocking news. The European Union has a grand tradition of waiting until five minutes to midnight before even beginning to get serious in negotiation.
However, the artificially imposed timetable of the "exit" process does create a more rigid process overall.
Achieving a divorce deal in the fall is seen as vital to allow enough time for the British and European Parliaments to ratify the accord before Britain legally leaves the bloc on March 29.
The lack of progress has weighed on the pound in recent weeks, amid warnings from senior ministers that Britain risks crashing out of the EU without any agreement.
French and U.S. Q2 GDP – 2nd Estimate
On the date front we have today revised GDP numbers from France and the United States.
French GDP expanded at an unrevised 0.2 percent quarterly rate during the April-June period. This matched the sluggish first quarter outturn and so equaled the weakest outturn since the last contraction back in the second quarter of 2016. Annual growth was 1.7 percent, also in line with its previous estimate and down 0.5 percentage points from the start of the year.
For the U.S., the Bureau for Economic Analysis (BEA) is releasing at 8:30 a.m. EDT the second estimate for Gross Domestic Product during the 2nd quarter, which is expected to come in at a 4.0 percent annualized rate vs 4.1 percent in the first estimate. Consumer spending is expected to come in at a 3.9 percent rate vs the prior estimate's 4.0 percent. The GDP price index is seen holding at 3.0 percent.
U.S. Goods Trade Deficit Rises as Exports Fall
Besides all that, there is some risk from a widening U.S. deficit. The income tax cuts are encouraging spending on imports and create hereby a larger deficit. The full effects of the tariffs or consumer tax increases have not hit the data yet.
Canada and the Not-NAFTA agreement
There is ongoing noise around markets. The Canadians are still talking with the United States about whether to sign up for the Not-NAFTA agreement, having until Friday on the current political timetable.
Emerging Markets – Turkey
Turkey’s lira extended its slump to a third day as a central bank move on overnight borrowing limits failed to bolster investor sentiment.
The dollar surged as much as 2 percent against the Turkish lira (TRY), which led declines among emerging-market currencies. The central bank said on Wednesday it is altering banks’ borrowing limits for overnight transactions, which effectively tightens liquidity by ending unrestricted funding it has offered since August 13.
The Turkish lira was trading 1.6 percent lower at 6.38 per dollar as of 4:45 a.m. EDT. Together with the Argentine peso, it’s the worst-performing emerging-market currency this year. The yield on 10-year bonds climbed 19 basis points to 21.95 percent.
Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.
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