On the GAFA tax and the hostile reaction of the Americans

The reaction of other European countries in this new context of US reaction will be interesting. The new global and multi-polar equilibrium, that is emerging, forces Europeans to be more autonomous. It has already been observed that on the issue of 5G some European countries were not indifferent to Chinese offers, thus taking a distance from the Americans.
Europe must find and define its place in this new multi-polar balance. The GAFA tax and the American reaction can make it possible to define a dynamic specific to Europe with a distance from China and the US. The stakes are high for Europe to exist on a political scale.

Inequality

Issues on inequality are more and more discussed. These questions were not mentioned when I was a student in the 80’s. They à re now part of the economic discussion at the academic level and elsewhere. Angus Deaton and the Institute for Fiscal Studies (IFS) in the UK have launched a first report on inequality. It can be found here. Deaton gave a speech that explains all the diversity of the term inequality and its consequences.

The quote below is the last paragraph of his speech

“I think that people getting rich is a good thing, especially when it brings prosperity to others. But the other kind of getting rich, “taking” rather than “making,” rent-seeking rather than creating, enriching the few at the expense of the many, taking the free out of free markets, is making a mockery of democracy. In that world, inequality and misery are intimate companions.”

The speech from Angus Deaton launching the IFS report on inequality can be found here

Business investment profile is still worrisome

The pace of capital goods orders in Germany in March suggests a further slowdown in investment in OECD countries over the coming months.
Orders are down 5.9% year-on-year and this indicator is closely correlated with the investment profile of OECD countries.

This slowdown in orders is global.
The rebound in the Euro zone is limited since over a year the decline in orders is still -6.5%. The rest of the world does not look encouraging either.

This is why I have doubts on the investment profile published by INSEE yesterday for the manufacturing sector for France. A 11% growth is expected for 2019 after 0% in 2018. This seems excessive since the survey shows a rapid slowdown in the second half. This means that the first semester has to be very strong. This is not necessarily consistent with what we see in the pace of investment of non-financial companies in the first quarter.
The survey is probably a bit too optimistic. Capital goods orders continue to contract in April 2019. I do not imagine strong investments in France while the rest of the world is rather in an investment slowdown.

The Macro 2 pagers – Low interest rates for a long time

The Macro 2 pager explains how the interest rates profile will remain low for an extended time. 
The central banks’ stimulus after the 2008 crisis has been caught up by an economy whose characteristics have changed and which can now accommodate only low rates thus conditioning the behavior of central banks.

The Macro 2 Pager – Interest Rates

macro2pager-interestrate

Huawei vs America

Look at this map. Who then can expect a trade deal between China and the USl The real question is about techno leadership? Huawei has a step ahead of the US.

The Chinese company already has deep discussions with many countries throughout the world. From Asia to Europe, Africa and Latin America the Chinese web is already impressive. On the other side, the US has forbidden purchases of infrastructures coming from Huawei. Australia, New Zélande, Japan and Taiwan follow the same rule. But it is a minority.

Recently, the US has generate pressure on Germany to forbid the German to buy Huawei products in the renewal of their mobile network. Germany has not changed its mind and has allowed Huawei to compete.
The balance of strength at the global level may change rapidly at the expense of the US.

How to expect an agreement that would validate the dominance of one over the other? From China to the US?