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DealBook Briefing: Could This Weekend Bring Relief to the Global Economy?

Good Friday. DealBook is taking a summer break next week. We’ll be back in your inboxes on Sept. 3. (Was this email forwarded to you? Sign up here.)

Who will save the global economy?

As top central bankers meet at their annual conference at Jackson Hole, Wyo., this week, they will look to political leaders who are convening in Biarritz, France, for the Group of 7 meeting to help keep the world’s prosperity going, Jeanna Smialek of the NYT writes. They might be waiting awhile, though.

The global economy looks gloomy, and that poses a challenge for central banks:

• The Fed recently cut interest rates, but there’s limited room for further reductions, since they didn’t rise much after the 2008 financial crisis. And it’s far from clear what its plan for the future is.

• The European Central Bank is expected to cut interest rates deeper into negative territory, and may even consider asset purchases in a bid to protect economic growth. Yet it is low on ammunition.

“Global political brinkmanship is adding to uncertainty,” Ms. Smialek writes:

• President Trump is locked in a trade war with China that is clouding the outlook for the global economy.

• Britain’s departing the E.U. without a deal looks increasingly likely under Prime Minister Boris Johnson, which could hurt both Britain’s economy and those of its trading partners.

Economists hope governments will intervene. “We are at the point where, if we want to accomplish something — especially in countries like Europe — the ball is in the fiscal policy territory,” Roberto Perli, the head of global monetary policy research at Cornerstone Macro, told the NYT.

• But don’t bet on a wave of fiscal stimulus. Mr. Trump has said he doesn’t plan to introduce new tax cuts (though his economic adviser, Larry Kudlow, said that they could be introduced before next year’s elections).

• In Europe, “growth is getting little help from national governments,” Ms. Smialek writes. Germany, for instance, is promising stimulus as its economy is on the brink of recession. But the $55 billion that it says is available represents just over 1 percent of its economy.

More: Mr. Trump’s muddled messages on the economy are making his advisers nervous. But are Democrats hurting America’s economic boom with negative thinking?

ImageCreditKin Cheung/Associated PressHow Trump is using Hong Kong as trade war leverage

President Trump has shifted his stance on the unrest in Hong Kong in recent days to show greater solidarity with the pro-democracy protesters, Alan Rappeport and Edward Wong of the NYT write.

• “For months, Trump administration officials described the Hong Kong uprising as an internal matter for China,” Mr. Rappeport and Mr. Wong write. “With tensions already high between the two nations and trade talks stalled, the administration chose to tread lightly.”

• “But as the protests have dragged on, advisers to Mr. Trump have succeeded in making the case that wading into the issue could prove necessary — and advantageous — to the United States as it tries to push Beijing to accede to its trade terms.”

A coordinated message has emerged from the Trump administration this week, with Mr. Trump, Vice President Mike Pence and Secretary of State Mike Pompeo arguing that violence in Hong Kong could get in the way of a trade deal. “If it’s another Tiananmen Square, it’s — I think it’s a very hard thing to do if there’s violence,” Mr. Trump said on Sunday.

The new stance sends some clear signals to Beijing. It suggests that violence would make China a pariah around the world, clouding the prospects of further trade talks. And the suggestion that Beijing is straying from its promise to preserve Hong Kong’s special status underlines the Trump administration’s insistence that a trade deal must have strict enforcement provisions.

The open question: How badly does Beijing want a trade deal? Is it so unwilling to have its authority undermined in Hong Kong that it crosses the Trump administration?

More: YouTube disabled 210 channels that it said were spreading disinformation about the Hong Kong protests. Canada’s Hong Kong consulate suspended travel for local employees. And accountants in the territory have joined the protests.

ImageCreditKimberly White/Getty ImagesJeffrey Epstein’s gifts to M.I.T. are under scrutiny

The university will examine its dealings with the disgraced financier, according to Marc Tracy and Tiffany Hsu of the NYT.

M.I.T. said yesterday that it had received $800,000 in donations from Mr. Epstein over the past 20 years. The money went to one of the school’s elite research centers, called the Media Lab, as well as a faculty member, the physicist Seth Lloyd.

Joichi Ito, who leads the Media Lab, disclosed the donations — but not their amounts — in a public apology last week. He also revealed that he had spent time at Mr. Epstein’s residences. (Mr. Ito is on the board of The New York Times Company.)

Mr. Lloyd offered his own apology yesterday, and acknowledged having visited Mr. Epstein while the financier was in jail a decade ago on state prostitution charges. Mr. Lloyd also said that Mr. Epstein had funded projects described in 19 papers from 2008 to 2016.

The inquiry comes after two scholars quit their roles at the Media Lab in protest over the Epstein revelations. Some students have also demanded that Mr. Ito resign.

Facebook’s currency partners may be getting cold feet

Ever since Facebook announced its plan for a cryptocurrency, called Libra, it has drawn intense criticism. Now, several of the project’s early backers are wondering how closely they want to be involved, the FT reports, citing unnamed sources.

• There were 28 initial members of the so-called Libra Association — including Visa, Mastercard, Uber and Spotify — who made a nonbinding commitment to invest $10 million in the project.

• “Two of the project’s founding backers told the FT they were concerned about the regulatory spotlight and were considering cutting ties.”

• “Another backer said they were worried about publicly supporting Libra for fear of attracting the attention of agencies who oversee their own businesses.”

The situation is said to be frustrating Facebook. One of the FT’s sources said that company officials were “tired of being the only people putting their neck out.”

ImageCreditMaurizio Brambatti/EPA, via ShutterstockEurope’s push to become a bigger economic power

The E.U. has lagged behind the U.S. and China in flexing its economic might around the world. Now, officials from the bloc appear eager to change that with new policy proposals.

E.U. officials want to impose unilateral tariffs on the U.S., according to Politico, citing draft documents. They hope to use an “enforcement regulation” if the Trump administration continues to stymie the W.T.O. by refusing to approve new judges for the organization.

They also want to create a sovereign wealth fund to invest in European companies, according to the FT, also citing draft documents. It would have about 100 billion euros, or $111 billion, and would focus on tech — a sector in which Europe lags behind the U.S. and China.

The proposals are “the most forceful acknowledgment yet that Europe is at risk of slipping further behind the U.S. and China in the race to solidify themselves as the global economic powerhouses of the future,” Politico writes.

“For now, the plans are part of a wish list drawn up by civil servants,” Politico adds.

ImageCreditPeter Nicholls/ReutersA possible boon for Barclays’ global ambitions

With Deutsche Bank retreating from the international stage, Barclays has become the last European lender to keep running a true global investment bank that hopes to rival American giants, David Crow of the FT writes.

• “The world doesn’t want to see just U.S. investment banks,” Jes Staley, Barclays’s C.E.O., told the FT.

• Now, Mr. Staley hopes that Deutsche Bank’s retreat will help Barclays claim new business and further its goal. “The demise of Deutsche was a good day for Jes Staley,” an executive at a rival told the FT.

• Still, several big shareholders have doubts about whether Barclays should have a full-scale global investment bank.

• And Mr. Staley probably has limited time to prove that his approach is working. “Jes has five or six quarters to improve returns,” an unnamed Barclays executive told the FT.

ImageCreditMichael Probst/Associated PressDeutsche Bank shows how princelings are hired

The German lender paid $16 million yesterday to settle charges from the S.E.C. over its hiring of underqualified relatives of Chinese and Russian government officials. The settlement reveals how that system worked, Mary Hui of Quartz points out.

• “The S.E.C. found that since at least 2006, Deutsche Bank hired relatives of executives at state-owned enterprises with the ‘primary goal’ of generating business for the bank,” Ms. Hui writes.

• “The markets regulator also alleged that the bank ‘created false books and records that concealed corrupt hiring practices.’”

• And a “lack of documentation on related expenses meant that the bank could not provide reasonable assurances that its employees did not bribe foreign government officials.”

A look at of some of the bank’s hires:

• The C.E.O. of Deutsche Bank’s China-based joint venture called one Chinese applicant “an average-level candidate based on the interviews but failed 2 tests which means she is not good at analysis.”

• Another Chinese candidate’s résumé “contained numerous grammatical errors and typos,” according to the S.E.C., which a bank employee fixed for him. He “showed very little interest” in finance, according to one banker, but was still hired.

• Another applicant, in Moscow, was described by a bank employee as “the classic nepo situation that we have every year.”

Revolving door

Patrick Byrne resigned as C.E.O. of after disclosing a relationship with a woman accused of being a Russian agent.

Dion Weisler is stepping down as the chief executive of HP, citing family health reasons. He’ll be replaced by Enrique Lores, the head of the company’s printing business.

Deutsche Bank is reportedly preparing to transfer up to 800 employees from its prime brokerage unit to BNP Paribas.

The speed read


• Hasbro agreed to buy Entertainment One, the owner of the Peppa Pig children’s entertainment franchise, for $4 billion. (WSJ)

• VMware said yesterday that it would buy fellow software maker Pivotal for $2.7 billion and the cybersecurity company Carbon Black for $2 billion. (NYT)

• Volkswagen denied rumors that it was interested in investing in Tesla. (CNBC)

• KKR is reportedly considering the sale of Epicor Software, which could be valued at up to $5 billion. (Reuters)

Politics and policy

• The financier Anthony Scaramucci, who served as the White House communications director for a few days, now wants to help defeat President Trump’s re-election bid. (FT)

• Health insurers like Oscar continue to expand their offerings under the Affordable Care Act. (WSJ)

• The Trump administration dropped a proposal to reduce U.S. foreign aid by $4 billion. (NYT)

• France’s goal as it hosts the Group of 7 summit meeting this weekend: Stop President Trump from disrupting proceedings. (WaPo)


• President Emanuel Macron of France said he didn’t expect negotiations to result in big changes to the existing Brexit agreement between Britain and the E.U. (FT)


• The U.S. accused China of intimidating Vietnam over oil and gas reserves in the South China Sea. (FT)


• F.C.C. and F.T.C. officials are reportedly concerned about the legality of a potential executive order from the White House that would have the agencies oversee social media censorship. (CNN)

• News Corporation is reportedly building a news aggregation app to address publishers’ concerns about how Google and Facebook are influencing the industry. Its name: Knewz.(WSJ)

• Verizon, AT&T, Comcast and nine other phone service providers have agreed to install robocall-blocking technology — but there’s no deadline. (NYT)

• Tesla reportedly began a secretive program last year to replace some solar panel parts that could cause fires. (Business Insider)

• DoorDash unveiled its new delivery pay policy. (Bloomberg)

Best of the rest

• How Wayne LaPierre, the longtime head of the N.R.A., survived a revolt. (NYT)

• Brazil’s environment minister has proposed monetizing the Amazon in order to save it. (FT)

• Negative interest rates could hit savings accounts. (Bloomberg Opinion)

• Research suggests that a strong economy is linked to traffic congestion. (WSJ)

Thanks for reading! We’ll see you on Sept. 3.

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