Daily Comment (September 14, 2018)

by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT]

Big tech under fire: Tech companies are coming under increased scrutiny from both left- and right-wing populists.  Yesterday, Breitbart released a video of Google executives showing disappointment after President Trump’s victory over Hillary Clinton in the 2016 election.  Prior to this incident, President Trump and other conservatives have accused the tech companies of censoring conservative viewpoints.  In response to the backlash, Attorney General Jeff Sessions has expressed interest in investigating big tech social media firms, while the Federal Trade Commission opened a hearing on Thursday to investigate possible antitrust violations.  Meanwhile, Senator Elizabeth Warren has suggested that Amazon (AMZN, $1,989.87) has become too big and should be broken up.  As we have discussed in the past, the big tech firms have taken advantage of litigation arbitration caused by deregulation and technological advancement to the detriment of labor wages, and this will become a growing issue as populism grows in popularity.

Koreas establishing ties: As denuclearization talks between North Korea and the United States appear to be in a lull, South Korea has taken steps to build closer ties with its northern neighbor.  Today, North Korea opened a liaison office along its border with South Korea.  The office will allow the two sides to discuss issues directly on a day-to-day basis.  Although Kim Jong-un has stated that he would like to secure a denuclearization deal with the U.S. before the end of President Trump’s first term in office, it is unclear what is stalling the process.  There is growing speculation that countries such as Russia and China may be contributing by helping North Korea flout sanctions.  Although it is unclear whether opening the liaison office will hamper the denuclearization negotiations, the U.S. appears to be a bit uneasy about the pace at which the two countries are recreating ties.  Following the announcement, the U.S. State Department stated that Inter-Korean relations should follow the same pace as the denuclearization talks.  We will continue to monitor this situation.

New York primaries: Last night, New York Governor Andrew Cuomo was able to beat populist-backed Cynthia Nixon to win the Democratic Party nomination.  Although Cuomo had a comfortable lead in the polls throughout the entire campaign, it did appear that Nixon had much of the momentum going into the primary.  Following the surprise victory of Alexandria Ocasio-Cortez over Joseph Crowley in June, there was growing speculation that the Bernie Sanders wing of the party could pull off a Tea Party-style route in the primaries.  Governor Cuomo’s victory will likely calm fears of a possible populist takeover of the Democratic Party; however, the battle between the establishment and populists is far from over.

Hurricane Florence: Hurricane Florence has made landfall along the North Carolina coast.  Upon hitting the coast the hurricane is expected to weaken into a tropical storm before making its way to South Carolina and Georgia.  The storm is expected to cause damage due to large amounts of flooding.  As a result, we expect economic numbers for this month to come in relatively weak as the states affected by the storm recover.

Merkel under pressure: German Chancellor Angela Merkel’s grand coalition has come under pressure due to comments made by Germany’s intelligence chief, Hans-Georg Maassen.  On Wednesday, Maassen claimed that video footage of foreign people being hunted down by far-right protestors was fake—a direct contradiction to Chancellor Merkel’s statements.  Members of Merkel’s own coalition as well as members of her opposition have called for Maassen’s resignation, with the most vocal group being the Social Democrats.  Nevertheless, it does appear that Maassen still has the support of Christian Social Union Leader Horst Seehofer, who has stated he doesn’t believe Maassen has done anything wrong.  The coalition that was reached in March between the CDU/CSU and Social Democrats appears to be on thin ice.  A meeting regarding possible disciplinary actions is due to take place on Tuesday.

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