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The ECB is getting a new deputy — but don’t expect a sudden hawkish change



And while the Irish government had been publicly extolling his suitability for the past few weeks, the campaign appeared either to be waged too halfheartedly, or else began too late, to dislodge the frontrunner. Madrid officials insisted that Berlin had promised them the ECB vice presidency in a previous round of horse trading, and Dublin apparently forswore its ambition for a seat at the central policy table, and surrendered to the desire for a continent-wide consensus.

And so just hours before an informal Eurogroup vote on Monday night, Irish Finance Minister Paschal Donohoe announced he would withdraw Lane’s candidacy for the position.

While De Guindos’ views on monetary policy and easing, in particular, are perhaps less documented than those of a widely-published academic economist like Lane, he said in a recent interview that he thinks the central bank’s bond-buying policy and low interest rate environment have undoubtedly helped to drive Europe’s growth. He added that inflation will rise close to 2 percent in the near future, and insisted positive economic indicators should encourage Europe’s integration, a process he believes the ECB leadership is responsible for defending.

ECB watchers should not expect the Spaniard to diverge too strongly from the approach promoted by his likely future boss — the Italian described by a recent guest on our TV channel as “do everything possible (Mario) Draghi.” But judging by his record in bailout-rescued Spain, it is likely his political experience will color his approach to the new job, and as of now his selection seems all but guaranteed.

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Biden to rally G-7 leaders around a unified approach to counter China



(L-R) President of the European Council Charles Michel, Japan’s Prime Minister Yoshihide Suga, Germany’s Chancellor Angela Merkel, France’s President Emmanuel Macron, Britain’s Prime Minister Boris Johnson, US President Joe Biden, Canada’s Prime Minister Justin Trudeau, Italy’s Prime minister Mario Draghi and President of the European Commission Ursula von der Leyen attend a working sesssion at the G7 summit in Carbis Bay, Cornwall on June 11, 2021.

Ludovic Marin | AFP | Getty Images

WASHINGTON — President Joe Biden will press G-7 leaders to take concrete steps to counter China’s rising global influence on Saturday, the second day of the annual summit.

One of these steps will be a global infrastructure initiative called “Build Back Better for the World.” The multi-billion-dollar plan, parts of which were previously announced, aims to create what one White House official described as a “higher quality” alternative to China’s Belt and Road infrastructure project. 

China has been developing overland and maritime routes between East Asia and the rest of the world for nearly a decade. Critics allege the country has also sought to leverage those investments to build political goodwill and discourage criticism of its leadership and institutions.

The new G-7 plan will be funded in part with existing U.S. contributions to overseas infrastructure financing, through institutions like the World Bank and the International Monetary Fund. 

The Biden administration also plans to work with Congress to increase U.S. contributions to the G-7’s Development Financing Toolkit. 

“The hope is that, together with G-7 partners, the private sector and other stakeholders, we will soon be collectively catalyzing hundreds of billions of dollars in infrastructure investment for low- and middle-income countries that need it,” said a senior administration official, who was granted anonymity to discuss ongoing negotiations during a call with reporters Friday.

Biden administration aides insist that the project is not about making countries choose between the United States and China.

“This is about offering an affirmative, alternative vision and approach that they would want to choose,” a second administration official told reporters during a briefing on Friday. 

“What we’re promoting is a confident, positive agenda focused around rallying other countries that share our values on the issues that matter most,” that official said.

Biden’s most challenging task on Saturday will be to convince G-7 leaders to take concrete action to address what the United States calls the “genocide and crimes against humanity” that China is committing against the predominantly Muslim Uyghurs in Xinjiang Province. 

But rather than press G-7 leaders to flatly condemn China’s treatment of Uyghurs, Biden will take a more diplomatic approach. The president will argue that China’s use of forced Uyghur labor represents unfair economic competition.

Biden “will make clear to the world that we believe these practices are an affront to human dignity and an egregious example of China’s unfair economic competition,” an administration official said. “The point is to send a wake-up call that the G-7 is serious about defending human rights, and that we need to work together to eradicate forced labor from our products.”

But there is no guarantee that Biden will be able to convince the rest of his G-7 partners to take concrete action. 

Not all G-7 members are “willing to be as confrontational toward China as Washington asks,” Denny Roy, a senior fellow at the East-West Center, told The South China Morning Post.  

“Most would rather have a constructive economic relationship while quietly opposing certain Chinese practices,” Roy said. “Even Japan, which is generally hawkish toward China, has been hesitant to sign on to sanctions against China over the mistreatment of Uyghurs in Xinjiang.”

And as of Friday afternoon, it was not yet clear yet whether China would be mentioned by name in the eventual public statement the G-7 leaders will issue on Sunday, known as the communique.

“We’re pushing for being specific on areas like Xinjiang, where forced slavery is taking place and where we have to express our values as a G-7,” a senior Biden official said during the briefing. “But it’s too early to say what will end up in the final [communique].”

After the G-7 summit wraps up on Sunday, Biden will travel to Brussels to meet with leaders of the European Union.

Following those meetings, the president is scheduled to hold a summit on June 16 in Geneva with Russian President Vladimir Putin.

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TaskUs IPO pop on Nasdaq values company at $2.8 billion



TaskUs co-founders Bryce Maddock (left) and Jaspar Weir


For Bryce Maddock and Jaspar Weir, the journey to the Nasdaq started in high school in southern California, continued through an entertainment venture for high-school kids and a failed yogurt business in Argentina, and finally ended up in a Texas town best known for its historic waterpark.

Now in their mid-30s, Maddock and Weir are each worth about $400 million and oversee a business with 27,500 employees worldwide. Thirteen years after they plowed their life savings into a venture called TaskUs, the company held its stock market debut on Friday and is valued at about $2.8 billion. The stock, trading under ticker symbol “TASK,” jumped 26% to $29.

TaskUs provides customer support services to fast-growing tech companies including Uber, Netflix, Coinbase and Zoom. Employees are spread across eight countries, and TaskUs dedicates hundreds or even thousands of staffers to its top clients so it can handle all their support-related issues. Revenue climbed 33% last year to $478 million, and TaskUs is profitable — a rarity among newly public tech companies — showing annual net income of $34.5 million last year.

Maddock, the CEO, said TaskUs is most commonly serving companies that “realize their growth is going to be so aggressive that they can no longer do it all themselves.”

For instance, Zoom called in early 2020, when the video chat company’s pandemic-fueled growth spurred a thirtyfold jump in support requests, according to the online roadshow ahead of the IPO. TaskUs soon had 700 employees working on the account.

Clients such as Zoom are the reason Maddock and Weir, the company’s president, were headed to the Nasdaq on Friday to ring the closing bell. But the trajectory wasn’t always up and to the right.

High school summer parties

They moved back in with their parents and invested the $20,000 they’d saved up from the events business into their next venture: a task-based virtual assistant. They chose to start in the Philippines, one of the top countries in the world for call centers and outsourcing.

“We used our combined life savings to rent a one-room office on the side of a highway an hour south of Manila and hire our first few employees,” they wrote in the founders’ letter portion of the prospectus.

In their initial conversations with start-ups, Maddock and Weir said they quickly learned that busy executives didn’t want task-based help, but rather needed more thorough support services to assist them as they grew. TaskUs broadened its focus to cover more business processes, and the founders got some venture-backed start-ups on board.

“As we earned their trust, we took on more critical parts of their operations such as advanced technical support and critical content review,” they wrote.

By 2012, TaskUs was established enough to hit the radar of Uber, which was still early in its development although expanding rapidly and raising large venture rounds. Maddock said the message from Uber at the initial meeting in San Francisco was that the ride-hailing company would never outsource its services. That changed completely the following year.

“They called us back and said that outsourcing sounds like a good idea now,” Maddock said.

TaskUs started working with Uber in 2013, reviewing and onboarding drivers, according to the prospectus. In 2014, it began helping on rider and driver support. A year later, TaskUs had more than 2,000 people dedicated to Uber.

Similarly, TaskUs began working with Coinbase as demand started surging. That was in 2017, when “bitcoin became a mainstream obsession, and support volumes spiked through the roof,” the filing says. Over time, TaskUs started handling fraud, compliance and customer safety needs for Coinbase.

The Philippines is still the company’s biggest hub, with more than 19,000, or 70%, of its employees located there. The U.S. is its second-biggest country, with over 4,000 employees, followed by India and Mexico.

TaskUs was originally headquartered in Santa Monica but started moving to Texas in 2016 with the opening of a San Antonio office, then to nearby New Braunfels, which became its current headquarters. New Braunfels is home to the Schlitterbahn, a 42-year-old water park that covers over 70 acres and is one of the 80,000-person town’s largest employers.

Schlitterbahn Waterpark and Resort in New Braunfels, Texas.

Erich Schlegel | Getty Images

Maddock and Weir both live in Austin, about 50 miles north of New Braunfels. Prior to the pandemic, they said, they spent about 75% of their time traveling to their various offices, including six to eight trips a year to the Philippines.

They’re anxious to get back on the road and into the air, though as the key persons for a publicly traded company, they have insurance policies that “forbid us from traveling on the same plane,” Maddock said.

‘Phantom stock’

In addition to Maddock and Weir, the TaskUs IPO is a big windfall for Blackstone Group, which invested about $250 million in 2018 and eventually controlled about two-thirds of the company. Including shares sold in the IPO, that stake is now worth about $1.7 billion.

Maddock and Weir were each able to maintain substantial ownership — 16% at the time of the IPO — because they’d only taken $15 million in outside funding prior to the Blackstone deal.

“We bootstrapped the business for seven years, living on a shoestring budget with our parents,” Weir said, in an interview. “Fortunately our parents didn’t charge us rent.”

Unlike the typical venture-backed tech company, TaskUs didn’t issue traditional stock options to its employees, because it was originally structured as a limited liability company. Rather, it created a “phantom stock plan” in 2015 and doled out grants that would appreciate in value as the company reached milestones and liquidity events.

Maddock said that following the Blackstone transaction in 2018, the company paid out $44 million to over 200 employees who owned phantom stock. After the IPO, he said a total of over $120 million will be paid to more than 400 employees.

“We have teammates and leaders in the Philippines who will make hundreds of thousands and, in some cases, over $1 million,” Maddock said.

WATCH: Cryptocurrencies see sudden sell-off — Here’s what experts say

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The Fed could be facing a jobs headache in its inflation fight



Residential single family homes construction by KB Home are shown under construction in the community of Valley Center, California, June 3, 2021.

Mike Blake | Reuters

If the Federal Reserve’s view on inflation prevails, a few key things have to go right, particularly when it comes to getting people back to work.

Solving the jobs puzzle has been the most vexing task for policymakers in the pandemic era, with nearly 10 million potential workers still considered unemployed even though the number of open positions available hit a record of 9.3 million in April, according to the latest data from the U.S. Labor Department.

There’s a fairly simple inflation dynamic at play: The longer it takes to get people back to work, the more employers will have to pay. Those higher salaries in turn will trigger higher prices and could lead to the kinds of longer-term inflationary above-normal pressures that the Fed is trying to avoid.

“Unfortunately, we see good reasons to think that labor participation might not return quickly to its
pre-Covid level,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. “Whatever is happening here, the Fed needs large numbers of these people to return to the labor force in the fall.”

The pace of inflation is of critical importance for economic trajectory. Inflation that runs too high could force the Fed to tighten monetary policy quicker than it wants, causing cascading impacts to an economy dependent on debt and thus critically tied to low interest rates.

Consumer prices increased at a 5% pace year over year in May, the fastest since the financial crisis. Economists, though, generally agreed that much of what is driving the rapid inflation surge is due to temporary factors that will ease up as the recovery continues and the economy returns to normal following the unprecedented pandemic shock.

That’s far from certain, though.

The Atlanta Fed’s gauge of “sticky” inflation, or price of goods that tend not to fluctuate greatly over time, rose 2.7% year-over-year in May for the strongest growth since April 2009. A separate measure of “flexible” CPI, or prices that do tend to move frequently, increased a stunning 12.4%, the fastest since December 1980.

In their most recent forecast, Fed officials put core inflation at 2.2% for all of 2021; Shepherdson said the current numbers suggest something closer to 3.5%.

“That’s a huge miss, and it potentially poses a serious threat to the Fed’s benign view of medium-term inflation because of its potential impact of the labor market,” Shepherdson said.

What’s keeping workers home

Surveys show a variety of factors keeping workers from taking jobs: Ongoing pandemic concerns, child-care issues, particularly for women, and enhanced unemployment benefits that are being withdrawn in about half the states and will expire entirely in September.

From the employer perspective, worries over skill mismatches have persisted for several years and have worsened during the pandemic. For instance, a survey from online learning company Coursera showed that the U.S. has fallen to 29th in the world in digital skills needed for high-demand entry-level jobs.

The dilemma is a pervasive one in American business nowadays.

All of my customers are struggling to staff at levels that they need staff to really get to the other side of this surge.

David Wilkinson

president of NCR Retail

David Wilkinson, president of NCR Retail, the cash-register maker that now provides a variety of products and services to the industry, said he sees “a bit of a labor crisis” unfolding.

“As labor gets harder to come by, as labor gets more expensive, the other side of the inflationary worry is that as prices go up, the cost of living goes up and you have to pay people more as they demand more,” Wilkinson said. “All of my customers are struggling to staff at levels that they need staff to really get to the other side of this surge.”

While he thinks inflation eventually will come down from its current level, he expects it will be higher than the sub-2% that prevailed during most of the post-financial crisis era.

The implementation of technology accelerated during the Covid era. While that will continue, Wilkinson said he also expects to see retailers paying higher wages to fill the demand for manpower.

“We’re seeing an increased focus on the worker in retail, and part of that is both the experience, the technology they need to do the job, and part of that is the willingness to pay,” he said. “This brought that back to the forefront.”

Managing its way through the various dynamics could prove difficult for the Fed.

Previous attempts to normalize policy over the years have largely failed, with the central bank having to revert back to the zero-interest money-printing world that arose during the financial crisis.

“The Fed is trapped,” wrote Joseph LaVorgna, chief economist for the Americas at Natixis and former chief economist for the National Economic Council.

While LaVorgna sees inflation as staying relatively under control, he thinks the Fed could face problems from deflationary pressures. The Fed doesn’t like inflation that’s too low, as it creates a low-expectation cycle that constricts monetary policy during downturns.

“The political pressure to do nothing will be intense” as government debt increases, LaVorgna said. “If the Fed cannot (or will not) remove excessive policy accommodation when the economy is booming, how can policymakers do it when growth invariably slows?”

Markets betting on the Fed

Indeed, markets aren’t expecting much movement at all in policy.

Treasury yields actually have dropped since Thursday’s hotter-than-expected consumer price index report, and market pricing now points to no rate hikes until about September 2022 and a fed funds rate of just 1% through May 2026.

A report Friday from the University of Michigan also showed consumers are lowering their inflation expectations, with the year-ahead outlook at 4%, down from 4.6% in the last survey, and at 2.8% over five years, down from 3% though still well above the Fed’s 2% target.

“For all the fears that the Fed will be prompted to tighten policy early to curb inflation, we suspect officials will be just as worried about a slowdown in the recovery in real activity,” wrote Michael Pearce, senior U.S. economist at Capital Economics.

Federal Reserve Board building is pictured in Washington, U.S., March 19, 2019.

Leah Millis | Reuters

Fed officials likely will talk next week about which way the risk are tilted in the current scenario. They’ve been lukewarm about the recovery, continuing to emphasize the role, albeit diminishing, of the pandemic and encouraging a full-throated policy response.

However, if inflation readings persist to the upside, the pressure at least to tap the brakes on the monthly asset purchases will build.

“There’s been this debate about whether inflation is different this time,” said Quincy Krosby, chief market strategist at Prudential Financial. “If inflation rises in a more material and less transitory way, consumers are going to need higher wages.”

The Fed is betting that a return to the labor market, particularly by women, will help hold down wage pressures and keep inflation in check. The current labor force participation rate for women is 56.2%, up from the pandemic lows but otherwise the worst since May 1987.

Regardless of the inflation pressures, the Fed last year changed its mission statement to keep policy accommodative until the economy sees inclusive labor gains, meaning across gender, income and race.

“They are going to make sure that the glide path to [policy] liftoff is long,” Krosby said. “The question is, if inflation picks up in a more meaningful way and is stickier, what does the Fed do? That’s the concern the market has.”

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