Turkey's New Central Bank Governor is Former First Republic Executive; Lingering Higher Longer-Term Rates in Canada; the Pillars of Bidenomics

Turkey's New Central Bank Governor is Former First Republic Executive; Lingering Higher Longer-Term Rates in Canada; the Pillars of Bidenomics By Perry Cleveland-Peck

Good day. Turkey has appointed a former First Republic Bank executive to lead its central bank, a move that is seen as a shift away from the unorthodox economic policies that have sown economic instability in the country and driven away foreign investors. Hafize Gaye Erkan was co-CEO of First Republic and part of its leadership during years when the bank pursued a strategy that would ultimately lead to its downfall, aggressively pursuing deposits that would later flee the bank. She left First Republic more than a year before there was a run on deposits and the institution imploded. Meanwhile, the Bank of Canada's most recent analysis suggests Canada's neutral rate hasn't drifted much from its prepandemic range, with short-term rates expected to settle at roughly 0% to 1% in real terms over time. But Deputy Gov. Paul Beaudry, a member of the central bank's policy-making governing council, said yesterday there are reasons to believe some factors that have weighed on long-term rates may be plateauing and could even change course. And, Greg Ip, chief economic commentator for The Wall Street Journal, takes a look at how the pillars of Bidenomics can be distilled from National Security Adviser Jake Sullivan's writings and interviews with people close to both him and President Biden.

Now on to today's news and analysis.

Top News Former First Republic Executive to Head Turkey's Central Bank

Turkey's new central-bank governor is Hafize Gaye Erkan, who until late 2021 was the co-CEO of First Republic Bank, which collapsed and was sold to JPMorgan Chase last month. She previously worked for Goldman Sachs and served on the board of Tiffany & Co.

Erkan is Turkey's first woman central-bank governor and replaces Sahap Kavcioglu, an Erdogan loyalist who was installed in March 2021 as President Recep Tayyip Erdogan took greater command over the economy. Erdogan pressured the bank into a series of interest-rate cuts that year that plunged Turkey into a currency crisis and stoked punishing inflation.

Bank of Canada's Beaudry Sees Signs of New Era of Higher Rates

Bank of Canada Deputy Gov. Paul Beaudry cautioned it is likely that longer-term real interest rates will remain elevated relative to prepandemic levels and will be higher than Canadians are used to in the coming years.

Analysis: Greg Ip on Bidenomics and Its Contradictions

Jake Sullivan, President Joe Biden's national security adviser, in April took aim at what he sees as a threat from within , an idea that "markets always allocate capital productively and efficiently."

U.S. Economy Trump Indicted in Classified Documents Case

Donald Trump was indicted by a federal grand jury in the investigation into his handling of classified documents at his home in Florida, marking the first timen the federal government has brought charges against a former president.

White House Prepares Plan B on Student Loans

Biden administration officials are quietly planning for the possibility that the Supreme Court could strike down President Biden's sweeping student loan forgiveness program, according to people familiar with the matter.

Democrats Push for Debt-Ceiling Overhaul Bill After Default Scare

Democrats in the House and Senate plan to introduce a bill Friday that would overhaul the debt-ceiling process, eager to capitalize on anxiety in the party regarding the brinkmanship over the country's borrowing limit.

'War for Talent' at Mines Could Drive Up Cost of Energy Transition

A labor shortage across the U.S. mining industry might drive up prices for metals needed for the transition away from fossil fuels, another headache for producers already struggling to supply the materials.

Key Developments Around the World China's Inflation Problem? It Has None

Prices charged by Chinese factories tumbled in May at their steepest annual pace in seven years, while consumer prices barely budged, fresh signs of the challenges faced by the world's second-largest economy both at home and abroad.

Court Papers Offer Glimpse of Role of Graft in China Overseas Lending Chinese Junk Bonds Are Back on the Trash Heap

Asia's junk-bond market had a brief flicker of life earlier this year, when a Chinese company sold a $400 million bond in January, and a second bond a month later. Four months later, the bonds have lost around half of their value .

Cuba to Host Secret Chinese Spy Base Focusing on U.S.

China and Cuba have reached an agreement for China to establish an electronic eavesdropping facility on the island , in a breash new geopolitical challenge by Beijing to the U.S., according to U.S. officials familiar with classified intelligence.

Spy Station Brings China Rivalry to America's Doorstep Deal Has Echoes of Cold War Tensions A Factory Exodus Is Hollowing Out Brazil's Industrial Heartland

U.S. carmaker Ford's exit from Brazil was the most striking recent example of an economic trend that is shaking Latin America's biggest country: Industry is shriveling in Brazil along with the high-paying jobs the country needs.

Taliban's Opium Crackdown Piles Pressure on Afghan Economy

A dramatic slash in the cultivation of Afghan poppy, used to produce heroin, shows the Taliban's willingness to enforce a ban on a cash crop many farmers rely on as the country's debilitating economic crisis continues .

Glynn's Take: Australia May Choose Recession to Tame Inflation By James Glynn

It is looking more likely that the answer to Australia's stubborn inflation woes will be the onset of a recession.

It's a desperate idea, but crashing the economy into a wall to escape the even greater threat posed by the wrecking ball of sustained high inflation is a possibility.

It might be the recession Australia has to have. Read more .

Financial Regulation Roundup Crypto's Quiet Gains: Ownership Climbs Despite Crash in Prices

It has been a rough 18 months for cryptocurrencies. Some might see this as proof that crypto was always a fad, incapable of growing beyond a niche. In fact, there is intriguing evidence of just the opposite .

You Scored With an Online Sports Bet. Do You Owe Taxes?

While phone apps have made sports bets easy and fun, the taxes on them are not. A key change in the law plus other factors have combined to make taxes on online sports betting both unfavorable and murky .

Forward Guidance Friday (all times ET)

8:30 a.m.: Canada labor force survey for May

Monday

11 a.m.: New York Fed's consumer expectations survey for U.S.

Research ECB Could Raise Rates Next Week Without Clear Guidance

The European Central Bank is expected to raise interest rates by 25 basis points at its meeting next week but is unlikely to give specific guidance on future rate decisions, Silvia Ardagna, European economist at Barclays, writes in a note. "The ECB is likely to remain non-committal on future rate decisions but to signal policy rates are closer to peak," she writes. However, the ECB will be keen to "send a strong message that policy rates will remain in restrictive territory for longer," Ardagna adds.

-Emese Bartha

Eurozone Economy Stagnating Rather Than in Recession, ING Says

The eurozone economy is better understood as being in broad stagnation rather than in recession, ING analysts say in a note. The bloc slipped into a technical recession-generally defined as two quarters of decline-after the European Union revised down its estimates for the first quarter of this year and the last of 2022. But the declines, of 0.1% in each quarter, are so minimal that current economic circumstances should be seen as stagnation, ING says, pointing to the bloc's strong labor market. "The stagnation of the economy does mark a clear cut from the recent postpandemic boom, though," ING says.

-Joshua Kirby

Commentary It Is Time to Admit It: Bank Regulation Doesn't Quite Work

Perhaps even big financial cushions can't stop a panic once a bank has tarnished its reputation beyond repair, and worse, when regulatory ratios are raised they become the new threshold under which fear is warranted, Jon Sindreu writes.

China's Lost Generation

A record cohort of new university graduates in China estimated at over 11 million will crash into a shaky job market-echoing the post-2008 struggles in the U.S. that helped sharpen political divisions, Nathaniel Taplin writes.

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