WEBVTT - Hawkish Rhetoric 0:00:03.880 --> 0:00:07.040 Welcome to Bloomberg opinion. I'm Vonnie Quinn. This week, the 0:00:07.080 --> 0:00:09.239 odds are two and three. will end up with the 0:00:09.280 --> 0:00:12.560 negotiation starting at some point in the next six to 0:00:12.640 --> 0:00:15.440 twelve months. Admiral James De Brit us with a military 0:00:15.440 --> 0:00:18.560 appraisal of Russia's position, seven months and counting into its 0:00:18.560 --> 0:00:22.119 war on Ukraine. This has Vladimir Putin taunts Kiev and 0:00:22.200 --> 0:00:26.400 its allies with implicit threats of nuclear escalation and orders 0:00:26.400 --> 0:00:29.640 the mobilization of as many as three hundred thousand reservists. 0:00:29.880 --> 0:00:33.760 Also referendums in four regions. First, though, to the F 0:00:33.840 --> 0:00:36.640 O MC decision. In the United States, another seventy five 0:00:36.680 --> 0:00:40.279 basis points and fed funds rate increases and more hawkish 0:00:40.360 --> 0:00:44.200 talk on inflation. Longer term inflation expectations appear to remain 0:00:44.360 --> 0:00:47.800 well anchored, but that is not grounds for complacency. The 0:00:47.880 --> 0:00:50.800 longer the current bout of high inflation continues, the greater 0:00:50.880 --> 0:00:54.080 the chance that expectations of higher inflation will become entrenched. 0:00:54.120 --> 0:00:57.640 Bloomberg Opinions Jonathan Levin and John Author is joining. We've 0:00:57.640 --> 0:01:00.600 written down a plausible path and it will will be enough. 0:01:00.640 --> 0:01:03.760 I'm quoting there directly from Fed Chrome Powell, Jonathan Levin. 0:01:04.319 --> 0:01:06.679 This plausible path, very different from what we saw in 0:01:06.720 --> 0:01:10.280 the last stop plot. Does it look plausible to you? Yeah, 0:01:10.280 --> 0:01:12.400 I mean, I think one thing that's sort of interesting 0:01:12.800 --> 0:01:16.000 to observe is that, you know, J pal is sort 0:01:16.040 --> 0:01:18.800 of insinuating that this is it, this is plausibility we 0:01:18.880 --> 0:01:21.920 have for you know, but the pace of the revisions 0:01:22.040 --> 0:01:24.200 has not slowed down at all. If you just go 0:01:24.360 --> 0:01:28.320 back in history a little bit, right in December, three 0:01:28.640 --> 0:01:31.240 fed funds rate was expected to be at one point six. 0:01:31.760 --> 0:01:34.080 March we bumped it up to two point eight. June 0:01:34.120 --> 0:01:36.800 we bumped it up to three point eight. September we 0:01:36.880 --> 0:01:39.600 bumped it up to four point six. As sort of 0:01:39.600 --> 0:01:43.000 Hawk ish takeaway from all of this, from the trajectory itself, 0:01:43.080 --> 0:01:46.160 might be the trajectory of the revisions is going to 0:01:46.200 --> 0:01:49.480 have to probably slow down a little bit until it 0:01:49.560 --> 0:01:52.800 really feels like we're at the top dance. One pointing 0:01:52.800 --> 0:01:54.480 out that this is the highest fed funds rates in 0:01:54.560 --> 0:01:57.600 spurserns collampsed in March, which is kind of hard to believe, 0:01:57.640 --> 0:02:00.400 but at the same time it's not. In some is John. 0:02:00.480 --> 0:02:02.600 It's also the fifth rate like this year. What's been 0:02:02.720 --> 0:02:06.360 what's going on? Well, I think, as you bring in 0:02:06.480 --> 0:02:10.560 bear sterns, I think there is a fairly real sense 0:02:11.880 --> 0:02:16.079 that this is our final, at long, long, long, long 0:02:16.160 --> 0:02:21.200 last exit from the conditions of the global financial crisis. 0:02:22.040 --> 0:02:24.720 I that something like what is happening now is what 0:02:24.840 --> 0:02:27.240 I thought was going to happen sometime around about two 0:02:27.240 --> 0:02:32.200 thousand and ten. But it's amazing how long logic takes 0:02:32.320 --> 0:02:34.840 to work itself out in the real world. So it's 0:02:34.880 --> 0:02:38.000 obviously there's been a risk that eventually you'll see rates 0:02:38.040 --> 0:02:40.400 go up and inflation return, and amazingly it took over 0:02:40.400 --> 0:02:44.120 a decade before it happened. But now you do see 0:02:44.280 --> 0:02:47.240 somehow or other we are going to finally get back 0:02:47.400 --> 0:02:50.680 to something that's more like the world from before the 0:02:50.720 --> 0:02:53.720 crisis than from after it, if you want to comparison. 0:02:53.840 --> 0:02:59.000 I mean at this point I just wonder you have 0:02:59.080 --> 0:03:03.320 a crisis after some pretty bad monetary policy and then 0:03:03.680 --> 0:03:07.360 various monetary mistakes along the way. You bump along and 0:03:07.400 --> 0:03:12.040 you only finally jolt out of that crisis after there's 0:03:12.080 --> 0:03:18.040 been a truly horrible external shock, World War Two and 0:03:18.520 --> 0:03:23.480 the pandemic. Just wonder whether in another generation's time they'll 0:03:23.480 --> 0:03:26.160 see that the decade we've just lived through in the 0:03:26.160 --> 0:03:29.080 thirties as being very similar in financial terms. Well, it's 0:03:29.080 --> 0:03:31.280 funny that you mentioned that because, Jonathan Levin, do you 0:03:31.360 --> 0:03:33.240 agree with me that Fed your Powell almost gave a 0:03:33.240 --> 0:03:36.800 little mini economics lecture at one point during the news 0:03:36.840 --> 0:03:39.160 conference answering a question when he talked about the fact 0:03:39.160 --> 0:03:41.720 that if we can get things back to the two 0:03:41.800 --> 0:03:45.120 percent inflation target, that we could have business cycles that 0:03:45.160 --> 0:03:47.280 are ten years long at least, because that's what we've 0:03:47.320 --> 0:03:49.720 been having. You know, feder pell was playing a little 0:03:49.720 --> 0:03:51.760 bit of a politician here, because he's in a very 0:03:51.760 --> 0:03:55.000 typical place. The fact of the matter is, if you 0:03:55.080 --> 0:03:59.040 just look at the rather conservative estimate for where employment 0:03:59.080 --> 0:04:01.880 is going to have to be, you know this economy 0:04:01.960 --> 0:04:05.040 is going to have to raise more than a million jobs. Right. 0:04:05.160 --> 0:04:08.080 That's very difficult to go out and tell the American people. 0:04:08.280 --> 0:04:11.440 So at the same time he's trying to justify this 0:04:11.880 --> 0:04:15.800 sort of barbaric process and say, you know, look, this 0:04:15.880 --> 0:04:18.440 is this is ugly, this is like surgery. Right, we 0:04:18.480 --> 0:04:22.000 need to go out and do damage to the economy 0:04:22.040 --> 0:04:24.760 in order to make it better in the long term, 0:04:25.040 --> 0:04:28.039 and this is this sort of justification that the economic 0:04:28.160 --> 0:04:31.200 orthodox he keeps coming back to. This may be bad, 0:04:31.760 --> 0:04:33.760 some people may have a really tough run of it, 0:04:34.080 --> 0:04:37.040 but in the long run you can't have sustainable business 0:04:37.040 --> 0:04:41.440 cycles unless you get volatile prices under control. And just 0:04:41.560 --> 0:04:45.120 for points of comparison, he could have gone the full 0:04:45.279 --> 0:04:48.960 Andrew Bailey, because the last Bank of England's meeting was 0:04:49.000 --> 0:04:54.400 about as spectacularly negative as you could possibly imagine a 0:04:54.480 --> 0:04:58.400 central banker would ever be. Britain was going to go 0:04:58.440 --> 0:05:01.120 into recession any day now out and stay there for 0:05:01.160 --> 0:05:04.000 the whole of next year. And I mean he also 0:05:04.040 --> 0:05:07.279 made which is an awful political Faux Pa. He urged 0:05:07.320 --> 0:05:10.400 people not to ask for more money, which doesn't go 0:05:10.560 --> 0:05:12.440 well with the new chancellor saying that he's not going 0:05:12.480 --> 0:05:16.120 to put any limits on bankers bonuses anymore. But anyway, 0:05:16.240 --> 0:05:20.000 there was that possibility of really just saying, I'm sorry, guys, 0:05:20.760 --> 0:05:23.200 call a spade a spade. This is going to hurt 0:05:23.480 --> 0:05:26.360 far better some pain now than worse pain later. Well, 0:05:26.440 --> 0:05:29.159 chair Powell didn't do that, Jonathan, and even though the 0:05:29.200 --> 0:05:30.960 market came away with the idea this was a very 0:05:31.000 --> 0:05:34.120 hoggish some who I basis point hike, he also wouldn't 0:05:34.160 --> 0:05:35.680 go so far as to say, look, we are going 0:05:35.720 --> 0:05:37.920 to have millions more unemployed. We need to have millions 0:05:37.960 --> 0:05:40.880 more unemployed. He said that the costs. Let me get 0:05:40.880 --> 0:05:43.080 the exact quote. If our projections are close to right, 0:05:43.160 --> 0:05:46.200 you will see that the costs in unemployment are meaningful. 0:05:46.720 --> 0:05:48.920 That's not millions of jobs loss, but in fact that's 0:05:48.920 --> 0:05:51.640 what it means exactly. I mean, you know, my takeaway 0:05:51.880 --> 0:05:55.400 is that he took the juring summary of economic projections. 0:05:55.400 --> 0:05:57.320 A lot of people have said that the Ted was 0:05:57.360 --> 0:06:00.359 in fantasy land here. What the Fed is doing is 0:06:00.360 --> 0:06:04.719 it's bumping itself in a pessimistic direction and it now 0:06:04.800 --> 0:06:09.520 finds itself probably somewhere between Wall Street and Larry Summer's 0:06:10.080 --> 0:06:13.520 Olivier Blanchard. But I got to say there's still an 0:06:13.520 --> 0:06:16.760 awfully lot closer to Wall Street than they are to 0:06:16.880 --> 0:06:20.400 the summer's take, which is essentially that you know, just 0:06:20.480 --> 0:06:24.960 to get to neutral unemployment rate in this atmosphere you 0:06:25.000 --> 0:06:28.600 have to be at about five and quite possibly, in 0:06:28.680 --> 0:06:31.320 order to rain in this inflation, they would say you 0:06:31.400 --> 0:06:34.440 might have to go to six or seven percent unemployment, 0:06:34.839 --> 0:06:39.600 and that definitely implies some sort of meaningful recession. So 0:06:39.760 --> 0:06:42.120 how do we see markets adjust? John Author's we saw 0:06:42.120 --> 0:06:44.040 the two year yield topping four percent, but the ten 0:06:44.120 --> 0:06:47.040 year rate declined. Now does that signal that the market 0:06:47.080 --> 0:06:49.000 is anticipating the Fed will gets booked at some point 0:06:49.000 --> 0:06:52.520 and freeze increases, or what exactly is that? I mean? 0:06:52.520 --> 0:06:55.760 The other thing is the thirty year yield declines more 0:06:55.920 --> 0:07:00.000 so apparently the ten very abstres parts of the yield 0:07:00.000 --> 0:07:03.719 curve is now inverted. Um that, I have to admit, 0:07:03.839 --> 0:07:06.280 was one part of what went on that I find 0:07:06.320 --> 0:07:10.640 initially quite difficult to explain. I think you probably can 0:07:10.920 --> 0:07:15.280 in terms of just prior expectations. I think the bond 0:07:15.320 --> 0:07:19.680 market is braced for something was more realistic coming in, 0:07:19.760 --> 0:07:26.400 and I think the hawkishness from Powell helped convince people 0:07:26.480 --> 0:07:31.440 that that you'll have not a pivot per se, but 0:07:32.360 --> 0:07:36.520 enough of an aggressive fed to squelch the economy for 0:07:36.600 --> 0:07:41.880 quite a while and thereby justify lower longer term yields. 0:07:42.120 --> 0:07:44.640 Jonathan Evin, what was your interpretation of the moves and 0:07:44.640 --> 0:07:47.680 the yield curve? Yeah, I gotta agree with John. Very 0:07:47.680 --> 0:07:51.440 difficult to interpret. But I will make one sort of 0:07:51.480 --> 0:07:57.040 separate observation, which is that Powell has really gotten rather good, 0:07:57.120 --> 0:08:02.360 at least comparatively speaking, at manageing financial conditions, and I 0:08:02.400 --> 0:08:06.120 thought that, you know, one of the better moments. We 0:08:06.160 --> 0:08:08.680 all knew that he became much more self aware of 0:08:08.680 --> 0:08:11.960 going into Jackson hole and he knew that he needed 0:08:12.000 --> 0:08:14.840 to keep interest rates up, probably needed to keep risk 0:08:14.880 --> 0:08:20.000 assets down, and he seems to have remembered these lessons. 0:08:20.000 --> 0:08:23.120 There was a great moment when Powell was like yeah, 0:08:23.200 --> 0:08:26.080 you know, I probably shouldn't answer your same question because 0:08:26.120 --> 0:08:29.320 he you know, he has become very self conscious about 0:08:29.360 --> 0:08:32.200 the fact that these dog on markets seemed to rally 0:08:32.640 --> 0:08:35.000 every time he goes before the microphone at one of 0:08:35.040 --> 0:08:38.120 these events. Yes, it's one of the things. I've been 0:08:38.360 --> 0:08:41.040 putting together charts for what I'm going to try writing 0:08:41.040 --> 0:08:47.080 about it. It is extraordinary how expectations in funds features 0:08:47.120 --> 0:08:49.760 got almost all the way up to four percent for 0:08:49.840 --> 0:08:53.400 the end of this year after the May CPI print, 0:08:53.440 --> 0:08:55.280 which came out in June and which was a real, 0:08:55.440 --> 0:08:58.600 real shock. There and then the market basically spent the 0:08:58.800 --> 0:09:01.800 entire summer convince seeing itself that rates wouldn't have to 0:09:01.840 --> 0:09:05.000 go up that much. So the estimates for where rates 0:09:05.040 --> 0:09:09.040 will be only four months from now have written by 0:09:09.080 --> 0:09:12.000 more than a full percentage point since the last fom C, 0:09:12.520 --> 0:09:15.440 which is bizarre. There's not been that big a change 0:09:15.440 --> 0:09:18.760 in concition, yes, and and, and there's not been that 0:09:18.920 --> 0:09:24.080 obvious a change in in messaging. Okay, Jackson hole arguably 0:09:24.360 --> 0:09:26.360 hawked things up a bit, but I don't think it 0:09:26.440 --> 0:09:30.520 was so much more hawkish than my interpretation of what 0:09:30.600 --> 0:09:33.360 PAL said after the previous fo MC. So that there 0:09:33.480 --> 0:09:37.240 is a hope springs eternal might well be something we 0:09:37.280 --> 0:09:41.040 should all bear in mind when covering a covering markets. Well, 0:09:41.240 --> 0:09:44.480 speaking of questions, there was, as there always is, the 0:09:44.600 --> 0:09:47.160 question of you know, monetary policy operates on a lag 0:09:47.320 --> 0:09:49.600 and I think our own Michael Mckee asked how will 0:09:49.640 --> 0:09:51.640 you know, or will you even know, if you've gone 0:09:51.679 --> 0:09:55.439 too far? And Jonathan, the third chair, did acknowledge, as 0:09:55.640 --> 0:09:58.080 is obvious, that monetary policy and the moves have been 0:09:58.120 --> 0:10:00.040 impacting some parts of the economy, interest rates and that 0:10:00.120 --> 0:10:01.680 of parts of the economy, but it's hard to know 0:10:01.800 --> 0:10:04.360 at what point it will impact the broader economy and 0:10:04.480 --> 0:10:06.600 by how much, and so on. Do they have any 0:10:06.640 --> 0:10:08.560 kind of sense of when that will happen or are 0:10:08.600 --> 0:10:10.880 they just a little mind. Still, the short answer is 0:10:11.000 --> 0:10:13.280 they don't know. I mean, as you say, they have 0:10:13.400 --> 0:10:16.400 great not great. They have reasonable visibility into something like 0:10:16.440 --> 0:10:19.560 the housing market, but you know the way that the 0:10:19.640 --> 0:10:23.120 economy is constantly evolving and given the fact that they 0:10:23.120 --> 0:10:25.920 haven't been in a fight like this for decades, they 0:10:25.960 --> 0:10:28.839 really have no idea how it's going to affect and 0:10:29.000 --> 0:10:31.400 with what kind of lag it's going to affect, say, 0:10:31.720 --> 0:10:35.599 consumer segments of the economy, which we know is extraordinarily 0:10:35.640 --> 0:10:38.680 important in the United States. So you know, the bottom 0:10:38.720 --> 0:10:40.680 line is I think they're going off of rules of 0:10:40.800 --> 0:10:44.480 some are in house economists at a long likes to 0:10:44.520 --> 0:10:47.280 say that the lag is something like twelve to eighteen months. 0:10:47.480 --> 0:10:50.360 That's what I tend to go by and I think 0:10:50.559 --> 0:10:53.080 they're going off of rules of pumb that are no 0:10:53.160 --> 0:10:55.160 better than the ones we have at our disposal. Well, 0:10:55.240 --> 0:10:57.800 according to the new SCB headline, inflation won't return to 0:10:57.840 --> 0:11:00.720 the Fed's price target of two until twenty twenty five. 0:11:01.000 --> 0:11:04.280 And we're still in two, let's be clear, and that 0:11:04.280 --> 0:11:09.400 seems beautable to me. And what's quite intriguing also, though, 0:11:09.440 --> 0:11:13.760 about the dots compared to previous years is if you 0:11:13.800 --> 0:11:16.800 look at the estimates for where rates are going to 0:11:16.840 --> 0:11:19.559 be at the end of twenty four and twenty five. 0:11:20.559 --> 0:11:23.199 They look more like a random scatter plot for a 0:11:23.320 --> 0:11:25.720 raw shark test than anything. I think there was no 0:11:25.880 --> 0:11:30.959 more than four governors agreed on any one rate for 0:11:31.679 --> 0:11:35.520 the end of four and the spread was something like 0:11:35.559 --> 0:11:38.199 one and a half one and three quarters percentage points. 0:11:38.440 --> 0:11:44.319 And similarly it's kind of all over the place, right, Jonathan? Yeah, 0:11:45.200 --> 0:11:48.440 and when you're talking about long term inflation objectives, you're 0:11:48.480 --> 0:11:51.839 still in the throes of this debate about between two 0:11:51.880 --> 0:11:55.040 and three. How much does it actually matter? I tend 0:11:55.080 --> 0:11:57.600 to be in the camp that, as far as the 0:11:57.679 --> 0:12:00.600 average American it doesn't matter so much. It only sort 0:12:00.600 --> 0:12:03.280 of matters because the Fed has gone out and made 0:12:03.280 --> 0:12:05.560 this promise and now it sort of has to keep 0:12:05.559 --> 0:12:09.480 it lest it lose its credibility for the next inflation. Well, 0:12:09.480 --> 0:12:11.640 I'm going to get your thoughts on the next increase. 0:12:11.720 --> 0:12:15.720 Sent basis points and then fifty, Jonathan. Yeah, it seems 0:12:15.800 --> 0:12:19.840 reasonable at this point. It almost doesn't feel like what 0:12:19.960 --> 0:12:22.840 happens at the next couple of meetings is that consequential. 0:12:23.160 --> 0:12:26.480 It's really just all about where are we going? And 0:12:26.640 --> 0:12:29.000 probably even more importantly, how long are we going to 0:12:29.000 --> 0:12:30.679 stay there? Yeah, it's just about getting it up there, 0:12:30.679 --> 0:12:33.120 isn't it? John? Yeah, I think the path for the 0:12:33.200 --> 0:12:38.680 next few months for policy is very straightforward, barring either, 0:12:38.960 --> 0:12:42.640 you know, a major geopolitical shock, we've got a picture 0:12:42.640 --> 0:12:45.360 of Volodomy Zelenski on the TV screens around us at 0:12:45.360 --> 0:12:50.120 the moment, or a financial crisis, some really major financial accident, 0:12:50.200 --> 0:12:54.240 which really doesn't look all that likely still. I think 0:12:54.240 --> 0:12:58.560 it's a question of we know roughly what the route 0:12:58.720 --> 0:13:01.800 is for the next few months and then so much 0:13:02.000 --> 0:13:06.560 is about everybody sort of sitting back very tensely in 0:13:06.640 --> 0:13:11.440 the breach position or whatever to see exactly how fast 0:13:12.160 --> 0:13:15.439 inflation does come under control, how what happens to the 0:13:15.520 --> 0:13:20.160 labor market, and very many, number of very intelligent, very 0:13:20.200 --> 0:13:23.840 decent people have been arguing in good faith in all 0:13:23.960 --> 0:13:28.160 kinds of directions over that. We will all learn. Nobody 0:13:28.240 --> 0:13:31.400 knows which way that's going to go, but ultimately the 0:13:31.480 --> 0:13:34.000 courses sets and we just need to see what actually 0:13:34.040 --> 0:13:36.760 happens to the economy. You know, it's really all over 0:13:36.800 --> 0:13:39.400 the place. I mean I noted that, you know, two 0:13:39.440 --> 0:13:41.760 of the most popular e t f s were like 0:13:42.480 --> 0:13:46.079 one to three months treasury bills and the prow sharees 0:13:46.160 --> 0:13:49.000 q q q, which offers a three times leveraged play 0:13:49.040 --> 0:13:52.440 on the Naz Bak. So you know, with all the 0:13:52.440 --> 0:13:55.959 cross currents in this market, I don't expect there to 0:13:56.000 --> 0:14:00.160 be any resolution between. Is this a massive buying opportunity 0:14:00.240 --> 0:14:03.160 for real, or is this at the moment to run 0:14:03.200 --> 0:14:09.080 for cover liquidate everything? That's quite a barbell. That really 0:14:09.160 --> 0:14:12.480 is quite something. Bloomberg opinions. John Authors and Jonathan live 0:14:12.520 --> 0:14:15.440 in there. Russia's war in Ukraine had some turning points 0:14:15.480 --> 0:14:18.680 this week, with Ukraine retrieving a swathle of land previously 0:14:18.720 --> 0:14:22.560 held by Russian forces and Vladimir Putin announcing reserve troop 0:14:22.640 --> 0:14:26.840 mobilization and referendums and territories of eastern Ukraine. I asked 0:14:26.880 --> 0:14:30.360 Admiral James De Rita's Bloomberg opinion columnist and NATO's Sixteenth 0:14:30.440 --> 0:14:34.120 Supreme Allied Commander, also former commander of US Southern Command, 0:14:34.280 --> 0:14:37.320 to join Admiral Yale Historian Timothy Snyder often says that 0:14:37.400 --> 0:14:40.280 military history is not covered as much as it should be. 0:14:40.400 --> 0:14:43.680 So we concentrate on things like strategy or somebody's thinking 0:14:44.000 --> 0:14:47.160 that they're paramounting conversations about war. So let's start there. 0:14:47.200 --> 0:14:49.920 What do we know right now about what shape Russia 0:14:50.000 --> 0:14:54.480 is in militarily, talking hardware, from tanks to drones, battlefield artillery, 0:14:54.560 --> 0:14:58.600 ammunition and so on. In terms of the systems they 0:14:58.640 --> 0:15:03.240 need to prosecute the war in Ukraine, they're in very 0:15:03.280 --> 0:15:09.080 bad shape, and that means manpower, particularly trained soldiers. They've 0:15:09.160 --> 0:15:14.280 evidently lost around eighty thousand killed or grievously wounded. They've 0:15:14.280 --> 0:15:19.160 lost thousands of tanks, thousands of armored personnel carriers. Their 0:15:19.320 --> 0:15:24.280 grown fleet has been destroyed. That's why they're seeking additional 0:15:24.320 --> 0:15:27.960 help from Iran. So the systems they need to conduct 0:15:28.080 --> 0:15:32.720 a ground war against a well equipped, high morale ground 0:15:32.760 --> 0:15:36.760 force like the Ukrainians are very low. Funny, it's important 0:15:36.760 --> 0:15:40.320 to remember there are other parts of the Russian military 0:15:40.360 --> 0:15:45.120 they are quite capable and remained so, notably their submarine force, 0:15:45.240 --> 0:15:49.440 their nuclear forces, their long range bomber forces. None of 0:15:49.480 --> 0:15:53.160 those have been touched by the Ukrainians, but that forward 0:15:53.640 --> 0:15:58.440 ground element has been decrimented I'd say at least fifty 0:15:59.160 --> 0:16:02.080 and that's quite markable at six months of war. Are 0:16:02.120 --> 0:16:06.400 you suggesting that Russia could somehow change this theater into 0:16:06.440 --> 0:16:11.240 something different. I think Vladimir Putin today is looking at 0:16:11.320 --> 0:16:16.880 options to use other longer range systems to attack Ukraine, 0:16:17.480 --> 0:16:20.920 and that could mean using long range bombers to go 0:16:21.000 --> 0:16:25.040 after the electric grid or the water supplies. It could 0:16:25.120 --> 0:16:28.880 mean a massive cyber attack, something we have been watching 0:16:28.960 --> 0:16:32.560 for but he has not yet chosen to undertake. It 0:16:32.640 --> 0:16:35.320 could be the use, at the very dark end of 0:16:35.360 --> 0:16:37.880 the spectrum, of a chemical weapon, which he would no 0:16:37.920 --> 0:16:41.200 doubt try and false flag attributed it to the United 0:16:41.240 --> 0:16:45.080 States or Ukraine. But because his ground forces have been 0:16:45.160 --> 0:16:49.640 so decremented and have failed him, he's looking at other 0:16:49.760 --> 0:16:53.200 options from a military perspective. How easy would it be 0:16:53.400 --> 0:16:56.400 for him to mobilize any of those sorts of efforts? 0:16:56.400 --> 0:16:58.400 Would it just be a question of giving the order? 0:16:58.880 --> 0:17:03.119 It would be. This is the tragedy of the situation 0:17:03.160 --> 0:17:07.160 in which the Ukrainians find themselves, which is that effectively 0:17:07.440 --> 0:17:12.640 they have a massive sanctuary state, that would be Russia, 0:17:12.880 --> 0:17:16.920 where they are proscribed from attacking Russia. They can't reach 0:17:16.960 --> 0:17:20.920 into Russia and attack those sites because they don't want 0:17:21.000 --> 0:17:25.080 to escalate the war and drag NATO into it. So 0:17:25.359 --> 0:17:29.760 the Ukrainians have a very tough situation in that Russia 0:17:29.840 --> 0:17:35.280 can operate from sanctuary basis and strike into Ukraine. What 0:17:35.320 --> 0:17:39.119 would Vladimir Putin have to take into account international relations wise, 0:17:39.240 --> 0:17:44.000 in order to escalate? He's obviously had conversations with president 0:17:44.080 --> 0:17:47.480 she recently. You mentioned Iran. He's maybe not getting the 0:17:47.520 --> 0:17:49.600 support that he would like from both of those countries. 0:17:49.760 --> 0:17:54.000 Would that matter to him? Increasingly it is mattering to him, 0:17:54.119 --> 0:17:57.720 and very recently, of course, in Uzbekistan, the meeting of 0:17:57.760 --> 0:18:02.399 the Shanghai Cooperative Organization and Um the meetings that he 0:18:02.480 --> 0:18:05.879 had there were tepid at best in terms of the 0:18:05.960 --> 0:18:12.400 level of support from Russia, Iran in India. Frankly, moody 0:18:12.440 --> 0:18:16.960 in public really chastise Putin's good to see. So he's 0:18:17.000 --> 0:18:21.200 got a weak international flank there and on the other 0:18:21.280 --> 0:18:27.120 side the United States, NATO, Japan, the Pacific democracies are 0:18:27.359 --> 0:18:31.120 very unified at this point. So Putin has not only 0:18:31.200 --> 0:18:34.240 the military problems we just spoke about and not only 0:18:34.280 --> 0:18:39.000 the economic problems, he's got a significant diplomatic shortfall as well. 0:18:39.520 --> 0:18:41.200 So it seems what you're saying is that a ground 0:18:41.280 --> 0:18:43.639 war offensive to continue. That would be quite difficult for 0:18:43.680 --> 0:18:46.399 President Putin, but he does have other options. At the 0:18:46.440 --> 0:18:49.880 same time, the opinion columnists, Leonid Breshitski talks about Russian apathy, 0:18:49.920 --> 0:18:52.520 and we're seeing internal descent now as well from many, 0:18:52.680 --> 0:18:56.240 dozens of municipal leaders. Will that play a part in 0:18:56.359 --> 0:19:01.920 Putin's decision? So far it will not. He still maintains 0:19:02.400 --> 0:19:06.440 brutal control over the levers of power. It seems every 0:19:06.480 --> 0:19:10.800 week I hear about a new Russian oligarch who mysteriously 0:19:11.040 --> 0:19:14.800 falls out a window of a six more hospital or 0:19:15.320 --> 0:19:21.439 suddenly goes overboard from his yacht. But those cracks are widening, 0:19:21.600 --> 0:19:25.600 and it's not just the oligarch Spannia, it's also on 0:19:25.760 --> 0:19:29.280 his right, and there is a right of Putin in Russia, 0:19:29.800 --> 0:19:34.080 hard right that's saying, Mr Putin, take the gloves off, 0:19:34.200 --> 0:19:37.360 and they're sort of advocating for all the kind of 0:19:37.880 --> 0:19:40.800 escalations you and I just talked about. And then, finally, 0:19:41.000 --> 0:19:44.639 a woman named Ala Pugasheva, who has been described to 0:19:44.680 --> 0:19:47.439 me as kind of a combination of Brittany Spears at 0:19:47.520 --> 0:19:52.160 Taylor Swift, one of the most popular Russian pop music stars, 0:19:52.240 --> 0:19:55.040 has just come out against the war. There are cracks 0:19:55.080 --> 0:19:57.639 emerging and Putin is going to have to deal with 0:19:57.680 --> 0:20:00.280 that as well. We know Ukraine took Marcas much as 0:20:00.320 --> 0:20:02.720 ten percent of the territory that Russia had seized. It 0:20:02.800 --> 0:20:05.639 was seen as a major win for Ukraine. But given 0:20:05.800 --> 0:20:08.880 everything you've just said, can we actually say that Russia 0:20:09.040 --> 0:20:11.280 is losing the war? Is that something that could change 0:20:11.359 --> 0:20:17.560 very quickly? I think the Ukrainians conducted a very smart surprise, 0:20:17.880 --> 0:20:23.080 almost attack, of Blitzkrieg like, and they've taken thirty square 0:20:23.119 --> 0:20:28.159 miles back. Putin's forces stumbled out of those territories. But 0:20:28.200 --> 0:20:31.640 I think your fundamental point is the right one, which is, yeah, 0:20:31.760 --> 0:20:35.360 it's too soon to say who's winning who's losing. At 0:20:35.400 --> 0:20:40.000 the moment the momentum has shifted and it is clearly 0:20:40.040 --> 0:20:42.800 on the side of the Ukrainians. But it's going to 0:20:42.880 --> 0:20:48.399 get harder because Putin's forces are compressing back into smaller 0:20:48.600 --> 0:20:54.440 territorial areas that they've held since is on. The defense 0:20:54.640 --> 0:20:58.320 is a better military position. You have to have three 0:20:58.320 --> 0:21:02.240 times as many troops to over come strong defensive positions. 0:21:02.720 --> 0:21:05.359 All of that, I think, is going to make it 0:21:05.680 --> 0:21:09.440 harder in the months ahead for Ukraine to replicate the 0:21:09.520 --> 0:21:12.840 rather sweeping character of what they've been able to accomplish. 0:21:12.960 --> 0:21:15.159 We talked a little bit about what Russia has at 0:21:15.200 --> 0:21:20.240 its disposal militarily. What does Ukraine haven't need militarily, from 0:21:20.320 --> 0:21:23.600 hardware to all of the other types of artillery that 0:21:23.640 --> 0:21:26.840 you spoke about? They're very well supplied at this point. 0:21:26.880 --> 0:21:29.320 But I'll give you three things that I think are 0:21:29.359 --> 0:21:33.240 on President Zelinski's wish list. One, and at the top 0:21:33.280 --> 0:21:37.520 of that list, is a long range surface to surface, 0:21:37.680 --> 0:21:42.800 highly accurate missile called a tacums. It's an acronym and 0:21:43.040 --> 0:21:46.480 a tacoms is like High Mars, which everyone has learned 0:21:46.480 --> 0:21:48.920 what the High Mars is. High Mars has a range 0:21:48.920 --> 0:21:53.600 of about fifty miles. A tacum is high Mars on steroids. 0:21:53.640 --> 0:21:56.520 It goes two hundred miles. So it would allow the 0:21:56.680 --> 0:22:00.639 Ukrainians to reach even deeper behind the front lines of 0:22:00.720 --> 0:22:04.440 Russia and disrupt their logistics, their command and control. That's 0:22:04.520 --> 0:22:08.439 way up his list. Number two, President Zelinsky would like 0:22:08.480 --> 0:22:12.679 fighter aircraft. It ideally loved F sixteens from the United 0:22:12.720 --> 0:22:16.280 States had welcomed MiG twenty nine for Poland. He needs 0:22:16.480 --> 0:22:20.879 more fighter aircraft. And number three, he would still like 0:22:21.119 --> 0:22:25.320 additional sea going cruise missiles to take the fight to 0:22:25.359 --> 0:22:28.840 the black sie fleet. Beyond those three systems, and those 0:22:28.840 --> 0:22:32.720 are big, important systems, but everything else has been putting 0:22:32.760 --> 0:22:35.520 the hands of the Ukrainians and they're putting into good use. 0:22:36.200 --> 0:22:39.440 Would everything you just mentioned be enough to counter if 0:22:39.600 --> 0:22:43.239 Russia were to mobilize its submarine fleet, for example, as 0:22:43.240 --> 0:22:47.439 he mentioned earlier? I think that what Putin's next big 0:22:47.520 --> 0:22:52.159 challenge is, and you mentioned the word, it's mobilization. He 0:22:52.400 --> 0:22:56.960 is going to have to mobilize troops. That's his biggest 0:22:57.000 --> 0:23:01.360 shortfall at this point and obviously you can build troops 0:23:01.359 --> 0:23:04.720 in a factory. You have to mobilize them, draft them, 0:23:04.800 --> 0:23:08.359 can script them, given uniforms, train them, put them into 0:23:08.359 --> 0:23:12.520 the fight. That's when your base at home really starts 0:23:12.560 --> 0:23:16.600 to dislike what's happening, just like occurred for the United 0:23:16.640 --> 0:23:19.800 States during the war in Vietnam. What brought down the 0:23:19.920 --> 0:23:23.000 United States is participation that were in many ways was 0:23:23.119 --> 0:23:27.040 the unpopularity of the draft. Putin knows that that's a 0:23:27.040 --> 0:23:29.520 big challenge for him coming up. And let's move to 0:23:29.560 --> 0:23:31.720 a different theater, though one hesitant to use the word 0:23:31.800 --> 0:23:34.760 theater because the activities may not meet the criteria for 0:23:34.840 --> 0:23:37.360 that word, and obviously I'm talking about China and Taiwan. 0:23:37.800 --> 0:23:39.800 It was quite striking to hear it spelled out by 0:23:39.840 --> 0:23:43.040 the presidents on CBS of sixty minutes that US troops 0:23:43.200 --> 0:23:47.200 would be involved. So physical troops involved, but when US 0:23:47.280 --> 0:23:50.240 forces defend the island? Yes, if in fact there was 0:23:50.280 --> 0:23:54.199