Speaker 1: Yeah. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Yeah. So,
Speaker 1: President Donald Trump said he expected your own power to
Speaker 1: be a cheap money FED chairman and lamented to wealthy
Speaker 1: Republican donors at a Hampton's fundraiser this past week that
Speaker 1: his nominee instead has raised interest rates. This according to
Speaker 1: three people who were present in the Hampton's listening to
Speaker 1: the President of the United States. Joining us here in
Speaker 1: New York City. Present with us is John Riding, Anti
Speaker 1: que Economics chief economist and founding partner. Good morning to
Speaker 1: your John, John. I guess the big important is whether
Speaker 1: any of this influences the Federal Reserve. Does it. If
Speaker 1: it does, it's only to be more resolved in getting
Speaker 1: on with the job of renormalizing interest rates. But to
Speaker 1: be honest, the Fed is going to be guided by
Speaker 1: the fact the unemployment rates at three the inflation rate
Speaker 1: is pushing above two uh and that's going to keep
Speaker 1: the Fed on task raising interest rates in September and
Speaker 1: December this year, and I was like spoke with Tom
Speaker 1: and the tv UH in the last hour four more
Speaker 1: times in two thousand nineteen, regardless of what the president said.
Speaker 1: And by the way, there is nothing in h J.
Speaker 1: Pal's background to have led one to believe that he
Speaker 1: was going to be an easy money UM central bank
Speaker 1: head uh and UM. So I don't know. I wasn't
Speaker 1: president in Hampton's. I don't vacation in Hamptons, so I
Speaker 1: can't say what was It wasn't said behind He might
Speaker 1: have been there because Tom King was away Friday and yesterday,
Speaker 1: so maybe Tom, did you make it to the Hampton's?
Speaker 1: Did the temperature went down? Could handle it? Did you?
Speaker 1: Did you get a position in the FX marketing time?
Speaker 1: But no story came out. I mean, that's what's crazy
Speaker 1: about this, right. There were people who were privy to
Speaker 1: some pretty important comments from the President the United States
Speaker 1: and a private setting job, but it doesn't affect policy.
Speaker 1: Mark market moves on headlines, and we have a president
Speaker 1: who can give us more headlines than others from his
Speaker 1: own cell phone. Um. But in the end, as a comeback,
Speaker 1: it's what the FED does uh? And I think ahead,
Speaker 1: please no. I I think that the FED is the
Speaker 1: FED is on task here and will be more truly
Speaker 1: data driven than it comes three or four years ago.
Speaker 1: Then push against the good economists who you agree to
Speaker 1: disagree with on this point, who say it will be
Speaker 1: damaging to raise rates. How do you respond to those
Speaker 1: good and qualified economists. I don't see what the damage. Look,
Speaker 1: we we there's nothing more damaging. Again, you're talking tenurees
Speaker 1: on for the financial crisis and less financial crisis and
Speaker 1: the great recession we went through. And what were the
Speaker 1: origins of that. It wasn't that monetary policy was too
Speaker 1: tight too quickly. It was that monastry policy was far
Speaker 1: too easy for far long in a too likely regulated
Speaker 1: capital market environment. So the thing is that, you know,
Speaker 1: going going back to another famous ahead of the vet,
Speaker 1: the vet's job is to take the punch bowl away
Speaker 1: when just when the party is getting good. And this
Speaker 1: party has been pretty good for a good while, and
Speaker 1: they've only been sort of closing the bar in very
Speaker 1: small stages. And I think that that's what they have
Speaker 1: to continue to do. I think that's what history, doesn't it.
Speaker 1: And when you hear unconventional central banking guide years like
Speaker 1: low interest rates are good, high interest rates caused inflation.
Speaker 1: You're talking about Turkey, you're talking about Venezuela, you're talking
Speaker 1: about Argentina, talking about a very different economics textbook. Um, John,
Speaker 1: I think it's also quite easy to point out and
Speaker 1: maybe the Federal Reserve is still quite accommodative. Absolutely, as
Speaker 1: I said again with Tom before, the short term interest
Speaker 1: rates who below the inflation rate. We have negative real
Speaker 1: interest rates and that is an historical anomaly and one
Speaker 1: that if persisted, would lead to misallocation of capital. And
Speaker 1: it's that misallocation of capital as we had the capital
Speaker 1: misallocated in the in the in the last decade um
Speaker 1: that led to the housing bubble and led to the
Speaker 1: mortgage crisis in the financial Now, this line probably doesn't
Speaker 1: work on the campaign trail, but the yield curve is
Speaker 1: something the FED might respond to. The Atlanta FED President
Speaker 1: Raphael Bostock yesterday claimed that he will not vote for
Speaker 1: anything but that will knowingly invert the curve, and he's
Speaker 1: hopeful that as we move forward he won't be faced
Speaker 1: with that. We seriously face in the prospect that over
Speaker 1: the next couple of meetings, we might see some descent
Speaker 1: at the FED because of whether yield cove is right now,
Speaker 1: yield curve is right now? Look, I suppose that's possible.
Speaker 1: We've had the center at the FED before um in
Speaker 1: in rate hikes last year. But the FED is not
Speaker 1: an innocent actor on the long end of the curve.
Speaker 1: The FED has a massive balance sheet in long term bonds,
Speaker 1: both mortgage bonds and treasury securities that are holding down
Speaker 1: long rates. So I will put the question back, would
Speaker 1: President Bostick want to see a faster wind down of
Speaker 1: the balance sheet or even active sales of long end
Speaker 1: rates which would push interest rates up? As by the way,
Speaker 1: I think will the supply of treasury is that need
Speaker 1: to be issued in order to fund the growing federal deficit?
Speaker 1: And John, let me ask you a slightly technical question
Speaker 1: as well. When the curves should they be looking? Tim
Speaker 1: Dowey of the University of Oregon race this, Does it
Speaker 1: FED funds right out to tends? Is it twos tends?
Speaker 1: What are the FED looking at? Well? When I joined
Speaker 1: the New York Fed in the Fed's expert in that
Speaker 1: area was an economist called Arturo. Yesterday, I worked with him.
Speaker 1: His work was three month te bills to UH ten
Speaker 1: year rates, and that curve is a lot less flat
Speaker 1: than the market popularized two years to ten year curve,
Speaker 1: which is where you know people people tend to look
Speaker 1: but but I think FED fund not FED fund, but
Speaker 1: it's pretty much same thing. Three month bills to ten
Speaker 1: years is where the FEDS research points within within this
Speaker 1: is I guess the people behind German Powell, as you mentioned,
Speaker 1: he's a pragmatist, but at the same time he's not
Speaker 1: an account This line up the governors right now and
Speaker 1: now they will defend this chairman. Well, I I think
Speaker 1: you know j. Pau By by training, you know, is
Speaker 1: a lawyer, is a capital markets guy. I have to
Speaker 1: say that he assimilates and understands research in a way
Speaker 1: um that you know might surprise economists and say, well
Speaker 1: if you don't have a page, so you don't have this,
Speaker 1: you know, how can you get it? He? I mean
Speaker 1: he gets it um uh. And I think he is
Speaker 1: a consensus builder. And I don't think that in terms
Speaker 1: of the governors of the FED, who are all too
Speaker 1: few compared to the seven governors that the FED is
Speaker 1: supposed to have. Uh, they there's no um that that
Speaker 1: all of them would be back. John Bran j Pa
Speaker 1: Good to see It, Q Economics, Chief Economists and found
Speaker 1: in Karna. He is the author of Securities Regulation Cases
Speaker 1: of Materials Edition. John Ferrell read that cover to cover.
Speaker 1: He is the most cited lawyer on entrepreneurial and corporate affairs.
Speaker 1: Of course he is John Coffee. There is only one
Speaker 1: of Columbia Law School, and we are honored. The Professor
Speaker 1: Coffee joins us this morning on Professor Musk. John Coffee,
Speaker 1: if you were advising Elon Musk this morning, what would
Speaker 1: you say to him? Well, he needs to reach an
Speaker 1: agreement with his board, and he needs to reach an
Speaker 1: agreement with the SEC, and he needs very much to
Speaker 1: shrink his shareholder base. To do a going private transaction.
Speaker 1: He has to get the number of shareholders a record
Speaker 1: of Tesla below three. Currently they're around one thousand, one
Speaker 1: hundred and fifties. So it's a shrink that's gonna be
Speaker 1: hard to do. Uh. Simultaneously, he can't do this transaction
Speaker 1: if the SEC is suing him, and I think with
Speaker 1: the SEC really watching him, which he probably should give
Speaker 1: without a fight, is some kind of an agreement about
Speaker 1: how he will make future statements about the company and
Speaker 1: this proposed transaction. Thus, I think the SEC is going
Speaker 1: to insist that you enter an agreement that you won't
Speaker 1: make further statements on Twitter without at least first clearing
Speaker 1: them with your general counsel on the board. Okay, John,
Speaker 1: and you're in your classroom and you mentioned Netflix and
Speaker 1: the re Hastings rule. We're gonna make original law here
Speaker 1: to come out. Are we going to make an original
Speaker 1: law that treats technology companies like industrial companies? Or is
Speaker 1: technology gonna have an asterisk where they have a different
Speaker 1: securities and regulation process. I think investors are the same
Speaker 1: investors invest in both kinds of companies, and investors want
Speaker 1: full information. Twitter statement, limited as it is to something
Speaker 1: like a hundred and fourteen letters, really can't explain the complexity.
Speaker 1: And his statement that funding was secured was extreme overstatement,
Speaker 1: and it's partly the product of having to compress what
Speaker 1: he was saying to a tiny number of letters. Thus,
Speaker 1: I think you need to make a fuller statement and
Speaker 1: then add your social media statements afterwards, but start out
Speaker 1: with something that you disclosed to the SEC, to the
Speaker 1: market generally and in a corporate press release. So, Professor,
Speaker 1: there is a difference, of course between best practice, which
Speaker 1: is something you've just described, and something that is legally
Speaker 1: required and something that would be against SEC roles. You've
Speaker 1: served as a member on the SEC Advisory Committee, and
Speaker 1: I'm interested, Professor, as to whether you would be telling
Speaker 1: them that actually they need to rethink disclosures on social media. Well,
Speaker 1: I think social media is useful. No one wants to
Speaker 1: keep it off of social media, but that's not inconsistent
Speaker 1: with having simultaneous statements. Make your statement on social media
Speaker 1: to that audience, but the rest of the market, not
Speaker 1: all of which goes to social media, is entitled to
Speaker 1: some disclosure that's filed with the SEC and a formate
Speaker 1: K or something that's put on the corporation's website where
Speaker 1: everyone knows they can go. A selective disclosure is problematic.
Speaker 1: What should the board do? And the board is made
Speaker 1: up of different principles. Let me start with the most
Speaker 1: visible member to the audience, and that is Mr Murdoch.
Speaker 1: James Murdoch, of course affiliated with Fox and perhaps Disney.
Speaker 1: How should a board member like James Murdoch act and
Speaker 1: react to all of this? Well, of course, there is
Speaker 1: a committee that doesn't include him. They've appointed a committee
Speaker 1: to engage in valuing the company, and I think everyone
Speaker 1: should be focused on the need to come up with
Speaker 1: an independent investment banker and an independent law firm that
Speaker 1: helps this committee decide with the fair value the company is.
Speaker 1: The price cannot be four dollars just because Mr Musk
Speaker 1: said that. The company has got to sit down and
Speaker 1: evaluate their current value, looking at all the current factors
Speaker 1: and looking at professional help and investment vanking firm. Once
Speaker 1: they do that, they might well decide they're worth more
Speaker 1: because the premium that Musk was offering was only and frankly,
Speaker 1: most going private transactions see something like a thirty premium. John,
Speaker 1: what's the Bard's duty to investors right now after the
Speaker 1: interview of The New York Times, Well, I think right
Speaker 1: now the company has so many problems with their burn
Speaker 1: rate on cash flow that they've got to make sure
Speaker 1: they can communicate clearly that they are viable, that they
Speaker 1: are not burning money at such a negative cash flow
Speaker 1: that they can't afford to issue new debt. They already
Speaker 1: have ten billion of dead outstandings, and the idea that
Speaker 1: you can triple that um is something of a fantasy
Speaker 1: us joining us or without question or interview of the
Speaker 1: day on equities and Tesla and corporate governance. He is
Speaker 1: John Coffee of Columbia Law School. They're bro Professor of Law,
Speaker 1: director of their Center on Corporate Governance. Within the board,
Speaker 1: I guess it's a it's a smaller, more focused board,
Speaker 1: and I guess it's friends of Elon is a board?
Speaker 1: Are they getting enough advice now? And how does the
Speaker 1: board interact with their independent law firm? Well, they need
Speaker 1: to choose the independent law firm. They apparently have one.
Speaker 1: They really got two law firms because they got one
Speaker 1: handling the possible litigation and another dealing with the valuing
Speaker 1: the company. But the committee needs both an independent investsel
Speaker 1: banker and independent law firm that will be there focused
Speaker 1: on what is the fair value of this company today?
Speaker 1: What do we need to know and how do we
Speaker 1: negotiate with Mr Musk? Because it is not their job
Speaker 1: to sit down and say yes to Mr Musk. It
Speaker 1: is their job to say the fair value of this company,
Speaker 1: given all the different range of options in front of us,
Speaker 1: is at least X, and therefore we want you to
Speaker 1: improve your offer is this board independent of Elon Musk? John? Again,
Speaker 1: is this board independent of Elon Musk? Well, I must
Speaker 1: say that they have more relationships with him over a
Speaker 1: twenty year career than any other board I can think
Speaker 1: of right away. It's kind of an incestuous relationship because
Speaker 1: people even on the committee have previously been employees and
Speaker 1: Mr Musk and other firms. What would you do that?
Speaker 1: I mean, what what would be the John Coffee action
Speaker 1: for this board? I mean, they're going through all the
Speaker 1: right things, I get that, but what is the next
Speaker 1: creative step for a board to get control of an
Speaker 1: uncontrollable founder slash ceo? Well, I think the first thing
Speaker 1: would be to establish a protocol. You will make no
Speaker 1: more statements about the company or this transaction without first
Speaker 1: having them cleared by our general Council and by the
Speaker 1: law firm representing the in the committee. We want to
Speaker 1: make sure we don't get an obligation to fight off
Speaker 1: sec and private losses because you are too impulsive and
Speaker 1: saying things too quickly and too glibly. What will be
Speaker 1: the lasting impact on this and Silicon Valley? I mean,
Speaker 1: I know Tessa is unique, but we've had a few
Speaker 1: other entrepreneurial tech types feeling like they play with their
Speaker 1: own record. Bug. I'm afraid that that all depends on
Speaker 1: whether this is a success or a failure. This is
Speaker 1: still to be resolved. Drama every day Like a kaleidoscope.
Speaker 1: This changes in terms of whether people have losses or
Speaker 1: they have gains, whether the burn rate is so high
Speaker 1: nothing seems feasible, or whether the board should be seeking
Speaker 1: more than This has to play out, And I think
Speaker 1: settling with the sec so that you no longer have
Speaker 1: them over your shoulder and putting a cloud in transaction
Speaker 1: and then coming up with evaluation that you're comfortable with
Speaker 1: and that can't be just we're going to do with
Speaker 1: Mr musk Off. John Coffee, author of Entrepreneurial Litigation. It's
Speaker 1: Rise Fall in Future out a few years ago, of
Speaker 1: course at Columbia Law School, thrilled to bring you Professor Coffee,
Speaker 1: Foreign Affairs with a new issue out, and of course
Speaker 1: this September issue is always an important event, but never
Speaker 1: more important than their new issue. Why because you and
Speaker 1: me we are so dumb about the modern Internet. In
Speaker 1: the modern web, the book is the magazine rather is
Speaker 1: the World War Web. And it is absolutely brilliant cover
Speaker 1: to cover on stuff we don't know with this, Gideon Rose,
Speaker 1: he is, of course the editor in chief of Foreigners. Gideon,
Speaker 1: congratulations on this. Let me get right to it. The
Speaker 1: Internet has lost its promise to gus, so thank you
Speaker 1: very much for your kind words about the issue. UM. Basically,
Speaker 1: think of this as a four act play. In the
Speaker 1: first act, the United States Government creates the fundamentals of
Speaker 1: what will now call the Internet, UH, the communications networks,
Speaker 1: the Defense Department stuff, all that. In Act to the
Speaker 1: United States Government pairs with and partners with the private
Speaker 1: sector to develop. This makes it the infrastructure generally public
Speaker 1: and then allows private sector actors to develop all sort
Speaker 1: of applications so forth. This is the golden age of
Speaker 1: the Internet, the nineteen nineties. Things like that. Act three,
Speaker 1: this starts to pray because the system goes on autopilot.
Speaker 1: And what happens is the large private tech companies UH
Speaker 1: take over large course portions of the Internet and become
Speaker 1: a sort of oligopoly running things on their own. Government
Speaker 1: regulators really don't really get involved, and the Internet takes
Speaker 1: on its own life. And during chapter three, Act three,
Speaker 1: various people start to push back against the problems with
Speaker 1: the Internet. The Chinese try to succeed in a cyber
Speaker 1: sovereignty in their own sphere. The Europeans try to do
Speaker 1: regulation with gdp R, the Indians trying to build a
Speaker 1: new Internet from the ground up on more populist public
Speaker 1: good UH bases, and the Americans sit around wondering, g
Speaker 1: can we control the tech companies? But Americans are so
Speaker 1: embedded in an Anglo American view of liberal capitalism, in
Speaker 1: which the government lets the private sector do its stuff,
Speaker 1: that American policy has allowed the Internet to create problems,
Speaker 1: and now other people are stepping in to fix the problems. Explained,
Speaker 1: then who has the power here is? You go chapter
Speaker 1: by chapter brilliantly. Is it China or the power or
Speaker 1: is it a European regulatory structure. So the great question
Speaker 1: is we don't know who's going to have the power
Speaker 1: and act for because what happened in Act one and
Speaker 1: two was the U. S Government created the infrastructure and
Speaker 1: turned it over to the private sector to help run.
Speaker 1: And in Act three we ended up getting a lot
Speaker 1: of pushback. And right now you have governments like China,
Speaker 1: you have regional regulators like those in Europe, you have
Speaker 1: private sector companies like big tech. You have the citizens
Speaker 1: in general and you and you. Nobody knows who is
Speaker 1: going to control the commanding heights of the digital economy,
Speaker 1: like for example, data regulation. Who is going to get
Speaker 1: to keep and control and monetize the data, the individuals,
Speaker 1: the companies, the government. You mentioned commanding heights, which is
Speaker 1: of course Daniel Jurgan in his classic book on the
Speaker 1: nineteenth to the twentieth century capitalism, there were two wars
Speaker 1: in the middle of Dan Jurgen's commanding heights. What's going
Speaker 1: to be the warfare equivalent of this technology in our society?
Speaker 1: So it's not going to be warfare in terms of
Speaker 1: geopolitical conflict between uh the major powers. What's going to
Speaker 1: happen is there was a common American sponsored liberal open
Speaker 1: order of the Internet, somewhat parallel to the globalization order,
Speaker 1: and American officials moved that forward to get all the benefits.
Speaker 1: But they forgot that the destruction. Part of creative destruction
Speaker 1: creates pushback and people resist. And what you're seeing now
Speaker 1: in China, in Europe, in India, even in the US,
Speaker 1: is people reacting against an unfettered private tech or dominated internet.
Speaker 1: But no one knows how to re establish control because
Speaker 1: you don't want to kill the goose that's laying the
Speaker 1: golden eggs. So what's happening right now is a question
Speaker 1: over the future control of the Internet. It's not necessarily
Speaker 1: just gonna be what it was in the last couple
Speaker 1: of decades, which is the United States debating whether or
Speaker 1: not to allow tech companies to have control over things.
Speaker 1: Now other global players are in fact going to be
Speaker 1: the news. Just in the last twenty four hours, Apple
Speaker 1: limit x number of apps to China. I mean within
Speaker 1: your chapter on China. They're making the rules were not
Speaker 1: and even Tim Cook, chief operating officer of Tesla Bound
Speaker 1: Tim Cook asked to bow to China. So what I
Speaker 1: feel about this is it's a little bit like the
Speaker 1: econom nationalism in other areas that we're seeing right. Globalization
Speaker 1: races forward, it produces lots of wonderful things, lots of
Speaker 1: creative destruction and turmoil, but it also produces pushback and
Speaker 1: problems for people inside major developed Western countries, which causes
Speaker 1: them to want to put breaks in the process. Okay,
Speaker 1: the fact is the Chinese are doing the same thing
Speaker 1: with the Internet, and just like American economic nationalists and
Speaker 1: populists and British ones and places elsewhere want to hive
Speaker 1: off their economies from the globe and establish sovereignty. So
Speaker 1: the Chinese are trying to do the same thing for
Speaker 1: the Internet, right, But we're talking about two different different things, right.
Speaker 1: Getting on the one side, it's like cybersecurity and and
Speaker 1: I guess you know, the cyber race on who will
Speaker 1: have supremacy between China and the US. The other one
Speaker 1: is simply who is in the third act? It could
Speaker 1: be regulators, right, and this is Europe. Europe as leading
Speaker 1: the forefront regulation. I know Tom in the past has
Speaker 1: pushed back against it, but when it comes to data protection,
Speaker 1: these are the new p full in town. Yes, but
Speaker 1: it's actually there are several competitors trying to do the
Speaker 1: same thing, and we don't know which way of controlling
Speaker 1: the problems is going to win out. The European approach
Speaker 1: is regulation for the whole system, Okay. The Chinese approaches
Speaker 1: secession from the system cyber sovereignty. Eventually, the goal of
Speaker 1: that is to create essentially a Splinternet in which there's
Speaker 1: a general public Internet. But the Chinese have built their
Speaker 1: own platforms, their own system and twenty years. In effect,
Speaker 1: it will be much more of a Chinese dominated Internet
Speaker 1: than UH than American dominated one. The Indians want to
Speaker 1: re engineer the whole thing from the ground up. Fascinating.
Speaker 1: Our article by Nanda Nilakani UH from Emphasis about what
Speaker 1: the Indians are doing in Internet policy maybe the most
Speaker 1: impressive and interesting of all of the different approaches, even
Speaker 1: though we don't hear much about it, and basically in
Speaker 1: the United States we're still wondering what to do because
Speaker 1: we don't basically have the conceptual ability to direct companies
Speaker 1: the way the government wants. And so for the public
Speaker 1: ones talking about regulation because there's a great, great, great
Speaker 1: article in the latest edition of Foreign Affairs written by
Speaker 1: Helen Dixon saying regulate to liberate? Can Europe save the Internet? Cannet? Well,
Speaker 1: so this is the great question. We tried to present
Speaker 1: a fair picture of this whole, big debate that's going
Speaker 1: forward on the future. So the lead piece in the
Speaker 1: packages by Adam Siegel talking about the transition of power
Speaker 1: from the United States to China. Helen Dixon's article expresses
Speaker 1: the European approach, which is, no, we doesn't have to
Speaker 1: be the U s approach or the Chinese separate one
Speaker 1: we can regulate it. Non Da Nilakani talks about the
Speaker 1: Indian one. We also have a number of different pieces
Speaker 1: on specific challenges of cybersecurity. You should look at the
Speaker 1: European approach, the Chinese approach, the Indian approach, and the
Speaker 1: American approach as variants of the same thing. Now that
Speaker 1: we've unleashed the wonderful creative destruction of digital technology, how
Speaker 1: do we keep it going forward in a positive way
Speaker 1: while controlling the social and political effects of all this
Speaker 1: creative destruction? But with these nations ever come together get
Speaker 1: in I don't know whether it's a plaza chord for
Speaker 1: the Internet, but you know that's the kind of idea.
Speaker 1: So if people like John writing we're controlling this stuff,
Speaker 1: then the answer would be yes, because there's an obvious
Speaker 1: benefit for people to come together in a collective action
Speaker 1: coordination solution to reap the benefits of a coordinated policy
Speaker 1: uh with into a regulation. But the problem is, right
Speaker 1: now we have a tied in infnational politics in the
Speaker 1: United States and elsewhere which is going inward rather than collective.
Speaker 1: And I think the answer is we're moving towards a
Speaker 1: splinternet more than we are towards a new You steal
Speaker 1: that word splinternet, you get a royalty on that. It's
Speaker 1: not mine, but it's royalty. Here's the New York Times today,
Speaker 1: folks all read it for your Russian ackers broad and
Speaker 1: attacks to conservatives. First of all, I got to make
Speaker 1: some news here was this was a counsel on foreign
Speaker 1: relations hacked by by Russians. Is within this article. Like
Speaker 1: everybody else, we're constantly fit an attacked by various different actors.
Speaker 1: But that's just that's like, the Russians don't bother me
Speaker 1: as much. The Russians are like um, butch Casside and
Speaker 1: the Sundance harassing the railroad. Who's the Catherine Ross of
Speaker 1: the World War Web? The Chinese who are gonna be
Speaker 1: building a whole new railroad. So we're worrying, like E. H.
Speaker 1: Harriman and the Union Pacific Railroad about who's stealing our
Speaker 1: little We're worrying about who's stealing or are safe. The
Speaker 1: Chinese are going around buying up the land and running
Speaker 1: the developing engine technology. Twenty years from now, we're gonna
Speaker 1: be running on Chinese trains and we're gonna be wondering,
Speaker 1: how did that happen. Okay, Well, then what Francie's wonderful
Speaker 1: question about how do we get together on this? Where's
Speaker 1: the unifying force, particularly given the fractious politics our presidents
Speaker 1: having with our allies. Karen corn Blue and UH, Michelle
Speaker 1: Flournoy UH and Michael so Meyer have pieces in the
Speaker 1: article in the package telling you what the United States
Speaker 1: should do, and there are a lot of things. Again,
Speaker 1: I would look to the Indian approach of the internet
Speaker 1: as a public good that may hold the best solution
Speaker 1: down the long road. You have a two cook stock
Speaker 1: options is not the public good. The question of the
Speaker 1: regulation of capitalism in a way that is beneficial economically
Speaker 1: but also sustainable politically and socially is going to be
Speaker 1: the question of the mid century. Gideon, do you think
Speaker 1: any of these companies would self regulate for real? Not
Speaker 1: just but just like Martin? Look, yes, yeah, we can
Speaker 1: count on the tech companies to self regulate, just like
Speaker 1: we can count on the pharmaceutical companies to provide low
Speaker 1: cost medicines for everybody without regard to jacking up things
Speaker 1: when they have a scarce monopoly like an EpiPen. Alright, perfect,
Speaker 1: we we uh, we do a little bit of you know,
Speaker 1: that's that's a no. But why not if you listen
Speaker 1: to the rationale of them regulating. It's either you regulate
Speaker 1: or you don't survive if people stop using you because
Speaker 1: you don't. You know, they don't trust. This is they
Speaker 1: make money out of trust. It don't make money out
Speaker 1: of selling drugs. Yes, in the long run, but in
Speaker 1: the short run you make money by increasing your share
Speaker 1: of things. Right, we have a president right now who
Speaker 1: is ignoring the entire costs of a global trade war
Speaker 1: to get some short term, minor advantage in trivial, little issues.
Speaker 1: So that kind of thinking, if it can apply to
Speaker 1: the President of the United States and the entire Republican Party,
Speaker 1: it also applies to individual private sector company managers, so
Speaker 1: we can't rely on them to be responsible for the
Speaker 1: entire global community down the road. Gideon, thank you so much.
Speaker 1: Your most important issue. I I really mean this, folks,
Speaker 1: how dumb I am on our World War Web and
Speaker 1: I've got to read it cover to cover cancer. Enough
Speaker 1: about it. The big question now going forward is what
Speaker 1: will the relationship be between the U S and Turkey,
Speaker 1: and Turkey being it's incredibly important geopolitical location, that it's
Speaker 1: in who is going to come to its rescue? And
Speaker 1: I'm really pleased to say we are now being joined
Speaker 1: by Amanda Sloat, the Robert Bosch Senior Fellow in the
Speaker 1: Center on the United States and Europe at Brookings. Amanda,
Speaker 1: thank you so much for being here. So I want
Speaker 1: to start with now that we do seem to have
Speaker 1: found some stability for today in the Turkish lira, how
Speaker 1: much financial aid will Turkey need and who is going
Speaker 1: to provide it? I well, thank you for having me,
Speaker 1: and that's an excellent question. As you said, we are
Speaker 1: seeing stability today. The money that they got from Qatar
Speaker 1: last week, the fifteen billion, has helped stabilize things. But
Speaker 1: we also had Treasury Secretary Manuchin out last week saying
Speaker 1: that the US was preparing more sanctions, and we had
Speaker 1: President Trump and his wide ranging interview with Reuter's yesterday
Speaker 1: indicate his continued frustration with Turkey. So I think it
Speaker 1: is quite possible that we will see the US imposed
Speaker 1: sanctions or addition measures on on Turkey this week. Then
Speaker 1: we come to the question that you asked, which is
Speaker 1: how the Turkish markets will respond in and what the
Speaker 1: broader challenge of this is Turkey certainly could try and
Speaker 1: find money from other other partners. Uh, they could repair
Speaker 1: US ties as an easy way of dealing with this.
Speaker 1: And then there's still are all the broader structural problems
Speaker 1: that we are seeing in Turkey with one of the
Speaker 1: easiest fixes they could make to is being let the
Speaker 1: central Bank raised interest rates. Yeah, and as you talk
Speaker 1: about the potential for the US to a place further
Speaker 1: sanctions on Turkey, we are just getting some breaking headlines
Speaker 1: that the Treasury is sanctioning Russian vessels and shipping companies, uh,
Speaker 1: and also issuing cyber and North Korea related sanctions to
Speaker 1: just sort of put into context that sanctions are free
Speaker 1: flowing these days. So it isn't a hard stretch to
Speaker 1: think that there might be more on Turkey. But Amanda,
Speaker 1: I guess then the question becomes, you know, we did
Speaker 1: get that loan from Cutter, and I'm wondering we'll Russia
Speaker 1: and will China step in to try to align themselves
Speaker 1: more mostly with Turkey financially at this point, Uh, it's
Speaker 1: certainly possible. Uh. The Turks have been in touch with
Speaker 1: the Russians. There was a call between the Turkish and
Speaker 1: Russian leaders about a week and a half ago, and
Speaker 1: last week we saw the Russian Foreign Minister in Turkey
Speaker 1: uh the challenges that Turkey and Russia have continued to
Speaker 1: have a difficult relationship. You may remember it was less
Speaker 1: than three years ago that Turkey shot down a Russian
Speaker 1: jet that had violated its airspace along the border with Syria,
Speaker 1: leading Russia to slap a number of economic sanctions on Turkey,
Speaker 1: forcing Air Tawan a year later to apologize to Putin
Speaker 1: as a way of getting those lifted. So certainly any
Speaker 1: measures that come from Russia are going to have strings attached.
Speaker 1: From China's perspective, China has been investing quite significantly in
Speaker 1: other parts of Europe, and it would be in China's
Speaker 1: interest to have another foothold in Turkey, which again continues
Speaker 1: to raise questions for Europe in the United States about
Speaker 1: what the longer term implications are going to be from
Speaker 1: from greater Chinese investment in some of these Allied countries.
Speaker 1: Doctor Slot, is wonderful to have you with us, particularly
Speaker 1: after your public service to the nation on the watch
Speaker 1: for Southern Europe and Turkey. Can you enlighten our American
Speaker 1: listeners on the importance and present fragility of this large
Speaker 1: air base we have in Turkey. Is it a threat,
Speaker 1: Is it an important pawn in this debate, or even
Speaker 1: with a rhetoric, is a truly untouchable I it certainly
Speaker 1: is in asset that the Turks could use in retaliation
Speaker 1: for American sanctions on them. It's a Turkish base that
Speaker 1: the US has been using for an extended period of time.
Speaker 1: The UN has various strategic assets that are located there. UH.
Speaker 1: It's also been very helpful to the US in terms
Speaker 1: of prosecuting the fight against the Islamic State in Iraq
Speaker 1: and Sirius, since being able to fly missions from the
Speaker 1: base is much easier than having to fly off carriers
Speaker 1: the Gulf. UH. So far, there has been some using,
Speaker 1: amongst them some lower levels officials. I think in in Turkey,
Speaker 1: some pundits and Turkey that it could be put on
Speaker 1: the chopping block. I am not aware of air to
Speaker 1: Wana or any senior Turkish officials making that threat, although
Speaker 1: it's It's certainly something that has come up periodically in
Speaker 1: in the past when the US has has done things
Speaker 1: that Turkey has not liked. So from where you sit,
Speaker 1: I'm sure the President has his own agenda. Is separate
Speaker 1: from that is the new State Department advising perspective to
Speaker 1: the President on complexities like that air base. I am
Speaker 1: sure the State Department and the Pentagon are feeding all
Speaker 1: of that information into the White House, but as you say,
Speaker 1: it is not clear to me that President Trump is
Speaker 1: taking some of the broader considerations into account. Who who
Speaker 1: is the who is Turkey's ally, Well, it depends on
Speaker 1: the day, and it depends ends on on the the issue.
Speaker 1: I One thing that's been quite striking in Turkey over
Speaker 1: the last couple of weeks is that we're seeing them
Speaker 1: try to mend relations with European countries that they have
Speaker 1: had very fraid relations with. It's quite striking this week
Speaker 1: that you have the Germans coming out musing about whether
Speaker 1: or not they need to provide financial support to Turkey,
Speaker 1: since it's certainly not in Europe's economic interest to to
Speaker 1: see the Turkish economy tank uh And over the last
Speaker 1: couple of years, Germany itself has had very difficult relations
Speaker 1: with Turkey, following accusations of Nazi like behavior. When the
Speaker 1: Germans didn't allow Turkish ministress to campaign to diasporic communities.
Speaker 1: Before constitutional referendum, Turkey was also imprisoning some German citizens
Speaker 1: on spurious charges, and these things lad the Germans to
Speaker 1: impose some of their own economic measures in terms of
Speaker 1: issuing travel advice to citizens, limiting the number of export
Speaker 1: credits that that they were giving to their their own businesses.
Speaker 1: So it's it's quite a role reversal when we now
Speaker 1: have the German having gone through something quite similar, with
Speaker 1: the Turks now wondering if they're going to have to
Speaker 1: come to Turkey's defense to help stabilize its economy. Yesterday
Speaker 1: on Plumber Creator, we were speaking with Admiral James Tavridi's
Speaker 1: who formerly was the military commando of NATO as well
Speaker 1: as the U. S. Navy admiral, and he was saying
Speaker 1: that there is a chance that perhaps Turkey would leave
Speaker 1: NATO and if if it did, it would be disastrous
Speaker 1: for the US. Do you agree, yes, I definitely think
Speaker 1: it would be disastrous. There has been talking about whether
Speaker 1: or not NATO should kick Turkey out. NATO does not
Speaker 1: actually have any mechanisms to do that, so it's a
Speaker 1: decision that Turkey would have to take itself. I have
Speaker 1: not seen any indication from Turkish leadership that that's something
Speaker 1: that they want to do. I think a lot of
Speaker 1: their regional security comes under the offices of the NATO umbrella.
Speaker 1: Turkey has continued to be a good player and and
Speaker 1: member of NATO in the sense of contributing very actively
Speaker 1: to the ongoing mission in Afghanistan. Are the Alliance's second
Speaker 1: largest military uh and actually they are one of the
Speaker 1: countries that is on track to meet defense spending targets
Speaker 1: within the next couple of years. This has been wonderful.
Speaker 1: Don't be a stranger. Doctor Amanda Slote with Brookings or
Speaker 1: Public Service again at the U S Government is Deputy
Speaker 1: Assistant Secretary for Southern Europe and Eastern Mediterranean Affairs. Uh
Speaker 1: Dr Slip thank you again so much, of course serving
Speaker 1: now at Brookings as well. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio