WEBVTT - Surveillance: U.S. Recovery With Bernstein 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferroll and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.680 dot Com and of course on the Bloomberg termament. Let's 0:00:29.680 --> 0:00:32.120 have a conversation with Jared Bernstein u S Council of 0:00:32.159 --> 0:00:36.400 Economic Advisors Member. Jared, we appreciate your ongoing transparency off 0:00:36.440 --> 0:00:38.159 the back of a huge effort to deliver at one 0:00:38.200 --> 0:00:40.800 point nine trillion dollar plan. Let's start with this, how 0:00:40.920 --> 0:00:46.000 unique this moment is and why a unique approach is required. Yeah, 0:00:46.000 --> 0:00:50.200 it's a great question. Uh. The American Rescue Plan, which 0:00:50.200 --> 0:00:53.960 we expect to pass the Congress any moment now, is 0:00:54.280 --> 0:00:56.279 certainly one of the most consequential and one of the 0:00:56.280 --> 0:01:00.320 most progressive pieces of legislation in in in Reese Intoor 0:01:00.360 --> 0:01:04.120 even distant American history. We're talking about getting four hundred 0:01:04.160 --> 0:01:07.280 dollars in checks out to almost a hundred and sixty 0:01:07.319 --> 0:01:10.319 million American families, and those checks start going out the 0:01:10.360 --> 0:01:15.800 door days after signage. Uh. In fact, speaking of deadlines, UH, 0:01:16.000 --> 0:01:20.280 in just a few days, about eleven million Americans risk 0:01:20.360 --> 0:01:23.920 the potential of losing enhanced unemployment benefits if we don't 0:01:23.959 --> 0:01:26.319 extend them, which is of course at the heart of 0:01:26.319 --> 0:01:29.280 the American rescue plan. And then there's of course the 0:01:29.360 --> 0:01:33.120 crucial issue of finally gaining control of this virus, producing, 0:01:33.120 --> 0:01:35.440 distributing the vaccine, getting shots and arms so we can 0:01:35.440 --> 0:01:37.720 get to the other side of this crisis and launch 0:01:37.800 --> 0:01:42.280 a robust, reliable, and inclusive recovery. The shock is different, 0:01:42.360 --> 0:01:44.679 yet we have been conditioned by the previous cycle, and 0:01:44.680 --> 0:01:47.640 the lessons learned from the previous cycle being applied to 0:01:47.680 --> 0:01:50.960 this one, not Yad. That's something I'm struggling with. We've 0:01:50.960 --> 0:01:53.280 been conditioned by the previous cycle that we need to 0:01:53.280 --> 0:01:56.400 do more because the recovery was so so shallow. If 0:01:56.400 --> 0:01:58.360 the shock is different, why are the lessons that we've 0:01:58.440 --> 0:02:02.000 learned previously? Person, and to this one, I think the 0:02:02.040 --> 0:02:04.240 critical lesson there is the one you've said, and I 0:02:04.280 --> 0:02:06.960 don't think that, if anything, the magnitude of the shock 0:02:07.040 --> 0:02:09.680 would would really emphasize that lesson, which is that our 0:02:09.720 --> 0:02:11.720 tendency has been to do too little, not to do 0:02:11.760 --> 0:02:14.200 too much. You know, when I came up in this business, 0:02:14.240 --> 0:02:16.440 there was no such thing as a jobless recovery. You 0:02:16.480 --> 0:02:19.280 had these more v shaped dynamics, and you know, a 0:02:19.320 --> 0:02:22.320 bunch of folks refurlowed from the factory. The shotka went 0:02:22.320 --> 0:02:24.079 into the rear view mirror, and a bunch of folks 0:02:24.120 --> 0:02:27.679 came back. Now, we've had these sluggish, jobless recoveries that 0:02:27.800 --> 0:02:32.520 often set up UH an expansion that underperforms. That's not 0:02:32.600 --> 0:02:35.280 the way Joe Biden wants to see his administration get 0:02:35.320 --> 0:02:37.399 out of the gate. And with the American rescue plan 0:02:37.520 --> 0:02:41.200 behind us, we think again, especially with getting the finally, 0:02:41.240 --> 0:02:44.920 getting this virus behind us is so critical to launching 0:02:45.240 --> 0:02:47.240 not a wait and see, not an on to get 0:02:47.240 --> 0:02:50.080 off again kind of recovery, but a reliable recovery that 0:02:50.120 --> 0:02:53.440 would be durable. Dr Burston, good morning, thrilled to have 0:02:53.600 --> 0:02:56.680 you with us today. You did a front line interview 0:02:56.720 --> 0:02:59.360 and the heat of the financial crisis talking about you 0:02:59.400 --> 0:03:03.200 guys in hair. In a recession, your critics will say 0:03:03.440 --> 0:03:08.120 you are manufacturing a boom economy with this stimulus, and 0:03:08.160 --> 0:03:11.040 they will then go on to say you are manufacturing 0:03:11.560 --> 0:03:16.720 new higher inflation. Defend the administration. Sure, Well, first of all, 0:03:17.280 --> 0:03:20.200 I don't hear too many of those voices outside of 0:03:20.560 --> 0:03:25.440 partisan Republicans. Um even even some economists who've been worrying 0:03:25.440 --> 0:03:28.360 about overheating and critical of the magnitude of the package 0:03:28.400 --> 0:03:32.560 have recognized the support and recognized and support the importance 0:03:32.600 --> 0:03:35.800 of rescue and relief. But let's talk about your inflation question. 0:03:36.120 --> 0:03:38.160 I want to tell you about the three sas Okay, 0:03:38.200 --> 0:03:43.440 you ready for the three s is spending, slack, and savings. 0:03:43.760 --> 0:03:47.640 So spending, by which I mean spend out. Uh. The 0:03:47.720 --> 0:03:50.400 spend out of the American Rescue plan does not occur 0:03:50.560 --> 0:03:53.000 in one month or two months. It is true, and 0:03:53.040 --> 0:03:55.880 it's very important that the checks and the unemployment insurance, 0:03:55.880 --> 0:03:58.760 the enhanced benefits get out very quickly, right out the door. 0:03:59.160 --> 0:04:01.800 But the planets spends out over a couple of years. 0:04:01.800 --> 0:04:04.680 So some of the folks on kind of the overheating 0:04:04.760 --> 0:04:09.520 team don't recognize the spend out pattern. Then there's slack, Okay, 0:04:09.680 --> 0:04:12.920 there is still way more slack in this labor market time. 0:04:12.920 --> 0:04:15.480 And I think your question implied. We have an unemployment 0:04:15.520 --> 0:04:18.400 rate for African Americans of nine point nine percent, eight 0:04:18.440 --> 0:04:21.880 point five percent for Hispanics. Nine point five million jobs 0:04:21.880 --> 0:04:24.520 in the whole still that's deeper than the deepest part 0:04:24.560 --> 0:04:27.400 of the Great Recession. And then of course savings the 0:04:28.240 --> 0:04:31.800 other suh. Some of these benefits, some of these uh, 0:04:31.920 --> 0:04:34.400 parts of the American rescue plan will be at least 0:04:34.440 --> 0:04:37.640 initially saved by people who will then use it to 0:04:37.720 --> 0:04:41.359 meet accumulated debts, say from rents and mortgage forbearance. That 0:04:41.520 --> 0:04:44.680 too puts downward pressure on price pressures. But Jared, we've 0:04:44.720 --> 0:04:46.560 had a number of economists come on and say that 0:04:46.560 --> 0:04:49.280 that was actually perhaps a bit overstated, that actually consumers 0:04:49.320 --> 0:04:51.480 are not as indebted as they have been in the past, 0:04:51.560 --> 0:04:54.159 There isn't as much debt to pay down. That is 0:04:54.200 --> 0:04:57.440 one argument, but there's another argument saying, yes, the depth 0:04:57.480 --> 0:05:00.159 of this crisis was deeper in some ways in the 0:05:00.240 --> 0:05:02.440 last crisis, but it was very different and the bounce 0:05:02.480 --> 0:05:06.200 back has been much faster than economists are predicting. What 0:05:06.360 --> 0:05:09.280 makes you confident that that isn't a sign that we're 0:05:09.279 --> 0:05:11.080 going to get some sort of growth that was going 0:05:11.120 --> 0:05:14.120 to be turbocharged and the inflation also with it. That 0:05:14.200 --> 0:05:16.159 will be a very different picture than what we've seen 0:05:16.200 --> 0:05:18.880 in the past ten years. Yeah. Well, first of all, 0:05:19.000 --> 0:05:21.280 let me talk about the debt issue. And for that, 0:05:21.360 --> 0:05:23.320 you know, you might want to consult with our good 0:05:23.320 --> 0:05:26.640 friend Mark Zandy, who has been tracking a very specific 0:05:26.680 --> 0:05:28.560 type of that, which is the type I've had in mind, 0:05:28.839 --> 0:05:32.599 and that's for people who've been benefiting from rent moratoriums 0:05:32.600 --> 0:05:36.320 and mortgage forbearance. This type of debt is uh, I think, 0:05:36.680 --> 0:05:39.720 quite escalated right now, and it's precisely the type of debt. 0:05:39.760 --> 0:05:42.040 And there's some evidence for this that folks are using 0:05:42.080 --> 0:05:45.000 these benefits to spend down. You know, eviction risk is 0:05:45.040 --> 0:05:47.960 still upon the land, and and and the American Rescue 0:05:48.000 --> 0:05:51.120 Plan addresses that head on. Now. You talked about the 0:05:51.160 --> 0:05:54.560 pace of the recovery. Every forecast I've seen has a 0:05:54.600 --> 0:05:57.560 couple of things common to it. One is that we 0:05:57.680 --> 0:06:00.080 will grow above trend this year and next year. And 0:06:00.160 --> 0:06:03.279 that is precisely the kind of growth rates that the 0:06:03.320 --> 0:06:06.039 American Rescue Plan is supposed to set off again in 0:06:06.080 --> 0:06:08.880 a reliable sense, because we finally put the virus behind us, 0:06:08.920 --> 0:06:11.919 We've safely opened schools, we've gotten families and business as 0:06:11.960 --> 0:06:16.840 a relief they need. But these forecasts also showed heat, yes, 0:06:17.080 --> 0:06:20.440 heat in terms of interest and inflation rates, but not overheat. 0:06:20.480 --> 0:06:22.520 And I think that's the key, j before we let 0:06:22.560 --> 0:06:24.760 you go in about thirty seconds, if you can, something 0:06:24.800 --> 0:06:26.520 you've been finding for for a long long time will 0:06:26.560 --> 0:06:28.240 not be in this bill that goes through the House today. 0:06:28.240 --> 0:06:30.960 It's a high minimum white what's the administration's message to 0:06:31.120 --> 0:06:33.520 progressive members of the House who didn't get what they 0:06:33.560 --> 0:06:38.359 want either. President Biden was disappointed by the ruling of 0:06:38.400 --> 0:06:41.120 the Senate parliamentarian to keep this out of the bill. However, 0:06:41.200 --> 0:06:45.320 that doesn't mean he's at all putting this fight behind him, 0:06:45.320 --> 0:06:49.560 and in fact, he continues to be extremely committed. I 0:06:49.600 --> 0:06:51.640 got an email this morning to that effect, and I 0:06:51.680 --> 0:06:54.400 won't divulge what it's said, but I will say that 0:06:54.480 --> 0:07:00.640 the administration remains that the administration, our administration remains absolutely 0:07:00.640 --> 0:07:03.799 committed to finding a path forward on a fifteen dollar 0:07:04.200 --> 0:07:07.039 minimum wage, and that's going to be work that you'll 0:07:07.040 --> 0:07:09.360 hear a lot more about going forward, Jared. Hopefully we'll 0:07:09.360 --> 0:07:11.080 hear from you soon. This is truly a big, big 0:07:11.120 --> 0:07:13.720 effort down in Washington, d c. And it deserves transparency, 0:07:13.720 --> 0:07:16.360 and I'm pleased we're getting it from you today. Jared Bernstein, there, 0:07:16.280 --> 0:07:26.320 the U. S. Council of Economic Advisors member, let's bring 0:07:26.360 --> 0:07:28.960 it Bruce Cansman's som JP Morgan, chief Economist and head 0:07:29.000 --> 0:07:32.640 of Global Economic Research, Bruce Great to catch obvious. Typically 0:07:32.680 --> 0:07:34.640 we'd start with the analysis, then we get to the forecast. 0:07:34.720 --> 0:07:36.360 Can we just start with the call? What is the 0:07:36.400 --> 0:07:39.720 call from you and the team for this year? So 0:07:39.760 --> 0:07:41.960 we've got the US economy growing at a six and 0:07:42.000 --> 0:07:45.240 a half percent pace UM with the middle part of 0:07:45.280 --> 0:07:49.120 the year uge almost nine growth for the next two quarters. 0:07:49.640 --> 0:07:52.000 I would just want to emphasize the global dimension of 0:07:52.040 --> 0:07:55.760 what's happening here. The US is lifting largely a physical stimulus, 0:07:55.840 --> 0:07:58.400 but we don't want to ignore the lifting you get 0:07:58.440 --> 0:08:01.960 in Western Europe coming as the virus starts to fade 0:08:01.960 --> 0:08:04.600 as the vaccines come on. That's as big a lift 0:08:04.600 --> 0:08:06.880 in our forecast. So we have both the U S 0:08:06.920 --> 0:08:09.320 and Western Europe booming over the next couple of quarters, 0:08:09.480 --> 0:08:12.360 and our mobility and disease are suggesting that that lift 0:08:12.400 --> 0:08:15.240 in Europe started in February. That's right where I want 0:08:15.240 --> 0:08:17.880 to go, Dr Kasmin, and I'll go to Columbia University. 0:08:17.960 --> 0:08:20.720 Let's de tell your world leading market economics with the 0:08:20.760 --> 0:08:24.080 academics of Xavier sale E Martin. If I look at 0:08:24.160 --> 0:08:28.480 growth economics right now, How does the stimulus actually work 0:08:28.800 --> 0:08:31.920 and the emerging markets of Professor salet E Martin or 0:08:31.960 --> 0:08:37.320 in the JP Morgan world, how does it actually diffuse worldwide? Well, 0:08:37.360 --> 0:08:39.880 that's an interesting question, and I think what we're going 0:08:39.960 --> 0:08:43.520 to see is just the dominant effect of of spending 0:08:43.600 --> 0:08:46.280 in the US and Western Europe, which is gonna be 0:08:46.480 --> 0:08:49.319 sucking in imports from the rest of the world. Um, 0:08:49.440 --> 0:08:52.280 that is gonna lift everybody, but there are offsets in 0:08:52.400 --> 0:08:55.880 terms of higher interest rates, in terms of central banks 0:08:56.120 --> 0:08:59.120 in emerging markets, not the FED of course, beginning to 0:08:59.160 --> 0:09:01.760 move towards tight policy. The net effect of this is 0:09:01.760 --> 0:09:04.920 a very clear positive. The other reaction, which I think 0:09:05.000 --> 0:09:08.600 is important is China. They've had a very successful recovery. 0:09:09.000 --> 0:09:11.480 They're gonna sit on the demand they get from the 0:09:11.520 --> 0:09:14.240 rest of the world and tighten policy here. So Chinese 0:09:14.280 --> 0:09:17.520 demand is gonna slow, being somewhat of an offset against 0:09:17.559 --> 0:09:20.880 it otherwise booming global growth picture brus How much is 0:09:20.880 --> 0:09:23.800 this to recovery from some of the lost productivity, the 0:09:23.840 --> 0:09:26.800 lost growth that we saw in and how much are 0:09:26.800 --> 0:09:30.720 we entering a new cycle of potential inflation. Well, the 0:09:30.720 --> 0:09:33.360 way we've been thinking about this is to recognize that 0:09:33.400 --> 0:09:36.960 there is a huge bounce that's coming as we normalize, 0:09:37.160 --> 0:09:41.240 as we get bottleneck pressures, as we're seeing commodity prices. 0:09:41.240 --> 0:09:44.040 So the inflation pick up here looks to us like 0:09:44.080 --> 0:09:47.160 it's gonna bring us and global inflation possibly to the 0:09:47.200 --> 0:09:49.920 highest space we've seen in a decade. I want to 0:09:49.920 --> 0:09:52.000 fade that. I think there's a lot of temporary forces 0:09:52.040 --> 0:09:54.840 that are gonna start to dissipate as we get later 0:09:54.880 --> 0:09:58.160 in the year. However, I think behind the scenes, what 0:09:58.200 --> 0:10:02.080 we're seeing is committed pol sees. We're seeing with this stimulus, 0:10:02.160 --> 0:10:04.560 a very healthy balance sheet on the part of the 0:10:04.600 --> 0:10:08.200 household sector. We're seeing the interaction of FED policy and 0:10:08.240 --> 0:10:11.760 fiscal policy. So I want to buy the reflationary trend, 0:10:12.080 --> 0:10:13.880 and I want to fade the bounce that we're going 0:10:13.920 --> 0:10:15.679 to see in the next few months, which is going 0:10:15.720 --> 0:10:19.760 to weigh over state the degree to which this is changing. Bruce, 0:10:19.800 --> 0:10:21.880 do you think that will be the dominant market narrative 0:10:22.400 --> 0:10:24.480 later this year when we get that better data And 0:10:24.480 --> 0:10:26.080 I keep going back to this story because it's so 0:10:26.120 --> 0:10:28.800 important the data will get better. We can only agree 0:10:28.800 --> 0:10:31.040 on that. Whether you bearish or bullish, what the bears 0:10:31.080 --> 0:10:34.120 believe is that the inflation starts to run away and 0:10:34.160 --> 0:10:36.320 that the market starts to tighten up and then bring 0:10:36.360 --> 0:10:38.440 forward FED hikes as well. Do you think everyone else 0:10:38.559 --> 0:10:41.079 gets your view of the world, or enough people get 0:10:41.120 --> 0:10:43.440 to that view. I think there's no doubt as we 0:10:43.480 --> 0:10:45.600 go through the next number of months and we see 0:10:45.640 --> 0:10:49.120 inflation spikeire as we see these huge growth numbers, the 0:10:49.200 --> 0:10:51.680 debate is going to be are we gonna overshoot our inflation? 0:10:51.720 --> 0:10:53.840 Is the FED going to have to move earlier? I 0:10:53.840 --> 0:10:55.640 think the FED is going to be an anchor here, 0:10:55.960 --> 0:10:59.240 basically telling us that at least until the end of 0:10:59.280 --> 0:11:02.240 twenty two, they're on hold here. They're not gonna change. 0:11:02.280 --> 0:11:05.320 They're they're thinking anytime soon. And I think if we're right, 0:11:05.360 --> 0:11:07.680 what we're gonna see is the inflation numbers settled down, 0:11:08.080 --> 0:11:10.960 but I think in an underlying sense show signs that 0:11:10.960 --> 0:11:13.880 it is moving higher here. So I think the bottom 0:11:13.960 --> 0:11:16.839 line here is that we're gonna definitely buy this as 0:11:16.880 --> 0:11:19.160 a very different event than what we saw after the 0:11:19.160 --> 0:11:22.200 global financial crisis. But we've got to get through this scare, 0:11:22.240 --> 0:11:24.319 and I don't doubt that there's gonna be a lot 0:11:24.320 --> 0:11:26.560 of talk about whether inflation is getting out of control 0:11:26.640 --> 0:11:30.760 here verse I mentioned the X axis, the timeline moments ago. 0:11:30.920 --> 0:11:34.560 Michael Faroli has been a great leader on potential g 0:11:34.679 --> 0:11:39.000 d P. What's the Chasman timeline to get back to 0:11:39.080 --> 0:11:43.280 two potential g d P? Are we grossly off? Is 0:11:43.320 --> 0:11:46.920 it much farther out than we think? I think that's 0:11:46.920 --> 0:11:49.679 a really hard one, Tom, And we're kind of struggling 0:11:49.720 --> 0:11:53.360 with trying to figure out the lasting implications of what's 0:11:53.400 --> 0:11:57.520 what's happening here. Um. There are clearly some negatives here 0:11:57.600 --> 0:12:01.199 in terms of having created disclok asians, scarring in the 0:12:01.280 --> 0:12:05.400 labor market that are going to continue here for some time. Um. 0:12:05.400 --> 0:12:08.000 But at the same time, we're getting a boost to growth. 0:12:08.280 --> 0:12:11.480 It's not only lifting growth back to its previous level, 0:12:11.679 --> 0:12:14.320 it's actually raising it above the path we were on. 0:12:14.840 --> 0:12:18.319 And there's some real possibilities here that that dynamic, if 0:12:18.320 --> 0:12:22.319 it's sustained, creates positive factors. Our potential growth estimates for 0:12:22.360 --> 0:12:24.880 the US are one and a half. We haven't changed 0:12:24.920 --> 0:12:27.760 that yet, but I have to say I'm somewhat agnostic 0:12:27.800 --> 0:12:29.760 about what the next couple of years are going to 0:12:29.880 --> 0:12:32.240 deliver on that front. Bruce always get to see you 0:12:32.280 --> 0:12:34.400 and great to catch you out, Bruce Kasman that Jap Morgan, 0:12:34.440 --> 0:12:42.679 chief economist and the head of Global Economic Research. This 0:12:42.800 --> 0:12:45.120 is a joy on. On March tenths we get out 0:12:45.200 --> 0:12:48.080 front of what is possibly my book of the summer. 0:12:48.120 --> 0:12:50.120 I'm not willing to say that yet, but boy does 0:12:50.200 --> 0:12:52.719 James Travinis go to the top of the pile. Ad 0:12:52.840 --> 0:12:56.600 Mr Venus provides value as Bloomberg opinion. Calumness, the former 0:12:56.800 --> 0:12:59.800 NATO Supreme Commander, We're thrilled that you could join us 0:12:59.840 --> 0:13:03.400 with Ackerman and Tavita's two thousand thirty four. It's the 0:13:03.480 --> 0:13:06.720 three o the three page novel that begs to be 0:13:06.840 --> 0:13:09.480 read now. Ad was Tavidas, thank you so much for 0:13:09.600 --> 0:13:12.960 joining us. The banner that begins your book is chilling. 0:13:13.400 --> 0:13:16.200 It is a March day in two thousand thirty four 0:13:16.320 --> 0:13:19.880 in our United States Navy is in the South China Sea, 0:13:20.480 --> 0:13:23.480 looking and staring at China. Is there a risk here 0:13:23.520 --> 0:13:26.240 that we need to wait for war with China before 0:13:26.360 --> 0:13:32.200 two thousand thirty four? Low risk over the next few years. 0:13:32.240 --> 0:13:34.480 But the reason we set the book about fifteen years 0:13:34.480 --> 0:13:37.280 in the future, Tom, is because that's when the trend 0:13:37.320 --> 0:13:41.600 lines really start to look difficult, shall we say. Chinese 0:13:41.640 --> 0:13:45.880 cyber capability goes up, their maritime capability goes up, their 0:13:45.920 --> 0:13:49.920 ability to employ stealth, their determination to hold on to 0:13:50.080 --> 0:13:53.120 the South China Sea where the novel opens. It could 0:13:53.120 --> 0:13:56.480 be a collision, It could be a miscalculation. We ought 0:13:56.480 --> 0:13:58.560 to worry about it. In twenty thirty four is a 0:13:58.679 --> 0:14:03.920 cautionary tale on page six. I think this is so important, John, 0:14:04.400 --> 0:14:07.679 the couple sliding in a couple of beers at the 0:14:07.760 --> 0:14:11.319 Old Abbott Grill or the hay Adams Bar, and then 0:14:11.320 --> 0:14:13.760 they came back later. I mean, forget about that, John, 0:14:14.040 --> 0:14:17.520 this is outrageous where stravitas. John Farrell is going to 0:14:17.559 --> 0:14:21.320 the fiction of someone having cocktails at the hay Adam Hotel. 0:14:22.960 --> 0:14:25.080 So much Tom, because this is the same approach that 0:14:25.120 --> 0:14:29.520 you have in foreign relations. This wall, Admiral, were set 0:14:29.560 --> 0:14:32.400 that scene at the Willard Hotel, which also has a 0:14:32.440 --> 0:14:35.120 great ground driving bar. So there we go. Well, my 0:14:35.280 --> 0:14:37.440 d C bars not to work. I'm sure you've shared 0:14:37.440 --> 0:14:40.240 a drink with Tom at several of those bars as well, Admiral. 0:14:40.360 --> 0:14:43.120 Looking forward and how this relationship evolves, There has been 0:14:43.120 --> 0:14:45.560 talk and I believe it came from the South China 0:14:45.600 --> 0:14:48.320 Morning Post and just yesterday in the last twenty four 0:14:48.360 --> 0:14:50.160 hours that there could be a meeting with the top 0:14:50.240 --> 0:14:53.720 end boys between the United States and China, potentially in Alaska. 0:14:54.040 --> 0:14:56.520 How do you think this relationship resets, what's the approach 0:14:56.520 --> 0:14:57.880 and how is it different to what we saw with 0:14:57.920 --> 0:15:01.760 the previous administration. I think you'll see the Biden team 0:15:01.920 --> 0:15:05.080 work from a script, if you will, they'll create a 0:15:05.200 --> 0:15:11.360 strategy that will put together military deterrence, diplomacy, economic tools, 0:15:11.520 --> 0:15:17.120 cultural tools, strategic communication, and above all work with our allies. 0:15:17.280 --> 0:15:21.520 That's the formula here. The Trump administration was very episodic, 0:15:21.640 --> 0:15:23.520 very tactical. I think you're going to see a more 0:15:23.560 --> 0:15:27.160 strategic approach. That's what we need. This is the big 0:15:27.200 --> 0:15:30.720 strategic challenge of this part of the centry. What's the objective? 0:15:30.760 --> 0:15:33.560 What do you think the objective should be. I think 0:15:33.600 --> 0:15:38.479 a strategy ought to see to confront where we must 0:15:38.200 --> 0:15:41.400 and we can't turn over the entire South China Sea 0:15:41.480 --> 0:15:45.200 to China as territorial waters, which they claim. We've got 0:15:45.240 --> 0:15:48.040 to confront them there, but we have to cooperate wherever 0:15:48.200 --> 0:15:51.240 we can. We have to find zones of cooperation example 0:15:51.840 --> 0:15:56.440 the environment, example, prepare for the next pandemic, example, work 0:15:56.520 --> 0:16:00.680 together on medical diplomacy in the developing world, so confront 0:16:00.720 --> 0:16:04.400 where we must cooperate where we can, Let's avoid the 0:16:05.560 --> 0:16:08.920 scenario at all costs. Admiral, you're giving me permission to 0:16:08.960 --> 0:16:11.080 go with gloomy what ifs, which is basically what I 0:16:11.120 --> 0:16:13.440 like to do with my pastime. And I'm wondering as 0:16:13.480 --> 0:16:16.280 you look towards what some of the risks are. I'm curious, 0:16:16.280 --> 0:16:18.200 what does a world war look like in a post 0:16:18.320 --> 0:16:24.800 nuclear era. It's going to include cyber as a significant component, 0:16:24.840 --> 0:16:28.480 particularly by the end of this decade, as quantum computing 0:16:29.120 --> 0:16:32.520 collides with what we think of traditionally as cyber bits, 0:16:32.600 --> 0:16:37.480 ones and zeros, and computing much more complicated, opens many 0:16:37.520 --> 0:16:41.560 more abilities. Stealth will be even better than it is now. 0:16:41.920 --> 0:16:44.600 Space will be an important component. That's why the United 0:16:44.640 --> 0:16:48.840 States created as Space Force. And finally, you're going to 0:16:48.920 --> 0:16:53.440 see good old fashioned naval conflict here because, uh, for 0:16:53.560 --> 0:16:55.560 better or for worse, We're not going to get into 0:16:55.560 --> 0:16:58.160 a land war with China. It's going to be played 0:16:58.160 --> 0:17:02.040 out in the scenarios of the need more than anywhere else. 0:17:02.440 --> 0:17:04.679 Do you think that the United States has both the 0:17:04.720 --> 0:17:07.760 intellectual capacity in the government jobs that need to be 0:17:07.840 --> 0:17:10.040 filled in order to prepare ourselves for some of the 0:17:10.040 --> 0:17:12.840 cyber attacks, as well as the investment on the private 0:17:12.880 --> 0:17:16.280 side towards some of these resources. You put your finger 0:17:16.400 --> 0:17:20.359 on the key element here, which is private public cooperation. 0:17:20.720 --> 0:17:23.680 The government can't do this by itself. A good first 0:17:23.680 --> 0:17:27.000 step would be to create a cyber force, just like 0:17:27.119 --> 0:17:29.800 our Space Force was created a year or so ago. 0:17:30.320 --> 0:17:34.960 But secondly, there has to be pretty seamless cooperation across 0:17:35.040 --> 0:17:39.200 this enormous threat surface that we're facing. So we've got 0:17:39.200 --> 0:17:41.199 work to do in that regarding and we're gonna have 0:17:41.200 --> 0:17:45.160 to compete Hart with Silicon Valley to bring that talent 0:17:45.600 --> 0:17:49.120 to bear on this problem in cyber James, the shocking 0:17:49.200 --> 0:17:53.080 immediacy of this book two thousand thirty four, from your 0:17:53.119 --> 0:17:55.440 heritage of coming out of San Diego on a boat 0:17:55.440 --> 0:17:58.320 when you were a kid, and of course also Elliott 0:17:58.359 --> 0:18:03.199 Ackerman's wonderful word, the realism of this is tangible. Is 0:18:03.240 --> 0:18:07.040 our US Navy too ready to do what's in two 0:18:07.080 --> 0:18:11.960 thousand thirty four? Yes, and they are already at sea. 0:18:12.400 --> 0:18:16.160 The challenge is going to be numbers of ships. And 0:18:16.280 --> 0:18:19.120 even now this makes surprise you tom but China has 0:18:19.200 --> 0:18:22.960 more warships than the United States does. Ours are more capable. 0:18:23.040 --> 0:18:26.720 We have those big, beautiful nuclear aircraft carriers. China is 0:18:26.880 --> 0:18:29.760 gaining air speed in this regard where I don't mean 0:18:29.760 --> 0:18:32.080 to interrupt bed, but this is so important. We've lost 0:18:32.160 --> 0:18:34.879 Hong Kong. We can't show the flag there anymore. I 0:18:34.920 --> 0:18:39.160 believe where is our harbor is? We base affairs out 0:18:39.160 --> 0:18:42.840 of the South China Sea. We're gonna be forward time 0:18:43.040 --> 0:18:48.400 from Guas and that's gonna be the board based. Remember 0:18:48.440 --> 0:18:50.760 it used to be Pearl Harbor. Now you're all the 0:18:50.800 --> 0:18:53.359 way forward to Guam. And a second important piece of 0:18:53.400 --> 0:18:58.080 this is up in Tokyo Bay, ironically enough, where the 0:18:58.080 --> 0:19:02.080 World War two ended. That's our large just naval base 0:19:02.400 --> 0:19:06.040 in the Pacific is in a place called Yakuska, Japan. 0:19:06.200 --> 0:19:09.760 In Tokyo Bay. That's where the seventh Fleet is based. 0:19:10.000 --> 0:19:12.680 They will go forward. They'll also operate out of bases 0:19:12.840 --> 0:19:17.240 in South Korea. It's good to have allies in this one, admirable. 0:19:17.359 --> 0:19:19.000 I want to finish out by what you think this 0:19:19.080 --> 0:19:20.880 is going. You've told about the objective, and I think 0:19:20.880 --> 0:19:23.320 it's really important to understand where things aheading and whether 0:19:23.720 --> 0:19:26.560 we can just slow them down, or whether we can 0:19:26.640 --> 0:19:29.320 change the outcome. Do you think the outcome is already 0:19:29.320 --> 0:19:33.520 predetermined now? I do not, although we ought to be concerned. 0:19:33.560 --> 0:19:36.560 If we look back in history, so often when there 0:19:36.680 --> 0:19:41.920 is an established power Athens confronted by a rising power Sparta, 0:19:42.200 --> 0:19:46.200 or an established power the United Kingdom a hundred years 0:19:46.200 --> 0:19:50.000 ago challenged by a rising Kaiser's Germany, so often those 0:19:50.040 --> 0:19:53.480 scenarios do lead to war. We can still avoid this. 0:19:53.640 --> 0:19:57.840 That's why we wrote four to lay out a cautionary tale. 0:19:58.240 --> 0:20:01.280 We need a strategy to do that that employs all 0:20:01.320 --> 0:20:05.920 elements of US national power. And we need to understand 0:20:06.119 --> 0:20:10.520 China better. Today China knows us better, we know China. 0:20:10.800 --> 0:20:13.680 We have work to do, Admiral, before we let you go. 0:20:14.200 --> 0:20:16.520 Why a novel? And why now? I believe this is 0:20:16.520 --> 0:20:19.280 your first novel ever. Tom just may haveron it tried 0:20:19.280 --> 0:20:21.359 to throw it out at John, you did try to 0:20:21.400 --> 0:20:24.719 throw it. I just want to confirm that George Clooney 0:20:24.800 --> 0:20:29.400 is gonna play Strevitas, Leonardo DiCaprio is gonna play Lieutenant Faroh. 0:20:29.400 --> 0:20:31.159 Come on, It's a no brainer, all right? So I 0:20:31.280 --> 0:20:34.919 fix in because in fiction we can allow ourselves to 0:20:35.000 --> 0:20:38.720 imagine the future. If I'd written a dry as dust 0:20:39.000 --> 0:20:44.439 policy kind of book interest items, but this reaches the 0:20:44.560 --> 0:20:49.000 big audience and want to let people know this is 0:20:49.000 --> 0:20:51.960 a real danger. James to Venus, how is our new 0:20:52.040 --> 0:20:57.920 defense secretary doing? I forgot his name? Secretary Lloyd Austin, 0:20:58.000 --> 0:21:00.960 one of my contemporary is a wonderful officer. He's opted 0:21:00.960 --> 0:21:05.440 to a terrific start by being steady, by being very 0:21:05.480 --> 0:21:08.160 concerned about the people in the forest. He's a real 0:21:08.200 --> 0:21:11.320 expert on the Middle East. He's gonna be spending a 0:21:11.359 --> 0:21:14.680 lot of time focusing on the Pacific. I'm not sure 0:21:14.720 --> 0:21:17.920 if the President's listening. Go no sophisticated to human, So 0:21:18.080 --> 0:21:21.119 I'll give you that apple James to the President doesn't listen, 0:21:21.119 --> 0:21:22.920 But the two dogs are in front of the screen 0:21:23.040 --> 0:21:25.240 every morning. And good luck with the book release and 0:21:25.280 --> 0:21:27.439 we look forward to catching up with you soon. Apple 0:21:27.520 --> 0:21:30.199 James to vidis that of bloom Bug opinion columnist. Then 0:21:30.200 --> 0:21:40.480 fulminates how Supreme allied Commanda. Then it is now a 0:21:40.640 --> 0:21:43.959 joy and annual visit for us with Craig Moffatt and 0:21:44.000 --> 0:21:48.840 Michael Nathanson of Moffatt Nathanson, the founding partners legendary at 0:21:48.880 --> 0:21:51.760 Sanford Bernstein. If you got your hands on their Black 0:21:51.800 --> 0:21:54.480 Book years ago, you read it cover to cover. In 0:21:54.520 --> 0:21:57.800 this folks, more than ever, we've spoken with Moffatt and 0:21:57.840 --> 0:22:03.240 with Nathanson the importance of our homes, our TVs. Our kids, 0:22:03.560 --> 0:22:06.400 and what the future is for media. This is must 0:22:06.440 --> 0:22:08.520 listen for Global Wall Street. I don't even know who 0:22:08.560 --> 0:22:11.560