WEBVTT - Erdogan Responds to Pressure, Cook Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.440 Bloomberg dot Com, and of course on the Bloomberg. Joining 0:00:34.520 --> 0:00:37.600 us now a constructive credit Swiss maintaining a positive view 0:00:37.760 --> 0:00:40.720 on global equities with a preference for emerging markets. Let's 0:00:40.720 --> 0:00:43.960 talk to James Sweeney show we credit Swiss is chief economists. 0:00:43.960 --> 0:00:46.800 Good morning to James. Good morning. Why the optimism, why 0:00:46.840 --> 0:00:49.280 the preference for global equity still because of growth? I 0:00:49.320 --> 0:00:51.920 mean we have we have global growth running above trends. 0:00:51.920 --> 0:00:53.840 It's been doing so for two and a half years, 0:00:53.880 --> 0:00:56.120 and that should continue. I think the big problem has 0:00:56.160 --> 0:01:00.240 been dollar strength and policy concerns and bad Paul see 0:01:00.240 --> 0:01:02.440 in in a bunch of specific countries. To what degree 0:01:02.480 --> 0:01:04.560 do you think the U s economy has decoupled from 0:01:04.600 --> 0:01:06.520 the rest of the world. Well, when you look from 0:01:06.560 --> 0:01:10.000 a short term perspective, industrial production growth recently in the 0:01:10.080 --> 0:01:12.319 US has been running above four and the rest of 0:01:12.360 --> 0:01:15.679 the world, you know, significantly lower. Europe and China have 0:01:15.720 --> 0:01:17.960 slowed a little bit um in the last four or 0:01:18.000 --> 0:01:20.080 five months, but we actually expect them to rebound. We 0:01:20.080 --> 0:01:22.200 expect the rest of the world to rebound. We expect 0:01:22.240 --> 0:01:24.360 the US to actually slow a little bit, so that 0:01:24.520 --> 0:01:26.920 differential that you see in p M I S, for example, 0:01:26.920 --> 0:01:28.640 over the last six months, we actually think it's gonna 0:01:28.640 --> 0:01:31.119 start going the other way now, and that above trend 0:01:31.160 --> 0:01:33.399 global growth as a whole is set to continue. Does 0:01:33.400 --> 0:01:35.840 that shape or define how you allocate capital in the 0:01:35.840 --> 0:01:37.800 back haunt for this year? Yes, it does, I mean 0:01:37.840 --> 0:01:40.600 the yeah, I mean we're we're always thinking ahead on 0:01:40.680 --> 0:01:43.440 where the next turn is on industrial production, in particular 0:01:43.480 --> 0:01:46.520 because we expect all of the lead indicators at the 0:01:46.560 --> 0:01:49.520 market overreacts to p M S and such to move 0:01:49.640 --> 0:01:51.800 that way and the surprise and disease to follow that way. 0:01:51.840 --> 0:01:54.800 So that's very important. We expect positive data surprises from 0:01:54.840 --> 0:01:57.480 the Euro Area. It's just seems that the big triit 0:01:57.560 --> 0:02:00.360 so far in twent is by America, and we saw 0:02:00.360 --> 0:02:02.320 in the Bank of America Mary Lynch survey, the fund 0:02:02.320 --> 0:02:04.840 manager servant that was released yesterday that certainly the fund 0:02:04.880 --> 0:02:07.120 managers are allocating to that story. Do you think you 0:02:07.160 --> 0:02:11.240 need to reallocate elsewhere and drop your exposure to the US. 0:02:11.360 --> 0:02:14.200 I mean, there's the first element of buy America is 0:02:14.240 --> 0:02:16.320 that the tech sector lives here. And when you look 0:02:16.360 --> 0:02:18.800 at what's happening in the tech sector, you're getting explosive 0:02:18.800 --> 0:02:21.320 returns because you're getting explosive earnings and you don't have 0:02:21.400 --> 0:02:25.080 valuations really going crazy at this at this point. So 0:02:25.240 --> 0:02:28.600 if you could look at America X tech, uh, then 0:02:28.680 --> 0:02:31.040 you know, maybe allocating a little bit away from America 0:02:31.080 --> 0:02:32.920 and towards the rest of the world right now would 0:02:32.919 --> 0:02:35.679 would make some sense. But um, but I but I 0:02:35.760 --> 0:02:37.560 think you can't leave tech out. But that gets to 0:02:37.600 --> 0:02:41.079 the FED. Any idea of the meny America's Chery Yelling 0:02:41.200 --> 0:02:46.120 clearly had slack as a lead describer of an American economy. 0:02:46.639 --> 0:02:48.840 We have a FED that has to deal with the 0:02:48.880 --> 0:02:52.480 tech boom and its tangential excellence and the rest of 0:02:52.520 --> 0:02:58.079 America given the political tone, flat on their back. That's 0:02:58.120 --> 0:03:02.720 not in able bernanc or or in uh, you know 0:03:02.960 --> 0:03:06.200 the other core macro textbooks. It's not a manque right. Yeah, 0:03:06.240 --> 0:03:08.560 it's true, but it's also not new. I mean, we've 0:03:08.600 --> 0:03:11.600 had we've had kind of meager wage growth, lower down 0:03:11.639 --> 0:03:14.480 the income distribution for some time and what we've seen 0:03:14.600 --> 0:03:18.680 lately is that the labor market has tightened up at 0:03:18.680 --> 0:03:20.519 the kind of middle and the and the lower ends, 0:03:20.560 --> 0:03:23.480 but it has not led to sharply rising wage growth. 0:03:23.480 --> 0:03:26.240 And if you're getting two three percent wage growth at 0:03:26.240 --> 0:03:28.360 a level of wages which you're not very happy with, 0:03:28.400 --> 0:03:30.880 the chances are you're not thrilled, and that that's where 0:03:30.880 --> 0:03:33.240 it is right now. But income growth, labor income growth 0:03:33.240 --> 0:03:36.080 for the US as a whole, is strong and has accelerated. 0:03:36.160 --> 0:03:38.120 That's very important, and that's what the is gonna respond to. 0:03:38.360 --> 0:03:41.520 This is so important what Dr Sweeney just said. There 0:03:41.800 --> 0:03:47.120 there's this distinction between an aggregate analysis and the individual analysis. 0:03:47.200 --> 0:03:50.680 I think of Jason Furman's wonderful work on this. Explain 0:03:50.720 --> 0:03:53.800 to our audience how we can say wage growth is 0:03:53.920 --> 0:03:59.000 terrible and yet gross labor income is Is it a 0:03:59.000 --> 0:04:02.240 a great vector to and a great level. Yeah, labor 0:04:02.280 --> 0:04:05.160 income is simple. You add up everybody's paychecks and you 0:04:05.200 --> 0:04:07.880 say how much money is the household sector getting paid? 0:04:07.920 --> 0:04:10.360 The the that has been growing at around four point 0:04:10.400 --> 0:04:15.120 four percent nominal terms. Since the audience listening this goes 0:04:15.160 --> 0:04:17.000 you're out of your mind. Well, it's been growing at 0:04:17.000 --> 0:04:19.200 four and a half, as I said, and recently it's 0:04:19.200 --> 0:04:22.159 actually accelerated a little bit. Now, wage growth or or 0:04:22.200 --> 0:04:24.839 aggregate labor income growth comes from wage growth, and it 0:04:24.839 --> 0:04:27.720 comes from growth and hours worked, and hours worked obviously 0:04:27.800 --> 0:04:30.440 is driven mostly by jobs growth. And so what we've 0:04:30.440 --> 0:04:32.559 seen was we've had good jobs growth for a time 0:04:32.680 --> 0:04:35.360 that's now tightened the labor market, including a from low end. 0:04:35.600 --> 0:04:37.920 So you may be expect to see more wage growth, 0:04:38.360 --> 0:04:40.120 but we've seen a little bit more wage growth. We 0:04:40.160 --> 0:04:43.320 haven't seen that wage growth. Just so you know, oh wise, 0:04:43.400 --> 0:04:48.159 one that this is called the pharaoh effect, where hours 0:04:48.240 --> 0:04:52.800 work takes over is a partial differential, and Pharaoh's I 0:04:52.800 --> 0:04:55.359 mean he's working like a ninety two hour week, and 0:04:55.400 --> 0:04:59.920 that alone moves the needle along with you only work 0:05:00.680 --> 0:05:02.920 just just the eighty nine hours. Well, that's because you've 0:05:02.920 --> 0:05:06.640 got other properties, including the real yield. James, James Sweeney 0:05:06.640 --> 0:05:08.960 doesn't care about any of this. Well I do, actually, 0:05:09.000 --> 0:05:10.720 because it's one of the things that happens late in 0:05:10.760 --> 0:05:15.000 the cycle is that ours were working, James, So what 0:05:15.040 --> 0:05:16.880 will happen at at some point you'll get so good 0:05:16.880 --> 0:05:19.640 at your job, you'll have so many job offers that 0:05:19.839 --> 0:05:22.080 you'll just your wages will go up and you're working, 0:05:22.839 --> 0:05:25.919 he'll leave. No, No, you have to give him the race, James. 0:05:26.360 --> 0:05:28.279 You don't have to give him a race because of 0:05:28.320 --> 0:05:30.400 his offers. Hang on a minute, I like where this 0:05:30.480 --> 0:05:33.480 conversations going. You trying to negotiate for you. There's an 0:05:33.600 --> 0:05:37.000 email from the Brooks Falls in Alaska from Alfred new James. 0:05:37.960 --> 0:05:40.800 We should say, don't turn away from the grizzly bears. 0:05:41.040 --> 0:05:43.880 I mean he just dropped his cell phone. Take if 0:05:43.920 --> 0:05:46.160 I could afford to take you away from credit sweets 0:05:46.200 --> 0:05:48.240 and how you was my agent, I would before we 0:05:48.320 --> 0:05:51.200 let you go. I want to give I want to 0:05:51.200 --> 0:05:53.240 get your dollar cool and we're close to a ninety 0:05:53.320 --> 0:05:56.080 seven handle this morning. Want the x Y. What's your 0:05:56.080 --> 0:05:59.200 base case now, James? Yeah. We we actually think that 0:05:59.279 --> 0:06:02.320 the dollar is going to sell off because global growth 0:06:02.400 --> 0:06:04.960 is going to stay strong, and we expect upside surprises 0:06:05.000 --> 0:06:07.120 coming from Europe, and we think European interest rates are 0:06:07.120 --> 0:06:09.720 going to rebound and uh and and that the dollar 0:06:09.760 --> 0:06:12.039 move is basically overshot. We also see this as a 0:06:12.120 --> 0:06:14.120 as a e M crisis. We're in a panic, and 0:06:14.200 --> 0:06:16.000 usually in a panic, you know you're gonna go the 0:06:16.000 --> 0:06:18.800 other way. So the market pressure honor to one to 0:06:18.880 --> 0:06:21.279 make some of the correct economic choices is high. But 0:06:21.320 --> 0:06:25.039 what you just said, they're so important. You're assuming the 0:06:25.120 --> 0:06:30.240 panic gets solved. That has worked before. Stan Fisher's classic 0:06:30.240 --> 0:06:34.880 book Out is an example. Can it get solved now 0:06:35.520 --> 0:06:41.360 given the realities of American politics and their extension abroad. Well, 0:06:41.480 --> 0:06:44.640 I mean, you know this is this is a Turkish issue, 0:06:44.720 --> 0:06:47.200 not not a US issue. I mean, and and really 0:06:47.240 --> 0:06:49.919 what Turkey needs to do is to tighten fiscal and 0:06:49.960 --> 0:06:53.159 monetary policy and take some orthodox policy steps in order 0:06:53.160 --> 0:06:56.320 to step in this crisis. So, um, I'm not sure 0:06:56.560 --> 0:07:01.240 the political theater between our leadership and their leadership is 0:07:01.279 --> 0:07:03.440 the same as what the bond market wants. And I 0:07:03.480 --> 0:07:05.480 think that's a very important distinction. Are you surprised to 0:07:05.520 --> 0:07:08.159 see you wrote dollar down here at one? Yeah, I 0:07:08.160 --> 0:07:10.520 mean I think it's a it's a sharp move, but 0:07:10.720 --> 0:07:14.160 it's it's Um, it's related to the fact that we're 0:07:14.160 --> 0:07:17.040 in a little Turkey crisis at the moment. I'm just 0:07:17.080 --> 0:07:21.000 trying to work out what drives European and Asian growth higher, 0:07:21.000 --> 0:07:23.480 what delivers the upside? Surprise? Is it a policy resol 0:07:24.080 --> 0:07:27.080 when you look organic? Just tell me it's organic. I mean, 0:07:27.080 --> 0:07:29.360 the bottom line is if you look at the underlying 0:07:29.440 --> 0:07:32.720 pace of capex in Europe is in real terms, and 0:07:32.760 --> 0:07:36.440 you look at the underlying pace in retail consumer spending, um, 0:07:36.480 --> 0:07:39.760 they're strong, They're they're strong. And so what we do 0:07:39.960 --> 0:07:43.440 is we compare in detail what's happening to manufacturing activity 0:07:43.840 --> 0:07:47.760 to those sources of manufacturing demand from businesses and from firms. 0:07:47.960 --> 0:07:51.600 If the demand sources are fine and manufacturing activity has 0:07:51.680 --> 0:07:56.560 recently been very weak times out of a hundred, industrial 0:07:56.560 --> 0:07:59.000 production is about to rebound. And so in the three 0:07:59.040 --> 0:08:03.840 months to March or April, European industrial production actually contracted 0:08:03.880 --> 0:08:06.680 by three or four percent. So demand is running well, 0:08:06.840 --> 0:08:09.960 factory activity has slowed. It's a short term moment to move. 0:08:10.360 --> 0:08:12.680 P m I has come down with it. The market overshoots, 0:08:12.720 --> 0:08:15.920 the ECB overreacts and gives you forward guidance for a year, 0:08:15.960 --> 0:08:18.480 and then factory activity picks back up again because the 0:08:18.520 --> 0:08:21.280 consumers are spending money and the businesses are investing, and 0:08:21.280 --> 0:08:23.600 when you look at the hard data, that's what's happening. 0:08:23.840 --> 0:08:27.520 James Sweeney with some real optimism, they're sophisticated optimism, thank 0:08:27.520 --> 0:08:45.400 you so much. With credit sweets. Their chief economist, Stephen 0:08:45.440 --> 0:08:48.760 Cook is at the Council on Foreign Relations out of 0:08:49.000 --> 0:08:52.000 Vassar with parchment from JOHNS. Hopkins and his doctorate at 0:08:52.000 --> 0:08:56.000 the University of Pennsylvania. We are honored to have him 0:08:56.000 --> 0:08:58.680 for a half hour this morning to really dive into 0:08:58.720 --> 0:09:01.720 some of the nuances here Bay, basically to slow the 0:09:01.800 --> 0:09:06.400 show down and actually talk about the underpinnings of what's 0:09:06.440 --> 0:09:10.920 going on in Turkey. His must read is False Dawn, 0:09:11.440 --> 0:09:14.840 just simply because of events, it's become the book of 0:09:14.920 --> 0:09:17.439 the moment. Stephen Cook. Wonderful to have you with us. 0:09:17.760 --> 0:09:21.840 If you wrote False Dawn on this Wednesday morning, how 0:09:21.880 --> 0:09:25.360 would it be different than when you wrote it? Well, 0:09:25.400 --> 0:09:29.360 I couldn't write it in a Wednesday morning, but thanks Tom. 0:09:29.400 --> 0:09:32.400 I think that many of the arguments that I set 0:09:32.400 --> 0:09:34.720 forth in False One, particularly when it comes to Turkey 0:09:34.760 --> 0:09:38.839 and the and the transformation of Turkey into an elected autocracy, 0:09:40.280 --> 0:09:44.959 are our strengthened by what's been happening with the lyric 0:09:45.000 --> 0:09:47.839 crisis and the and the and the related crisis in 0:09:48.000 --> 0:09:51.520 US Turkey relations um. What has happened in Turkey is 0:09:51.640 --> 0:09:56.160 essentially self inflicted wounds as the result of a leader 0:09:56.240 --> 0:10:01.200 whose political calculations and political interests are UH bound up 0:10:01.320 --> 0:10:05.320 in UH pumping up the economy with low interest rates 0:10:05.400 --> 0:10:07.680 and then blaming the United States when the day of 0:10:07.679 --> 0:10:11.080 residing comes. Dr Cook John Ferrell has got all sorts 0:10:11.080 --> 0:10:12.960 of wisdom questions, But I want to cut to the 0:10:12.960 --> 0:10:17.760 American chase. What is different this time is the posture, 0:10:17.880 --> 0:10:23.920 stands cadence dialogue of our American president. What what's the 0:10:24.040 --> 0:10:28.079 change you need to see from President Trump to affect 0:10:28.240 --> 0:10:32.040 a better outcome in Turkey? Well, I think we are 0:10:32.080 --> 0:10:37.040 seeing a change in Cone and Um from one perspective, 0:10:37.120 --> 0:10:41.480 certainly for the better. The previous two administrations, the George W. 0:10:41.559 --> 0:10:45.880 Bush's administration and Barack Obama's administration, had been too passive, 0:10:45.960 --> 0:10:49.920 too willing to overlook Turkish bad behavior for the sake 0:10:50.080 --> 0:10:53.640 of a strategic relationship. I think that President Trump has 0:10:53.800 --> 0:10:56.920 taken a look at the accumulation of things that the 0:10:56.960 --> 0:11:00.280 Turks had done to undermine American policy and in American 0:11:00.360 --> 0:11:03.960 position in the Middle East UH and decided that the 0:11:04.000 --> 0:11:07.360 Turks have gone too far with the taking of Pastor 0:11:07.440 --> 0:11:10.599 Andrew Brunson as well as something that gets lost in 0:11:10.640 --> 0:11:14.319 all the commentary fifteen to twenty other Turkish Americans. Those 0:11:14.320 --> 0:11:17.520 are Turks with American citizenship who are in Turkish jails 0:11:17.559 --> 0:11:21.120 on trumped up terrorism charges. Uh. So, I think that 0:11:21.760 --> 0:11:25.640 this issue has become a flashpoint for the broader relationship 0:11:25.720 --> 0:11:28.760 and the problems in the broader relationships. Steven, is hard 0:11:28.760 --> 0:11:33.360 for some people to reconcile that a NATO ally is 0:11:33.400 --> 0:11:40.160 not a reliable partner. How do you reconcile those two things, Stephen? Well, Uh, 0:11:40.520 --> 0:11:44.199 Turkey is not the only problematic NATO partner, but it 0:11:44.280 --> 0:11:47.720 is I think an outlier in how far it has 0:11:47.760 --> 0:11:52.600 gone in UH development of its relations with Russia, how 0:11:52.640 --> 0:11:56.120 far it has gone to undermine, uh, the American fight 0:11:56.200 --> 0:11:59.480 against the Islamic State in Syria, how far it has 0:11:59.520 --> 0:12:04.040 gone to help the Iranians evade sanctions that are designed 0:12:04.040 --> 0:12:07.679 to contain and arrest the development of its nuclear program. Um. 0:12:07.679 --> 0:12:12.320 Those are just three of larger issues, um that are 0:12:12.400 --> 0:12:14.960 roiling the relationship. I think they're the most important ones, 0:12:15.000 --> 0:12:17.560 but of course there are others. Everyone has been able 0:12:17.600 --> 0:12:21.480 to capitalize in the fact that, because of his rhetoric, 0:12:21.920 --> 0:12:26.480 a stupefying eight of Turks believed that the United States 0:12:26.520 --> 0:12:30.480 was complicit in the failed Coupe Deta in July, and 0:12:30.880 --> 0:12:34.520 large numbers also believe that the current dispute between the 0:12:34.520 --> 0:12:37.360 two countries that in the current dispute between the two countries, 0:12:37.400 --> 0:12:41.120 the United States is engaged in economic warfare on Turkey. 0:12:41.200 --> 0:12:44.680 So to your point, with the last two administrations being 0:12:45.000 --> 0:12:49.520 perhaps far too passive and ignoring the behavior of President Urduan, 0:12:50.080 --> 0:12:53.000 what is the correct tool to use to address the 0:12:53.040 --> 0:12:56.839 behavior of Turkey And does economic sanctions get it done 0:12:57.320 --> 0:13:00.679 or does that just fuel this nationalism that erupting at 0:13:00.679 --> 0:13:04.880 the moment in the country. UH. I think that it's 0:13:04.920 --> 0:13:11.200 important to recognize that aired One responds to pressure. The 0:13:11.280 --> 0:13:16.439 Turks shot down a Russian bomber that had briefly crossed 0:13:16.440 --> 0:13:21.920 its airspace and route to Syria. In President Putin really 0:13:21.960 --> 0:13:25.400 put the screws to the Turks. Angela Merkel, the Chancellor 0:13:25.400 --> 0:13:30.720 of Germany, was quite upset over the arrest of a 0:13:30.800 --> 0:13:35.320 German Turkish journalists and threats to German journalists in Turkey. 0:13:35.440 --> 0:13:40.000 UH and threatened President air Duan with business ties and 0:13:40.040 --> 0:13:43.800 business ties between Turkey and Germany are extremely important. This 0:13:44.240 --> 0:13:47.240 UH encouraged President ed One to do the right thing 0:13:47.960 --> 0:13:52.320 on a variety of issues. I think that with the 0:13:53.040 --> 0:13:55.560 politicking that aired One is doing, he is seeking to 0:13:55.600 --> 0:13:59.959 buy himself some time politically and cushioned himself from an 0:14:00.040 --> 0:14:02.680 insulate himself from these problems. But I think that the logic, 0:14:03.040 --> 0:14:06.280 while the logic of Turkish politics right now is outstripping 0:14:06.280 --> 0:14:09.520 the logics on the market, at some point he's going 0:14:09.600 --> 0:14:13.400 to run out of nationalist rhetoric and the market is 0:14:13.440 --> 0:14:16.719 going to force changes on the Turk. Stephen Cook, with 0:14:16.760 --> 0:14:19.520 as a constant for relations, thrilled to have him here 0:14:19.520 --> 0:14:22.280 for a length the interview this morning, Dr Cook the 0:14:22.320 --> 0:14:25.600 Boss versus twenty miles long. It seems longer than that, 0:14:25.640 --> 0:14:28.160 But it's not if you go out the north side 0:14:28.200 --> 0:14:31.240 that nobody in the West pays attention to. There is 0:14:31.280 --> 0:14:34.680 a black sea. What's the dynamic right now that Mr 0:14:34.720 --> 0:14:38.720 Putin can take advantage of given this crisis? Oh well, 0:14:38.960 --> 0:14:43.480 certainly President Putin has sought to take advantage to the 0:14:43.520 --> 0:14:47.320 tension between US Turkey relations. They've He's been doing that 0:14:47.400 --> 0:14:50.080 for some time, as the as the Turks were forced 0:14:50.120 --> 0:14:54.880 to respond to him after shooting down their plane and 0:14:54.920 --> 0:14:57.280 after the United States made it clear that it wasn't 0:14:57.280 --> 0:15:00.560 going to get more deeply involved in Syria. The Turks 0:15:00.600 --> 0:15:05.000 went to Moscow to secure their interests. Certainly, President Putin 0:15:05.120 --> 0:15:08.880 is seeking to take advantage of the problems in the 0:15:08.960 --> 0:15:11.120 US Church relations as well as problems with the U 0:15:11.120 --> 0:15:15.000 S relations with other countries. Uh. The Black Seed, though, 0:15:15.200 --> 0:15:18.480 is something that makes the Turks very, very very nervous. 0:15:19.040 --> 0:15:22.320 That may still be an area of cooperation between the 0:15:22.360 --> 0:15:25.000 United States and Turkey. I don't think anybody's really looking 0:15:25.040 --> 0:15:27.320 at a breach in the relationship between the two countries, 0:15:27.720 --> 0:15:32.000 but I think a change is uh, and it's it's 0:15:32.000 --> 0:15:34.120 it's it's the kind of relationship where we will be 0:15:34.160 --> 0:15:36.440 able to cooperate where we can get out of each 0:15:36.440 --> 0:15:39.320 other's way in other places and have to avove each 0:15:39.320 --> 0:15:42.120 other when our interests dictate very quickly here and we'll 0:15:42.160 --> 0:15:45.359 come back in a more general discussion to percolating today 0:15:45.560 --> 0:15:50.600 is Turkish capitalism, Turkish business advising. Mr Erta Wad, let's 0:15:50.600 --> 0:15:53.920 get going from where you sit in international relations. What 0:15:54.000 --> 0:15:59.480 is the relation of Turkish big business to the Erduan regime. Well, 0:15:59.480 --> 0:16:02.280 it depends on which big business in Turkey we're talking about. 0:16:02.280 --> 0:16:05.600 If we're talking about the kind of traditional big business 0:16:05.720 --> 0:16:09.320 based in the western part of the country's associated with 0:16:09.320 --> 0:16:12.840 with big families. UH. That is a business community that 0:16:12.920 --> 0:16:18.920 has had UH a wary, mistrustful, more difficult relationship with 0:16:19.320 --> 0:16:21.960 UH with President aired One because they are considered to 0:16:22.000 --> 0:16:25.239 be kind of old establishment and air Duan is distrustful 0:16:25.520 --> 0:16:28.320 of of those people. Then there's a big business that 0:16:28.360 --> 0:16:32.040 has grown up around uh Arduana over the course of 0:16:32.040 --> 0:16:34.840 the last fifteen years or even pre date the emergence 0:16:34.960 --> 0:16:37.880 of the Justice and Development Party. UH. These are the 0:16:37.960 --> 0:16:40.760 kind of core constituency of the Justice and Development Party 0:16:40.800 --> 0:16:44.840 emerging from Central Anatolia. Those people have very good relations 0:16:44.880 --> 0:16:48.080 with the Justice and Development Party. Here's the deal, though, 0:16:48.480 --> 0:16:52.440 you have to have good ties with the government in 0:16:52.560 --> 0:16:57.280 order to do business in Turkey. So everybody, everybody understands 0:16:57.360 --> 0:17:02.880 that they can't openly cross UH one. Well, let's do this. 0:17:02.960 --> 0:17:05.400 Stephen Cook with us with the Council on Foreign Relations. 0:17:05.480 --> 0:17:08.520 I can't say enough about his effort. The False Dawn 0:17:09.119 --> 0:17:11.880 John of a year ago, A long, long, long year ago, 0:17:12.359 --> 0:17:15.240 just a spectacular book, linking all of the Middle East, 0:17:15.280 --> 0:17:19.480 not just Turkey into UH. The disappointments that we've seen 0:17:19.880 --> 0:17:22.280 across the political economics. We'll come back in a broader 0:17:22.280 --> 0:17:36.480 discussion with Dr Cook here. We are thrilled to bring 0:17:36.480 --> 0:17:39.879 you on the Stephen Cook of the Council on Foreign Relations. Stephen, 0:17:40.000 --> 0:17:44.360 at all studies I've seen the Middle East is about demographics, 0:17:44.400 --> 0:17:49.480 in the overwhelming reality of the youth and the lack 0:17:49.680 --> 0:17:53.600 of understanding of history of so many millions in the 0:17:53.600 --> 0:17:56.560 Middle East. Does Turkey have the same problem? Does Turkey 0:17:56.600 --> 0:18:00.080 have the same demographic structure is the other countries in 0:18:00.119 --> 0:18:03.040 your book the False Dawn? Turkey is a very young 0:18:03.080 --> 0:18:06.439 country as well. There are only two countries in the 0:18:06.440 --> 0:18:10.920 region that have average days that is even approaching thirty. 0:18:11.040 --> 0:18:15.080 Uh So, the difference between Turkey and other countries is 0:18:15.119 --> 0:18:18.880 that Turkey actually has a real economy. It has problems 0:18:18.880 --> 0:18:22.080 with its economy, but it does have a manufacturing base. 0:18:22.160 --> 0:18:25.840 It does it is connected and integrated to Europe, which 0:18:25.880 --> 0:18:29.200 is one of the concerns that people have right now. 0:18:29.240 --> 0:18:31.280 A lot of these other countries don't really have much 0:18:31.280 --> 0:18:33.320 in the way of an economy. Thus you have young 0:18:33.359 --> 0:18:36.920 people who who are quite idle. Uh not so much 0:18:36.960 --> 0:18:39.600 the case in Turkey, Okay, but in Turkey and the 0:18:39.680 --> 0:18:42.679 stereotypes here, folks, come on, let's admit it, folks, as 0:18:42.680 --> 0:18:46.760 we talked to Dr Cook. People listening is knowledge of 0:18:46.760 --> 0:18:49.879 Turkey is from Russia. Would love the James Bond movie 0:18:50.160 --> 0:18:53.040 from a few years ago, Stephen, take us away from 0:18:53.040 --> 0:18:57.800 our silly stereotypes of Turkey. If I go west from Istanbul, 0:18:58.280 --> 0:19:03.080 when do I hit Europe? Or is Turkey Europe? Well, 0:19:03.119 --> 0:19:05.040 it depends on where you're standing in is Stumble. You 0:19:05.119 --> 0:19:06.960 can stand in is Stumble and you are in Europe, 0:19:07.000 --> 0:19:08.720 and then you can stand in another place in is 0:19:08.760 --> 0:19:14.160 Stumble and you're in Asia. Istanble is an extraordinarily cosmopolitan city. 0:19:14.359 --> 0:19:17.280 People from all walks, all parts of the world, all 0:19:17.359 --> 0:19:19.719 kinds of cuisines. It is a city of great history. 0:19:19.960 --> 0:19:22.800 It's the former imperial capital of the Ottoman Empire, which 0:19:22.920 --> 0:19:25.520 ruled the Middle East as well as parts of Europe 0:19:25.560 --> 0:19:28.560 for about six hundred years. If you move east, you'll 0:19:28.560 --> 0:19:33.280 see changes in the country. Less development further out east, 0:19:33.320 --> 0:19:35.120 but still more developed than a lot of the other 0:19:35.119 --> 0:19:40.240 countries that are are neighboring Turkey. One of the things 0:19:40.280 --> 0:19:44.200 about the Justice and Development Party era the last sixteen 0:19:44.280 --> 0:19:46.600 years in Turkey is that there has been an explosion 0:19:46.640 --> 0:19:51.960 of development of infrastructure, of transportation, options of business, of 0:19:51.960 --> 0:19:55.080 a development of a middle class, so there has been 0:19:55.119 --> 0:19:58.639 some good economic management. This is a more recent problem 0:19:58.640 --> 0:20:01.520 with an overheated economy. Me based on the fact that 0:20:01.760 --> 0:20:06.359 President air Duan needs low interest rates and growth in 0:20:06.480 --> 0:20:09.080 order to get reelected and re elected and re elected 0:20:09.119 --> 0:20:12.399 so he can affect the transformation of Turkey for better 0:20:12.520 --> 0:20:15.399 or worse, and Stephen, as we know through history, this 0:20:15.480 --> 0:20:18.560 doesn't end well. I think some people sort of waking 0:20:18.680 --> 0:20:22.040 up if they've missed all of this. At one point, 0:20:22.160 --> 0:20:24.840 several years ago, Turkey was on course to being an 0:20:24.840 --> 0:20:28.879 EU member. Something politically went very very wrong. Stephen, what 0:20:29.160 --> 0:20:32.600 was it? Yeah, it's a it's a stunning irony. Um. 0:20:32.880 --> 0:20:37.280 By this time Turkey was to be by Turkey was 0:20:37.320 --> 0:20:39.399 to be on the cusp of European Union membership and 0:20:39.480 --> 0:20:43.320 joining the ultimate club of liberal democracies. Now it looks 0:20:43.400 --> 0:20:46.480 like an elected autocracy, and I think what has happened 0:20:46.520 --> 0:20:49.000 Now there's a debate. There's a debate within the Turkey 0:20:49.040 --> 0:20:52.080 watching community about what happened. Some people will argue that 0:20:52.160 --> 0:20:54.399 this was air Duan's plan all along, that he was 0:20:54.440 --> 0:20:57.840 an authoritarian out to accumulate power from the very beginning. 0:20:58.280 --> 0:21:00.879 Others have a more nuanced view, and I include myself 0:21:00.880 --> 0:21:03.440 in that group, which is that a number of things 0:21:03.480 --> 0:21:06.400 happened around two thousand seven two thousand eight in which 0:21:06.400 --> 0:21:09.480 the Turkish establishment made it very clear they were going 0:21:09.520 --> 0:21:11.960 to try to prevent the Justice and Development Party from 0:21:12.000 --> 0:21:14.399 ruling and governing in the country, and as a result 0:21:14.440 --> 0:21:19.080 you had this very harsh authoritian turn in which everyone 0:21:19.119 --> 0:21:23.000 has tried to pulverize opponents that even one final question 0:21:23.080 --> 0:21:26.280 unfortunately too quick. If I go down to the Mediterranean, ismir, 0:21:27.040 --> 0:21:29.399 what is this depreciation of a lira mean? If I 0:21:29.440 --> 0:21:32.800 walk into the Dennis restaurant, world famous, it's been there 0:21:32.840 --> 0:21:36.639 for thirty years, what is the lyric depreciation meant to 0:21:36.720 --> 0:21:39.680 the people that run and work at the dentist restaurant? 0:21:39.680 --> 0:21:44.520 And Ismir, Well, everything is more expensive for the Dennis 0:21:45.240 --> 0:21:48.840 restaurant owners uh and managers. Everything that they have to 0:21:48.880 --> 0:21:52.440 buy to run that restaurant is much more expensive for them. 0:21:52.480 --> 0:21:56.680 In addition, this, this tension with the United States has 0:21:56.720 --> 0:22:00.439 the potential to depress the number of tours who are 0:22:00.560 --> 0:22:03.960 visiting the Dennis restaurant, and tours to are carrying dollars 0:22:04.040 --> 0:22:06.359 or euros you would buy much much more in Turkey 0:22:06.359 --> 0:22:08.919 these days. But because of this tension, because of tension 0:22:08.960 --> 0:22:12.440 with Europe. Uh, there are a few of you were 0:22:12.440 --> 0:22:14.840 towards in the Turkey these days. See if kindly brought 0:22:14.880 --> 0:22:16.640 that up because Farrell and I are doing a road trip. 0:22:17.400 --> 0:22:20.560 That's what you did. I knew that we're pitching off 0:22:20.640 --> 0:22:23.680 roducers to allow us to go around the world. Stephen Cook, 0:22:25.119 --> 0:22:27.640 two countries where the currency has been battered, So we're 0:22:27.640 --> 0:22:30.359 going to do this food currency tool. This has been wonderful. 0:22:30.400 --> 0:22:33.080 Stephen Cook the concert for Uscis folks. I can't say 0:22:33.160 --> 0:22:35.760 enough about his false tone. I'll put a major push 0:22:35.800 --> 0:22:53.080 on it out at my book side this weekend. Spending 0:22:53.080 --> 0:22:56.720 money to make money, getting ways for people to have 0:22:56.800 --> 0:23:00.800 thirty off their big home and furniture. Let's find out 0:23:00.840 --> 0:23:03.760 more about how Macy's is doing with Sarah Hall zach 0:23:03.800 --> 0:23:07.600 Oar Bloomberg opinion columnists, who knows everything about shopping at 0:23:07.640 --> 0:23:10.960 the flagship store. Sarah, So what about Macy's. What's wrong 0:23:11.000 --> 0:23:14.800 with spending money to make money? Well, I think that 0:23:15.320 --> 0:23:18.240 investors maybe just realized today they got a bit ahead 0:23:18.240 --> 0:23:21.360 of themselves. This stock had been up sixty six percent 0:23:21.520 --> 0:23:23.640 year to day. It was one of the biggest movers 0:23:23.680 --> 0:23:26.240