WEBVTT - Surveillance: Fed Needs To Be Flexible, Laidler Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 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 --> 0:00:28.000 Bloomberg dot com, and of course on the Bloomberg December 0:00:28.280 --> 0:00:35.279 John and I were working what Yeah, And then there 0:00:35.360 --> 0:00:37.320 was a crater and there was a whole bunch of 0:00:37.320 --> 0:00:39.400 notes that said get on board, but there was one 0:00:39.479 --> 0:00:42.000 note that he had the courage to like get on 0:00:42.120 --> 0:00:46.280 board and also mentioned magnitude and he said up twenty 0:00:47.120 --> 0:00:50.720 And after everybody picked themselves up off the floor laughing, 0:00:51.159 --> 0:00:53.920 said Ben Laidler, you're out of here. Remember this crazy 0:00:53.960 --> 0:00:56.760 guy turns up from HSBC and starts talking about massive 0:00:56.840 --> 0:01:00.320 upside in and everyone's looking at him like his crazy, 0:01:00.440 --> 0:01:03.840 including me. I'm really pleased to say that the former 0:01:03.960 --> 0:01:06.880 chief equity strategist of HSBC and now the CEO of 0:01:06.880 --> 0:01:10.039 Tower Hudson Research, Ben Labor joins us on the phone. 0:01:10.280 --> 0:01:14.120 Been a fantastic call through and as Tom and I 0:01:14.200 --> 0:01:16.840 and least have been discussing for weeks, months, if not 0:01:17.040 --> 0:01:20.679 years now, the courage to stay invested when everybody is 0:01:20.720 --> 0:01:23.440 obsessed with the down side risk, Ben, how important is 0:01:23.480 --> 0:01:27.360 that story right now? Yeah? Very I mean, you know, 0:01:27.480 --> 0:01:29.520 to to Tom's point, you know, I don't really know 0:01:29.560 --> 0:01:33.000 how the coronavirus thing, um, you know, pans out right. 0:01:33.000 --> 0:01:34.959 We have some sort of historical precedent, But you know, 0:01:35.040 --> 0:01:38.120 I ultimately I think I think markets are sort of 0:01:38.160 --> 0:01:39.560 going to be fine here, right. I mean, I think 0:01:39.560 --> 0:01:43.000 the global business cycle is sort of stabilizing. Whether the 0:01:43.160 --> 0:01:46.399 coronavirus um, you know, delays that a quarter, and whether 0:01:46.440 --> 0:01:48.280 we need a bit more policy stimulus, you know, I 0:01:48.320 --> 0:01:50.400 don't know, But ultimately I think this is a macro 0:01:50.560 --> 0:01:56.120 narrative of a sort of stabilization of GDP, a stabilization 0:01:56.120 --> 0:01:58.760 of earnings um, you know, particularly in the US. I 0:01:58.800 --> 0:02:00.600 mean the US earnings or say, and I think is 0:02:00.600 --> 0:02:03.720 now over with the fourth quarter, after after three quarters 0:02:03.760 --> 0:02:06.880 of negative earning UM. And I think and I think 0:02:06.960 --> 0:02:09.680 valuations which people think are super expensive, I actually think 0:02:09.680 --> 0:02:12.840 that I can see here ten minutes and justify them. 0:02:12.960 --> 0:02:14.840 I think they're very well supported by a whole bunch 0:02:14.840 --> 0:02:18.440 of reasons, and this narrative that they're very expensive versus history. 0:02:18.440 --> 0:02:19.799 I think just you know, it's sort of a little 0:02:19.800 --> 0:02:22.200 bit intellectually lazy. And this is the fact that you know, 0:02:22.240 --> 0:02:24.080 we now have a huge tech sector, the bond deals 0:02:24.120 --> 0:02:26.119 are very low, that the US is growing more than 0:02:26.400 --> 0:02:28.360 any other developed market out there, and the BED can 0:02:28.400 --> 0:02:30.440 still cut rates if it if it wants to, no 0:02:30.440 --> 0:02:33.000 one else can. Well, let's stress test that intellectual laziness, 0:02:33.040 --> 0:02:34.720 shall we a little bit? Ben? I won't be as 0:02:34.760 --> 0:02:36.400 brutal as you. I think there's a lot of reasons 0:02:36.440 --> 0:02:38.440 to be cautious, to be less constructive, to be not 0:02:38.960 --> 0:02:41.440 the big over bowl that we saw, perhaps through parts 0:02:41.440 --> 0:02:44.480 of what did they get wrong? Though? Ben? I don't 0:02:44.480 --> 0:02:46.639 want to call them the doom crew because I think 0:02:46.800 --> 0:02:52.400 they're worries, irrational, they're well reason what do they get wrong? Though? Ben? Yeah? 0:02:52.440 --> 0:02:54.359 So I you know, I think what are the two 0:02:54.400 --> 0:02:56.440 big risks out there today? Because they're the same as 0:02:56.480 --> 0:02:58.720 they were back in Q four eighteen, Right, I mean 0:02:58.880 --> 0:03:01.040 you know which is which is that we get a 0:03:01.040 --> 0:03:04.120 big economic slowdown? Um, and you know all the focuses 0:03:04.120 --> 0:03:07.600 on China, right, that's global GDP growth, it's it's it's 0:03:07.600 --> 0:03:09.959 reasonably opaque. We think they have the policy flexibility, but 0:03:10.000 --> 0:03:11.560 they also have a lot of debt, right, so that 0:03:11.840 --> 0:03:14.320 you know, and the coronavirus just plays right into that again. 0:03:14.720 --> 0:03:17.000 So you know, China and how that feeds into the 0:03:17.000 --> 0:03:19.840 global economy is a big one. And the amount of 0:03:19.880 --> 0:03:23.000 policy flexibility that is out there globally, and that's obviously 0:03:23.040 --> 0:03:25.079 been getting less and less over the years of people 0:03:25.160 --> 0:03:27.200 have been getting more and more worried about it. And 0:03:27.240 --> 0:03:29.040 SPED has more than anybody else, you know, you know, 0:03:29.080 --> 0:03:31.799 negative rates in Europe and and and and and and 0:03:32.320 --> 0:03:35.200 essentially in Japan. Um. You know, those are the two issues. 0:03:35.400 --> 0:03:39.800 It's it's policy flexibility and and and global growth. I 0:03:39.800 --> 0:03:41.920 want to pick up on the policy flexibility. How much 0:03:42.040 --> 0:03:44.960 is your bullish call hinged on more stimulus from both 0:03:44.960 --> 0:03:50.480 the FED and the PBOC UM. I mean the p BOC, 0:03:50.600 --> 0:03:53.520 I think is is going to introduce you know, liquidity 0:03:53.560 --> 0:03:57.360 and credit measures here to support GDP at at current levels. 0:03:57.360 --> 0:04:01.560 But I think that's very coronavirus driven. The In terms 0:04:01.560 --> 0:04:03.160 of the FED, I think the FED just needs to 0:04:03.160 --> 0:04:04.720 be flexible. I mean, you know, why do we get 0:04:04.760 --> 0:04:06.920 this big sell off in in Q four eighteen. You 0:04:07.000 --> 0:04:09.000 know a big part of that was you know, people 0:04:09.000 --> 0:04:11.120 thinking the FAD was making a policy mistake by staying 0:04:11.160 --> 0:04:14.800 overly cautious for too long. So I think, um, you know, 0:04:14.800 --> 0:04:16.520 the first just cut three times here now there and 0:04:16.560 --> 0:04:18.159 holds at the moment. I think they just need to 0:04:18.160 --> 0:04:22.840 be um, you know, flexible and and you know growth 0:04:22.880 --> 0:04:26.640 in gend P growth in the US is still above potential. Um, 0:04:26.680 --> 0:04:28.760 you know, there's the stuffing at that and the first 0:04:28.760 --> 0:04:30.600 just kind of fests cut three times. So I think 0:04:30.600 --> 0:04:33.800 there's a lot of sort of insurance out there, um 0:04:33.920 --> 0:04:36.839 for for GDP growth and and and frankly for US earnings. 0:04:36.839 --> 0:04:38.719 I mean not to dwell on US earnings, but you 0:04:38.760 --> 0:04:41.720 know we're gonna get one percent earnings growth this quarter, 0:04:41.720 --> 0:04:44.200 which doesn't sound like very much, but it comes with 0:04:45.279 --> 0:04:48.240 negative drag from the energy sector and a five percentage 0:04:48.240 --> 0:04:52.080 point negative drag from international stocks, So you know, domestic 0:04:52.160 --> 0:04:55.839 corporate USA, well, I would argue it's in pretty rude 0:04:55.839 --> 0:04:58.200 health right now. Then what did Tara Hudson when you 0:04:58.279 --> 0:05:00.400 call on a bunch of fancying people that you're probably 0:05:00.440 --> 0:05:04.040 calling on Henry and Megan over in Vancouver for all 0:05:04.040 --> 0:05:07.560 I know. But then the fancy people, are they over 0:05:07.600 --> 0:05:09.760 owned in equities or not? I mean, are they are 0:05:09.760 --> 0:05:12.400 they all in on this bull market? Are you finding 0:05:12.440 --> 0:05:17.000 real skepticism out there? Yeah, there is a lot of skepticism. 0:05:17.080 --> 0:05:18.400 I mean, you know, I think there's a lot of 0:05:18.440 --> 0:05:20.200 sort of tourist and equities. People have sort of been 0:05:20.200 --> 0:05:23.840 stuck into equities but don't have very much conviction. Uh. 0:05:23.960 --> 0:05:25.839 You know, it's that classic sort of fear of missing 0:05:25.839 --> 0:05:28.760 out trade. So you know, there's a lot of there's 0:05:28.760 --> 0:05:32.120 not a lot of conviction. Um, you know a b 0:05:32.760 --> 0:05:35.200 I think a lot of people are the wrong stuff. Um. 0:05:35.240 --> 0:05:36.560 You know a lot of people in course of text 0:05:36.640 --> 0:05:38.120 run away from a lot of people that you know, 0:05:38.120 --> 0:05:40.520 they're very nervous about chasing it. And and there's this 0:05:40.600 --> 0:05:44.479 sort of siren call of international equity versus versus the US. 0:05:44.520 --> 0:05:46.440 I mean, how can the US just keep out performing 0:05:46.520 --> 0:05:49.640 year after year? Um? Well, I would make the case 0:05:49.720 --> 0:05:51.640 that it can again this year, right, I think growth 0:05:51.680 --> 0:05:54.360 expectations outside the US too high. A real idea of 0:05:54.440 --> 0:05:59.120 someone this bull shot, I meant, some of the bearishness. 0:05:59.120 --> 0:06:00.919 At the same time, we there are a lot of 0:06:00.920 --> 0:06:03.200 people who agree with him, And Ben, does that make 0:06:03.240 --> 0:06:06.479 you worry that a lot of people actually agree that 0:06:06.560 --> 0:06:10.719 it is time to stay invested and invest more? You know, 0:06:11.080 --> 0:06:12.760 you're definitely not going to make because you know, we 0:06:12.800 --> 0:06:14.760 madly decent last year, right, I mean that was a 0:06:14.760 --> 0:06:18.360 complete aberration. I all, I stand essentially arguing that you know, 0:06:18.560 --> 0:06:20.719 the US equities are going to move with earnings here, right, 0:06:20.760 --> 0:06:21.960 I mean we we we have a we have a 0:06:22.040 --> 0:06:24.600 U S earnings recovery which is going to gradually strengthens 0:06:24.600 --> 0:06:27.240 thro that the year. I don't think valuations are expensive. 0:06:27.279 --> 0:06:29.400 I think that you know, I think they're well supported. 0:06:29.400 --> 0:06:31.880 I do think the world has changed enough in terms 0:06:31.920 --> 0:06:34.400 of tech, in terms of discount rate, in terms of 0:06:34.400 --> 0:06:37.400 tax rate that you know, an eighteen times multiple is 0:06:37.600 --> 0:06:40.080 is sort of the new normal role than necessarily something 0:06:40.120 --> 0:06:43.200 to be to be afraid of. Ben. We've gotta get 0:06:43.200 --> 0:06:45.359 back really great stuff. And I don't think we've managed 0:06:45.360 --> 0:06:47.640 to talk since the massive call that you made last year. 0:06:47.680 --> 0:06:52.000 So congratulations on just a stellar coal. Didn't talk about it, 0:06:52.080 --> 0:06:54.360 but you know he missed. He missed about temper cent 0:06:54.400 --> 0:06:58.800 of upside rock. I thank thank you, Ben. Later their 0:06:58.800 --> 0:07:02.040 tower had some research see formerly of hs f C. 0:07:06.080 --> 0:07:09.400 John Yarmouth comes out of National Industries Money in Louisville 0:07:09.720 --> 0:07:12.600 a million years ago. He did what you did if 0:07:12.640 --> 0:07:15.960 you were liberal in nive, he left the Republican Party 0:07:16.240 --> 0:07:19.720 and wandered over to the Democrats as well. Speaker Pelosi 0:07:19.800 --> 0:07:22.120 loves him so much he put him in charge of budget, 0:07:22.120 --> 0:07:24.440 which is a good and beautiful thing. And Mr Yarmouth 0:07:24.720 --> 0:07:27.840 of Louisville joins us this morning, John Yarmouth, what is 0:07:27.880 --> 0:07:30.280 the state of your Democratic Party? Is that the Will 0:07:30.400 --> 0:07:33.880 Rogers Party where it's an ungodly mess? Or can some 0:07:34.040 --> 0:07:38.520 order actually come to your Democrats? Well, I'll tell you what. 0:07:38.640 --> 0:07:41.360 First of all, thanks for having me. I'm a Cleveland 0:07:41.360 --> 0:07:45.000 Indians fan, so long suffering, but we've been getting better 0:07:45.000 --> 0:07:51.560 and better and and uh there's always next season. Um. Well, 0:07:51.600 --> 0:07:56.480 obviously right now we're having uh some uh internal struggles. 0:07:56.520 --> 0:07:59.680 But I think what I pick up in my district 0:07:59.720 --> 0:08:02.360 and all around the country is that the only thing 0:08:02.400 --> 0:08:05.120 Democrats want to do is beat Donald Trump. And I 0:08:05.200 --> 0:08:09.320 really am optimistic that we'll pull together. And um, you know, 0:08:09.400 --> 0:08:13.040 if Bernie Sanders is is the nominee, everybody else is 0:08:13.080 --> 0:08:15.040 going to vote for him. If Bernie Sanders is not 0:08:15.120 --> 0:08:17.320 the nominee, Bernie Sanders, people are going to vote for 0:08:17.360 --> 0:08:20.760 the nominee because everyone knows that from our perspective, Trump 0:08:20.800 --> 0:08:23.200 is a worst fate you are into such a most 0:08:23.240 --> 0:08:26.360 interesting geography, of course, your battles of the Senate majority leader, 0:08:26.400 --> 0:08:29.120 and of course the state of an interesting interesting politics 0:08:29.120 --> 0:08:32.320 of Kentucky as well. Is the prescription here the middle 0:08:32.360 --> 0:08:36.600 ground of Biden Bloomberg as a prescription here something younger, 0:08:36.679 --> 0:08:38.960 hipper like a few of the other candidates. Which way 0:08:38.960 --> 0:08:42.240 do you cut it? You know, I have not resolved 0:08:42.240 --> 0:08:44.480 that in my own head. I've listened to both sides, 0:08:44.520 --> 0:08:47.000 and and I really hate to waffle in this, but 0:08:47.120 --> 0:08:50.560 I'm not sure. Uh. I do know though, that that 0:08:50.720 --> 0:08:54.480 the biggest motivating factor right now is is Donald Trump. 0:08:54.559 --> 0:08:58.240 And so you know, as the pole. The Quinnipiac poll 0:08:58.320 --> 0:09:03.800 showed yesterday all of the top six beat Donald Trump. Uh. 0:09:03.840 --> 0:09:08.199 And and Donald Trump is from so he looks to 0:09:08.240 --> 0:09:11.679 be pretty much kept at that number. So I'm not 0:09:11.880 --> 0:09:15.440 overly worried about our nominee, about who our nominee is. 0:09:16.120 --> 0:09:19.280 I do think, however, that the future of our party 0:09:19.400 --> 0:09:22.480 is going to arrest to a certain extent, on who 0:09:22.520 --> 0:09:26.640 can deliver on the promises of the agenda they make. 0:09:27.200 --> 0:09:31.120 And I worried that m Bernie Sanders or Elizabeth Warren 0:09:31.559 --> 0:09:34.800 will not be able to deliver on their agenda having 0:09:34.800 --> 0:09:37.679 been in Congress now, but this is my fourteenth year. Uh, 0:09:37.880 --> 0:09:41.720 you don't get that kind of revolutionary change in Congress. 0:09:42.040 --> 0:09:46.040 So John two points, you're making care winning and governing, 0:09:46.320 --> 0:09:48.400 And I want to just stress test the winning part 0:09:48.400 --> 0:09:51.320 of it. Do you really think a self proclaimed democratic 0:09:51.440 --> 0:09:55.560 socialist can win over people in places like Kentucky and 0:09:55.559 --> 0:09:57.480 can win other people in the swing tites as well? 0:09:57.640 --> 0:09:59.840 Is this a candidate in Senator Sanders that can really 0:10:00.080 --> 0:10:03.520 the country together? No? But I don't think so. But 0:10:03.600 --> 0:10:06.760 I think what what Bernie Sanders does is he brings 0:10:06.800 --> 0:10:09.200 a lot of new voters into the equation. And I 0:10:09.240 --> 0:10:11.760 think that's the mistake a lot of kind of conventional 0:10:11.800 --> 0:10:15.800 analysis of this election is people are making and that 0:10:15.960 --> 0:10:17.760 is to assume it's going to be the same voting 0:10:18.040 --> 0:10:21.240 uh block, and it's not going to be. There have 0:10:21.280 --> 0:10:26.040 been one point four million new voter registrations in Wisconsin, Michigan, 0:10:26.160 --> 0:10:31.320 in Pennsylvania since six Out of those, four hundred thousand 0:10:31.320 --> 0:10:35.480 registered independent, seven hundred fifty thousand registered Democrats, and two 0:10:35.520 --> 0:10:38.640 hundred fifty thousand Republicans. That's a three to one partisan 0:10:38.720 --> 0:10:41.640 registration advantage that's going to be awfully hard for Donald 0:10:41.679 --> 0:10:45.600 Trump to overcome. One thing I'm struck by Kevin's really 0:10:45.600 --> 0:10:48.480 talking about this is our Bloomberg got Washington correspondent from 0:10:48.520 --> 0:10:50.839 New Hampshire and he was saying, Uh, in Iowa, the 0:10:50.920 --> 0:10:53.680 swing voter, the middle voter was actually looking at either 0:10:53.720 --> 0:10:58.560 Sanders or Trump. It was not necessarily a moderate Democrat. 0:10:58.640 --> 0:11:00.760 And I'm wondering how represents and if that is. In 0:11:00.800 --> 0:11:04.080 other words, is that really the swing vote is to 0:11:04.160 --> 0:11:07.280 a more socialist or more kind of populist Telt, not 0:11:07.360 --> 0:11:11.000 socialist populist Telt, rather than the middle ground. Well, I 0:11:11.040 --> 0:11:13.720 think that is at least I think that is um 0:11:14.080 --> 0:11:16.679 the key those are those are populous motors. Those are 0:11:16.960 --> 0:11:21.320 people who they who think the the economy that the 0:11:21.360 --> 0:11:25.439 advantage they growing economy, the new economy is is passing 0:11:25.480 --> 0:11:28.240 them by, and they're looking for a government that's going 0:11:28.280 --> 0:11:31.440 to uh to pay attention to them and to make 0:11:31.520 --> 0:11:35.719 the economy work for them. So I think that is 0:11:35.760 --> 0:11:39.320 an interesting voting block, and I think that explains Bernie's 0:11:39.360 --> 0:11:42.559 appeal to too many of those people. The state review 0:11:42.679 --> 0:11:45.839 is the Midwest, of course, the key states Michigan, Wisconsin, 0:11:45.920 --> 0:11:48.400 and the rest. But I would really look at Kentucky 0:11:48.640 --> 0:11:53.440 is a really interesting mix of politics as well. How 0:11:53.480 --> 0:11:57.360 can the Northeasterners, the East coast elites, how can they 0:11:57.480 --> 0:11:59.960 do in Kentucky right now? Are you going to sell 0:12:00.040 --> 0:12:02.600 Senator Warren in Kentucky? For that matter, are you gonna 0:12:02.600 --> 0:12:06.400 sell Michael Bloomberg in Kentucky? Well, I think Michael Bloomberg 0:12:06.440 --> 0:12:09.439 actually would sell pretty well in Kentucky. I think Elizabeth 0:12:09.440 --> 0:12:12.760 Warren would. She's been to my district. She sells incredibly 0:12:12.760 --> 0:12:14.600 well in Louisville. She has a rock star there, and 0:12:14.640 --> 0:12:16.840 she would be in Lexington. And you know, we just 0:12:16.880 --> 0:12:20.280 won the governor's race um last fall, and we did 0:12:20.280 --> 0:12:22.720 it based on the votes in Louisville, Lexington and the 0:12:22.720 --> 0:12:26.640 Cincinnati suburbs. I think Elizabeth Warren would appeal very well there. 0:12:27.520 --> 0:12:31.000 So it's gonna be tough in Kentucky. Donald Trump is 0:12:31.040 --> 0:12:36.120 still popular in outside of the urban areas and he 0:12:37.880 --> 0:12:40.760 will remain popular I think through through this election year. 0:12:40.760 --> 0:12:43.920 And of course Mitch has sold his soul uh to 0:12:44.080 --> 0:12:48.000 Donald Trump and and as running as well, So, um, 0:12:48.080 --> 0:12:50.560 you're gonna have a tough tandem they're running in the state. 0:12:50.760 --> 0:12:53.440 John Quick final question, if we can just on the budget, 0:12:53.600 --> 0:12:55.840 if I may, and not on the composition of the budget, 0:12:55.880 --> 0:12:59.000 just on the size. It's being worried about the size 0:12:59.000 --> 0:13:04.040 of the budget popular anymore. Anyway, I don't see it anywhere. 0:13:04.240 --> 0:13:07.160 The President said nobody who cares about the budget. Republicans 0:13:07.160 --> 0:13:10.960 have basically given up as well. McK mulvaney has essentially 0:13:11.000 --> 0:13:14.520 given up the acting cheapest staff has run the OMB 0:13:15.360 --> 0:13:18.120 and and as a real deficit hawk. And I think 0:13:18.120 --> 0:13:20.880 one of the things that we focus on is, yes, 0:13:20.920 --> 0:13:24.560 they're they're sizeable deficits and maybe increased under the Trump administration. 0:13:24.960 --> 0:13:27.920 But we've got sizeable deficits in the in this nation 0:13:28.000 --> 0:13:32.719 deficits and infrastructure deficits, and education and and some other areas, 0:13:32.840 --> 0:13:35.960 and right now, and we've had a number of economists 0:13:36.679 --> 0:13:39.840 across the spectrum come to our committee and say, you know, 0:13:39.880 --> 0:13:41.960 now is the time to make those investments. It's not 0:13:42.000 --> 0:13:45.400 the time to shrink shrink back very quickly. Here, Congressman, 0:13:45.440 --> 0:13:48.280 the Louisville Batts is it the best triple A franchise 0:13:48.360 --> 0:13:51.520 in American baseball? I don't think there's any question about it. 0:13:51.840 --> 0:13:55.640 And we have a great, great, great stadium right on 0:13:55.679 --> 0:13:59.680 the river. The park and uh, and we said attendance 0:13:59.720 --> 0:14:03.199 record every year. It's a it's a wonderful place. And yeah, 0:14:03.679 --> 0:14:07.800 now they don't win much, but yeah, small detail. Cincinnati 0:14:07.840 --> 0:14:09.920 takes all our good players too soon. It has been 0:14:09.920 --> 0:14:12.920 too long, folks. So Louisville Redbirds always the best of 0:14:13.000 --> 0:14:15.319 Triple A baseball. Cox and thank you so much. John 0:14:15.440 --> 0:14:20.600 Yarmouth of Louisville, the Democrat with us this morning from Kentucky. 0:14:22.680 --> 0:14:24.840 Let's do this. Let's set up a different issue of 0:14:24.880 --> 0:14:27.720 foreign affairs. As you all know, I adore it, John 0:14:27.720 --> 0:14:30.400 Farrow the major thing with Gideon Rose effort, as he writes, 0:14:30.440 --> 0:14:34.440 with a big fun see John over here. Even old 0:14:34.480 --> 0:14:37.560 fossils like me can read it. But this time is different. 0:14:37.600 --> 0:14:40.680 It's a theme. It's about coming home America. But far more, 0:14:41.360 --> 0:14:44.160 this is the love affair that we have on international 0:14:44.200 --> 0:14:48.520 relations in foreign policy, and that's exceptionally deep. Gideon Rose 0:14:48.600 --> 0:14:52.040 joins us now the force behind Foreign Affairs magazine. Gideon, 0:14:52.160 --> 0:14:54.040 I want to go to the politics at the moment, 0:14:54.080 --> 0:14:57.640 the vice president, Vice President Biden writing an essay for 0:14:57.840 --> 0:15:01.520 you link New Hampshire and the vote today and the 0:15:01.640 --> 0:15:05.880 desperation of the Biden campaign into what Joe Biden wrote 0:15:05.920 --> 0:15:09.680 for you at Foreign Affairs. So what Biden wants to 0:15:09.760 --> 0:15:14.280 do is to go back to the Obama years, uh, 0:15:14.320 --> 0:15:16.440 not only when he was in power in the White House, 0:15:17.080 --> 0:15:21.400 but when American policies were more cooperative and trying to 0:15:21.440 --> 0:15:24.720 help lead the alliance and the international system rather than 0:15:24.760 --> 0:15:29.640 sort of aggressively assert just US interests alone or America 0:15:29.680 --> 0:15:34.240 first policies. And the details of that are pretty frankly 0:15:34.280 --> 0:15:36.880 common across most of the Democratic candidates. I think that 0:15:37.080 --> 0:15:40.320 they all want to put an emphasis on reducing inequality. 0:15:40.560 --> 0:15:44.440 They all want to put an emphasis on cooperative relations 0:15:44.440 --> 0:15:48.520 with American allies. Um. And the question is will the 0:15:48.600 --> 0:15:51.200 world actually first of all, will the Democrats get back 0:15:51.240 --> 0:15:53.920 in And second of all, will the world be ready 0:15:54.040 --> 0:15:57.840 to let America play a role uh like it used 0:15:57.880 --> 0:16:02.280 to once it has gotten the hack it's desire to getting. 0:16:02.320 --> 0:16:05.360 We always remember that debate of former President Barack Obama 0:16:05.560 --> 0:16:08.640 with Mitt Romney and Senator Romney brought up the risk 0:16:08.680 --> 0:16:11.280 that is Russia, and Barack Obama turned around and said 0:16:11.320 --> 0:16:13.920 the nineteen eighties would want would like its foreign policy back, 0:16:14.320 --> 0:16:18.120 And how wrong the former President Barack Obama was on 0:16:18.160 --> 0:16:20.120 the risk that Russia posed at that given time and 0:16:20.160 --> 0:16:22.480 the risk that Russia would pose in the coming years. 0:16:22.840 --> 0:16:26.280 What strikes me as almost insane watching the debates of 0:16:26.320 --> 0:16:29.640 these Democratic candidates is how little mention of China we 0:16:29.680 --> 0:16:32.760 get right now something stunning, Captain. In the last twenty 0:16:32.840 --> 0:16:37.360 four hours, the d o J announced charges against four 0:16:37.400 --> 0:16:41.560 members of China's People's Liberation Army for the seventeen hack 0:16:42.080 --> 0:16:45.000 of Equifax. And this is what Attorney General William Barr 0:16:45.040 --> 0:16:48.120 had to say. This was a deliberate and sweeping intrusion 0:16:48.120 --> 0:16:51.160 into the private information of the American people. Today, we 0:16:51.200 --> 0:16:53.720 hold p l A Hack as accountable for their criminal actions, 0:16:54.000 --> 0:16:56.360 and we remind the Chinese government that we have the 0:16:56.440 --> 0:16:59.720 capability to remove the Internet cloak of anonymity and find 0:16:59.720 --> 0:17:03.280 the hack because that nation repeatedly deploys against us. Why 0:17:03.320 --> 0:17:06.879 do I hear so little from the Democrats on the 0:17:07.000 --> 0:17:10.720 risk that China poses to the security of this country. Okay, 0:17:10.760 --> 0:17:12.560 first of all, Johnathan, I'm gonna push back a little 0:17:12.560 --> 0:17:15.440 bit on what you said, because Russia has indeed been 0:17:15.480 --> 0:17:18.919 trying to play a major spoiler role. They have not 0:17:19.119 --> 0:17:22.560 just violated borders in places like Ukraine with force and 0:17:23.160 --> 0:17:26.040 annexation of crimea, but they've just tried to mess with 0:17:26.160 --> 0:17:29.600 elections across the board. The Chinese have not done anything 0:17:29.680 --> 0:17:32.239 like that. The Chinese have been much more responsible than 0:17:32.280 --> 0:17:35.639 the Russians. And the threat China poses to American hegemony 0:17:35.840 --> 0:17:39.200 and to the global order is a long term challenge 0:17:39.520 --> 0:17:42.200 rather than a media crisis. This is not an attempt. 0:17:42.280 --> 0:17:46.120 These were individual companies and individual actors. It's not at 0:17:46.119 --> 0:17:49.520 the same level as the direct Russian challenge. But the 0:17:49.600 --> 0:17:52.719 question of what how we should compete with China over 0:17:52.760 --> 0:17:55.159 the long term is a really interesting one. And the 0:17:55.160 --> 0:17:59.280 big question that nobody wants to talk about is now 0:17:59.320 --> 0:18:02.080 that China is so big and strong that it can't 0:18:02.119 --> 0:18:05.359 be UH squashed and can't be put back in its box, 0:18:05.760 --> 0:18:08.439 what do they get from that in power? What is 0:18:08.480 --> 0:18:12.000 the uh is the price that America will have to 0:18:12.080 --> 0:18:15.640 pay for withdrawal. We were dominating the world somewhat. If 0:18:15.680 --> 0:18:18.280 we no longer want to do that, we're gonna have 0:18:18.400 --> 0:18:21.080 to give up certain things we want, either spears of 0:18:21.119 --> 0:18:24.040 influence to other countries, or certain issues we used to 0:18:24.119 --> 0:18:26.640 lecture the world about we won't be able to, or 0:18:26.880 --> 0:18:30.440 various kinds of things. The question becomes if anybody wants 0:18:30.440 --> 0:18:32.280 to deal with China. It's not so much what's your 0:18:32.280 --> 0:18:34.359 policy that's going to protect America in terms of the 0:18:34.400 --> 0:18:37.760 immediate Chinese threat, because we're safe from that. It's what 0:18:37.960 --> 0:18:40.399 is it that you're gonna have to give China to 0:18:40.480 --> 0:18:45.639 accommodate its rise that you don't currently want to give them. Gideon, 0:18:45.760 --> 0:18:47.960 let's clarify a cup of things. I've made the point 0:18:47.960 --> 0:18:50.160 the Russia was a risk. It's transplant that they were 0:18:50.200 --> 0:18:53.040 indeed a very real risk, and it's a risk that 0:18:53.080 --> 0:18:55.199 the former President Barack Obama did not acknowledge at the 0:18:55.200 --> 0:18:56.840 time when he sat across from mit Romney in that 0:18:56.880 --> 0:18:59.280 debate point at one point two, these are not just 0:18:59.400 --> 0:19:02.399 rogue actor? Is this according to the Attorney general? A 0:19:02.480 --> 0:19:06.480 people from the People's Liberation Army of China? This is 0:19:06.480 --> 0:19:10.800 the Unfortunately, at this point, the Chinese government has almost 0:19:10.800 --> 0:19:12.760 at least as much a credibility as the U. S. 0:19:12.800 --> 0:19:15.879 Attorney General, who has been a politicize a person pushing 0:19:15.920 --> 0:19:19.960 administration line. The question for American foreign policy is not 0:19:20.280 --> 0:19:22.800 just how to deal with the Chinese. Equifax and a 0:19:22.800 --> 0:19:25.480 few bunch of hackers who are trying to get commercial 0:19:25.520 --> 0:19:29.399 intelligence in various things The question is, given that China 0:19:29.600 --> 0:19:32.119 is such a major part of the global economy, is 0:19:32.119 --> 0:19:35.520 such a major power in the Pacific, can actually dominate 0:19:35.600 --> 0:19:38.760 certain areas militarily that we used to actually care about, 0:19:39.160 --> 0:19:40.800 what is it that we're going to do about that. 0:19:40.840 --> 0:19:43.639 We can't just confront them, We can't just bully getting 0:19:43.680 --> 0:19:45.880 The point you're making is to be fragmatic. I think 0:19:45.880 --> 0:19:48.080 that's an argument that's going to resonate with some people. 0:19:48.359 --> 0:19:50.840 But we've also made another argument there. Are you saying 0:19:50.840 --> 0:19:56.640 the Attorney General is politicizing the hack of Equifax. I'm 0:19:56.680 --> 0:20:00.800 saying that everything and everybody knows that this administration treats 0:20:01.640 --> 0:20:06.560 it's foreign policy announcements as part of its broader political agenda, 0:20:07.040 --> 0:20:12.600 and I would look to other sources for objective assessments 0:20:12.640 --> 0:20:16.919 of the Chinese threat rather than official American UH diplomats 0:20:16.920 --> 0:20:20.720 and spokesman at this point. And that's quite worrying. Well, 0:20:20.800 --> 0:20:25.400 it is, and it isn't that it's not clear. It's 0:20:25.520 --> 0:20:28.439 it's not clear to me that American officials have had 0:20:28.440 --> 0:20:31.080 a great deal of authority for any time now, and 0:20:31.240 --> 0:20:35.040 this administration has basically continued that process. And so I 0:20:35.080 --> 0:20:38.280 think that the markets and the world, and your listeners 0:20:38.320 --> 0:20:41.600 are more than intelligent and mature enough to make their 0:20:41.600 --> 0:20:45.680 own calls on the substance without necessarily taking guidance from 0:20:45.720 --> 0:20:47.680 the White House kitty. And there's a question sort of 0:20:47.720 --> 0:20:50.480 implicit in the discussion that you're having, which is the 0:20:50.560 --> 0:20:54.359 policy response to China, whether it's national security, Moving on 0:20:54.440 --> 0:20:57.520 to trade, and we talk about the Democratic primaries. We 0:20:57.560 --> 0:21:00.840 have not really heard much on what they will take 0:21:01.119 --> 0:21:03.600 with respect to the trade war and sort of trying 0:21:03.600 --> 0:21:06.679 to take a harder stance with China. What is the 0:21:06.680 --> 0:21:09.800 prevailing line within the Democratic Party right now and how 0:21:09.880 --> 0:21:12.520 they plan to go after China, not from a national 0:21:12.560 --> 0:21:16.679 security standpoint, but from a trade standpoint. So that's a 0:21:16.760 --> 0:21:20.040 great question, and the answer is there is no single 0:21:20.119 --> 0:21:22.919 line because there are two major camps in the party. 0:21:23.160 --> 0:21:26.679 There's the same kind of anti trade forces that have 0:21:26.800 --> 0:21:30.240 gotten dominance in the Republican Party and this administration are 0:21:30.280 --> 0:21:33.880 present in the Democratic Party. UH. Certainly among the standers, 0:21:33.960 --> 0:21:36.840