WEBVTT - Traders Analyze CPI and US-China Developments 0:00:02.400 --> 0:00:07.520 Bloomberg Audio Studios, podcasts, radio news. 0:00:11.920 --> 0:00:16.320 This is the Bloomberg Surveillance Podcast. Catch us live weekdays 0:00:16.360 --> 0:00:19.720 at seven am Eastern on Apple car Player, Android Auto 0:00:19.760 --> 0:00:23.080 with the Bloomberg Business App. Listen on demand wherever you 0:00:23.120 --> 0:00:26.599 get your podcasts, or watch us live on YouTube. 0:00:26.480 --> 0:00:30.360 And re sheats with Us Now with Morgan Stanley. Were 0:00:30.360 --> 0:00:32.560 thrilled that he could be with us today. Andrew, the 0:00:32.600 --> 0:00:35.000 first thing I did in honor of your Brown University 0:00:35.040 --> 0:00:39.280 of Mathematics is I took course EPI this series, not 0:00:39.720 --> 0:00:42.480 the year over your month of a month the series, 0:00:42.960 --> 0:00:45.920 and I don't have a first or second derivative convexity 0:00:46.320 --> 0:00:51.640 towards disinflation. Does Morgan Stanley see disinflation in place or 0:00:51.640 --> 0:00:53.840 can you not say that after the report? 0:00:55.560 --> 0:00:58.880 Yeah, so we do see disinflation in place, although you 0:00:58.880 --> 0:01:01.720 know not yet. Inflation is still holding up through the 0:01:01.800 --> 0:01:04.680 end of the year. Where we, I think are a 0:01:04.720 --> 0:01:07.640 little bit more optimistic on inflation than the consensus is 0:01:08.040 --> 0:01:11.080 next year where we see inflation coming down, and I 0:01:11.080 --> 0:01:14.160 think importantly it's really coming down in the first half 0:01:14.160 --> 0:01:17.280 of the year, where for the incoming Trump administration, we 0:01:17.319 --> 0:01:19.440 think it's going to be a case where policy has 0:01:19.640 --> 0:01:23.199 kind of fast announcement but slow implementation. You don't get 0:01:23.240 --> 0:01:27.880 the inflationary effects of tariffs of immigration changes until kind 0:01:27.920 --> 0:01:30.399 of in the back half of twenty twenty five and 0:01:30.440 --> 0:01:32.440 in the first part of the year. We think that 0:01:32.560 --> 0:01:34.440 a lot of the inflation which is being driven by 0:01:34.440 --> 0:01:37.640 shelter auto insurance, that that can come down, That those 0:01:37.680 --> 0:01:40.479 series are running kind of well ahead of where the 0:01:40.520 --> 0:01:43.520 real economy markets for those are, and that some of 0:01:43.560 --> 0:01:47.520 the difficult seasonality in January and February, which previously has 0:01:47.560 --> 0:01:51.280 boosted inflation, we think that actually sets an attractive bar 0:01:51.400 --> 0:01:53.400 that might make it a little bit easier for inflation 0:01:53.440 --> 0:01:55.520 to be a little bit better than expected. So we 0:01:55.560 --> 0:01:58.120 do see inflation coming down. We see that disinflation the 0:01:58.120 --> 0:01:59.600 first half of the year, and we think that will 0:01:59.640 --> 0:02:02.240 mean that the FED cuts not just this month but 0:02:02.320 --> 0:02:03.960 in January as well. 0:02:04.160 --> 0:02:08.240 Is that so get a sense there, Andrew, where out 0:02:08.240 --> 0:02:10.960 there are you suggesting your clients really think about adding 0:02:11.040 --> 0:02:13.839 some risk, if anywhere, as a thing about twenty twenty five. 0:02:15.200 --> 0:02:17.400 Yeah, So I think as a house, I think we 0:02:17.440 --> 0:02:21.040 are more optimistic than consensus on duration. We think that 0:02:21.160 --> 0:02:23.639 vond yields will fall. We think that that fall will 0:02:23.680 --> 0:02:27.239 be concentrated in the first half of the year, as 0:02:27.600 --> 0:02:30.160 the FED ends up cutting a little bit more than expected, 0:02:30.320 --> 0:02:33.480 as inflation falls a little bit more than expected, and 0:02:33.560 --> 0:02:36.440 as I think some of again, some of the inflationary 0:02:36.480 --> 0:02:41.320 impacts of policy change take longer than expected to develop. 0:02:41.360 --> 0:02:43.240 And you know, I think an important part that our 0:02:43.280 --> 0:02:45.680 interest rate strategists have been talking about, but it also 0:02:45.720 --> 0:02:49.120 applies to credit, is you know, fixed income markets have 0:02:49.120 --> 0:02:52.000 been operating under this very difficult environment of a very 0:02:52.040 --> 0:02:55.200 flat or inverted yield curve. There's been very little carry 0:02:55.200 --> 0:02:58.040 in the asset class. If the FED continues to cut 0:02:58.040 --> 0:03:00.880 as we expect, if the ECB continues to cut as 0:03:00.880 --> 0:03:03.200 we expect, we think the European Central Bank will take 0:03:03.520 --> 0:03:05.680 policy rates down to just one percent by the end 0:03:05.720 --> 0:03:07.760 of next year. That's going to provide I think, a 0:03:07.840 --> 0:03:11.880 much better carry environment for fixed income and be support 0:03:11.919 --> 0:03:14.079 of adoration credit risk. 0:03:14.080 --> 0:03:17.200 How much credit risk are you suggesting folks take here 0:03:17.360 --> 0:03:19.639 these days, given that the two year treasuries at four 0:03:19.639 --> 0:03:21.600 point one. 0:03:22.240 --> 0:03:24.960 So I think credit's also a story. I think of 0:03:24.960 --> 0:03:26.800 a little bit a better first half and then maybe 0:03:26.800 --> 0:03:29.840 a more challenging second half. So spreads are low you know, 0:03:29.840 --> 0:03:32.800 I don't think this is a case where ourselves are 0:03:32.880 --> 0:03:35.640 really any credit investor is loading up on a large 0:03:35.680 --> 0:03:37.920 amount of credit risk. But it's also one where I 0:03:37.920 --> 0:03:39.760 think you have to be kind of careful about timing 0:03:39.800 --> 0:03:41.760 that short or timing that underweight. 0:03:41.800 --> 0:03:42.240 The credit. 0:03:42.280 --> 0:03:45.600 We think can remain somewhat tighter for longer than the 0:03:45.640 --> 0:03:49.440 markets expecting. So we're expecting US credit spreads, European credit 0:03:49.440 --> 0:03:51.920 spreads to actually be a little bit tighter by the 0:03:51.920 --> 0:03:53.640 middle of next year and then maybe have a more 0:03:53.640 --> 0:03:54.680 difficult second half. 0:03:55.160 --> 0:03:57.840 Andrew, just your one final question here. It's too short 0:03:57.840 --> 0:03:59.320 a visit today. We want to get you on for 0:03:59.440 --> 0:04:03.800 much longer chat as well. You're sitting over the holidays 0:04:04.240 --> 0:04:07.520 and you've got family members going Andrew, we don't understand 0:04:07.520 --> 0:04:12.120 your world. But as capitalism is finance in place, is 0:04:12.160 --> 0:04:13.280 this a normal time? 0:04:15.920 --> 0:04:18.719 Well, I think what we are looking at is is 0:04:18.760 --> 0:04:22.039 a much wider range of outcomes looking ahead. And I 0:04:22.040 --> 0:04:25.640 think the new incoming administration increases the odds of boom 0:04:25.680 --> 0:04:28.839 and a larger capital market rebound, and it increases the 0:04:28.880 --> 0:04:32.760 odds of stagflation, of weaker growth and higher inflation. If 0:04:32.800 --> 0:04:36.279 you look at Morgan Stanley's Economic Outlook, our strategy outlook, 0:04:36.320 --> 0:04:38.560 which we published a couple of weeks ago. You'll see 0:04:38.560 --> 0:04:40.480 that in our forecast. You'll see that in our numbers. 0:04:40.480 --> 0:04:43.200 You'll see that in this wider range of outcomes. So 0:04:43.480 --> 0:04:45.960 I think we are moving from a very moderate outcome 0:04:46.000 --> 0:04:49.279 which was outstanding for credit and good for the equity 0:04:49.279 --> 0:04:51.440 market as well, to something that's a lot less moderate, 0:04:51.480 --> 0:04:53.760 and it might not be bad, it might be good, 0:04:54.000 --> 0:04:56.120 but it's a wider range of outcomes that we're dealing with. 0:04:56.320 --> 0:04:58.560 Just short of visit Andersy's Thank you so much. We'll 0:04:58.560 --> 0:05:03.920 do it again, Morgan Stanley. 0:05:06.000 --> 0:05:09.839 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:05:09.960 --> 0:05:13.240 weekday afternoons from seven to ten am Eastern Listen on 0:05:13.279 --> 0:05:16.559 Apple car Play and Android Auto with a Bloomberg Business app, 0:05:16.640 --> 0:05:18.359 or watch us live on YouTube. 0:05:18.400 --> 0:05:21.360 When you get a new office at Stanford University, yeah, 0:05:21.360 --> 0:05:22.440 you know, it's like you live in here. 0:05:22.800 --> 0:05:25.080 I mean it's like gorgeous. 0:05:24.640 --> 0:05:25.719 Out there, I know, perfect. 0:05:25.800 --> 0:05:28.840 Her public service to this nation has been extraordinary. We're 0:05:28.839 --> 0:05:31.040 gonna squeeze in a couple of minutes here. She has 0:05:31.120 --> 0:05:35.000 just served secretary of Ramando at Commerce, but far more 0:05:35.200 --> 0:05:39.360 before that, she served all of us with absolutely definitive 0:05:39.400 --> 0:05:43.480 coverage of China. Her Third Revolution is a definitive cover 0:05:43.560 --> 0:05:47.800 to cover. Read on President she Elizabeth Economy now at 0:05:47.839 --> 0:05:51.359 Stanford University, doctor Economy, Thank you so much for joining 0:05:51.400 --> 0:05:55.919 Bloomberg Surveillance. What is our intelligence on Beijing is a 0:05:56.040 --> 0:05:59.120 general sense. Do we know what's going on with the 0:05:59.200 --> 0:06:00.400 Chinese leader ship? 0:06:02.240 --> 0:06:05.960 I think we have a reasonably good idea of where 0:06:06.040 --> 0:06:08.760 she Jinping wants to take the country. If you're asking, 0:06:09.120 --> 0:06:12.160 do we have a good visibility into the inner workings 0:06:12.200 --> 0:06:15.039 of the Standing Committee of the Polipio, the top seven 0:06:15.080 --> 0:06:17.440 people that rule the country, I have to say the 0:06:17.560 --> 0:06:20.720 answer is probably not at this point. But I think 0:06:20.760 --> 0:06:23.320 we have a fairly clear sense both in terms of 0:06:23.320 --> 0:06:26.760 what China's doing at home and its foreign policies about 0:06:26.800 --> 0:06:29.800 overall directionally where She Didn't Ping wants to take the country. 0:06:30.240 --> 0:06:32.159 How is their military projection? 0:06:32.600 --> 0:06:35.280 I mean from the budget standpoint, we can talk about 0:06:35.640 --> 0:06:40.840 deflation in China and the capitalism or non capitalism of China. 0:06:40.880 --> 0:06:44.599 But the fear, the arch fear across all including the 0:06:44.640 --> 0:06:49.160 South China Sea. Is there military projection? Are they funding? 0:06:49.240 --> 0:06:54.560 Are they a defense? Are they an offense juggernaut. Oh absolutely. 0:06:54.600 --> 0:06:56.800 I mean they have the largest military in the world 0:06:57.360 --> 0:07:01.440 there maybe is now larger than in ours. You can 0:07:01.440 --> 0:07:03.880 see with the activity that they've been undertaking over the 0:07:03.920 --> 0:07:08.320 past six months, you know, sort of accelerated military activity 0:07:08.320 --> 0:07:12.440 in the Taiwan straight in the South China Sea, very aggressive, 0:07:13.160 --> 0:07:15.120 and I think this is all part of one of 0:07:15.200 --> 0:07:20.520 Chijinping's major sort of directives is really to reclaim the 0:07:20.640 --> 0:07:24.120 territory that he considers to be Chinese sovereign territory. And 0:07:24.160 --> 0:07:27.680 so I think they use any excuse they can to 0:07:27.880 --> 0:07:30.560 sort of do these military exercises, I think in the 0:07:30.560 --> 0:07:35.280 hopes basically to coerce other countries and Taiwan just to 0:07:35.400 --> 0:07:38.920 accede to Chinese demands. That hasn't happened yet, but I 0:07:38.920 --> 0:07:41.880 think that really is the intention. So there's been no 0:07:42.000 --> 0:07:44.840 letup despite the challenges in the Chinese economy, There's been 0:07:45.000 --> 0:07:47.880 no letup in terms of their spending on defense, in 0:07:47.960 --> 0:07:51.120 terms of the overall trajectory of their military and their 0:07:51.160 --> 0:07:54.040 desire to be able to project force and meaningful ways. 0:07:54.760 --> 0:07:58.360 Doctor economy, What do you believe the Chinese view is 0:07:58.480 --> 0:08:00.679 of President elected Trump here? 0:08:03.000 --> 0:08:06.400 So I think, look there as many views in China 0:08:06.920 --> 0:08:10.080 about President Trump as there are in the United States. 0:08:10.640 --> 0:08:14.480 I think there are people who welcome President Trump for 0:08:14.920 --> 0:08:17.960 a range of reasons. There are people who are kind 0:08:17.960 --> 0:08:23.000 of you know, maga Chinese who like the President's views 0:08:23.040 --> 0:08:25.440 around values, or at least the views that were expressed 0:08:25.520 --> 0:08:30.560 during the campaign around values. There are people who think 0:08:30.640 --> 0:08:32.600 that President Trump is going to be good for China 0:08:33.160 --> 0:08:36.000 because he's going to hold the United States, you know, 0:08:36.120 --> 0:08:39.080 back out of a number of international institutions, things like 0:08:39.080 --> 0:08:42.880 the World Health Organization or the Paris Climate Accords and 0:08:43.000 --> 0:08:45.319 leave a lot of space for China to assert its 0:08:45.400 --> 0:08:49.120 leadership on the global stage. People who think that there 0:08:49.160 --> 0:08:51.480 are going to be problems between the United States and 0:08:51.640 --> 0:08:55.120 our allies because President Trump has a sort of more 0:08:55.160 --> 0:09:00.240 transactional approach to how to navigate our relations there. And so, 0:09:00.440 --> 0:09:01.960 you know, we saw a lot of problems in the 0:09:01.960 --> 0:09:05.400 first Trump term with our European allies that China tried 0:09:05.440 --> 0:09:08.400 to exploit. I think they're thinking in those terms again, 0:09:08.600 --> 0:09:10.640 you know, are they going to have opportunities like that? 0:09:11.559 --> 0:09:14.360 At the same time, of course, President Trump has promised 0:09:14.440 --> 0:09:17.960 variously to level you know, sixty percent tariffs on you know, 0:09:18.000 --> 0:09:22.000 all Chinese exports twenty five percent tariffs, ten percent tariffs. 0:09:22.040 --> 0:09:24.480 We don't know where you know, the numbers in the land. 0:09:24.559 --> 0:09:25.040 We don't know. 0:09:25.000 --> 0:09:27.640 Whether it's going to be you know, whether the terrafs 0:09:27.640 --> 0:09:30.199 are basically the threat of tariffs is basically a tool 0:09:30.720 --> 0:09:33.520 to get China back to the matiating table. All of 0:09:33.520 --> 0:09:35.320 these things are sort of up in the air at 0:09:35.320 --> 0:09:38.000 this point in time, so a mix of views. I 0:09:38.040 --> 0:09:41.640 think about what president might mean for the country, and one. 0:09:41.520 --> 0:09:46.400 Of the chapters lives in the Third Revolution, The Lion awakens. 0:09:46.520 --> 0:09:51.360 That is the arch fear by partisan fear of America. 0:09:51.480 --> 0:09:54.760 You live this in real time with Gina Romando at 0:09:54.760 --> 0:09:57.160 Commerce in the Trump administration. 0:09:58.000 --> 0:10:02.560 We assume the lion away weakens. How do we quiet 0:10:02.679 --> 0:10:04.880 the lion and the coming four years? 0:10:06.440 --> 0:10:08.880 I mean, I'm not sure that there's really a way 0:10:08.920 --> 0:10:13.160 to quiet the lion. I think there's a way to 0:10:13.920 --> 0:10:17.440 ensure that the United States, you know, is the dragon. 0:10:17.559 --> 0:10:19.280 I guess in the. 0:10:19.400 --> 0:10:21.520 In the sense that you know, what I think our 0:10:21.600 --> 0:10:24.720 message should be is that we're still looking toward US 0:10:24.880 --> 0:10:29.000 leadership on the global stage, right, and US technological leadership 0:10:29.120 --> 0:10:34.200 and military leadership and leadership and the values domain. I think, 0:10:34.240 --> 0:10:37.200 to me, what we want to do is to run faster. 0:10:37.520 --> 0:10:42.320 I sometimes worry that we over index on our defensive tools, 0:10:42.440 --> 0:10:44.560 and so that would be a concern. I think with 0:10:44.640 --> 0:10:47.560 President Trump and you know, sort of the approach of 0:10:47.679 --> 0:10:51.280 just levy more tariffs, I'd like to see us invest more, 0:10:51.400 --> 0:10:54.400 you know, in science and technologies. We're still waiting to 0:10:54.440 --> 0:10:58.000 see the science right of the Chips Act. I think that, 0:10:58.120 --> 0:11:00.720 to me is what the United States needs to do 0:11:01.080 --> 0:11:03.560 and not simply say we don't want China to do this, 0:11:03.720 --> 0:11:05.000 stop China from doing that. 0:11:05.480 --> 0:11:08.520 Liz, you're twenty something and you're at Michigan, and you 0:11:08.720 --> 0:11:11.240 change the world where the river runs black on the 0:11:11.360 --> 0:11:13.880 environment in China, You, more than anyone has been over 0:11:13.880 --> 0:11:18.320 there more often. GM just pulled out of China. Effectively, 0:11:18.920 --> 0:11:24.319 Is American investment dead in terms of JV or investment 0:11:24.679 --> 0:11:26.480 in China. 0:11:26.640 --> 0:11:29.600 It's not dead, but there certainly has been a precipitous 0:11:29.720 --> 0:11:32.600 fall off. And it's not just the United States. It's 0:11:32.640 --> 0:11:36.400 you know, FDI into China overall. So our European partners 0:11:36.880 --> 0:11:39.360 are the same way, you know, Asian partners, same thing. 0:11:40.160 --> 0:11:42.560 I think there's just a sense that China has not 0:11:42.640 --> 0:11:47.240 been welcoming to private enterprise. Combination of factors, things like 0:11:47.240 --> 0:11:50.840 the anti espionage law, you know, controls around data, the 0:11:50.920 --> 0:11:54.800 lack of information around what's going on inside the Chinese economy, rights, 0:11:54.800 --> 0:11:58.320 the Chinese have been constraining, constricting the types of economic 0:11:58.400 --> 0:12:01.800 information that they're willing to share. And then there are 0:12:01.920 --> 0:12:04.640 Chinese you know, areas where China has just become far 0:12:04.720 --> 0:12:07.040 more competitive, And I think the car industry is a 0:12:07.080 --> 0:12:10.840 good example of that, where where I think multinationals find 0:12:10.840 --> 0:12:14.520 it more difficult to compete. But China doesn't want FDI 0:12:14.720 --> 0:12:17.800 to drop off this way, but they're they're sort of caught, 0:12:18.040 --> 0:12:20.080 I think, in a bind because she didn't Pink isn't 0:12:20.120 --> 0:12:24.000 really willing to undertake the steps necessary to open the 0:12:24.000 --> 0:12:26.559 door back up to private enterprise, even in his own 0:12:27.440 --> 0:12:28.240 private enterprise. 0:12:28.280 --> 0:12:30.559 I think it's probably exactly and that's kind of where 0:12:30.559 --> 0:12:33.440 I wanted to go, Elizabeth. I mean, does President g 0:12:33.640 --> 0:12:37.200 I mean closing off his country to foreign direct investment 0:12:37.240 --> 0:12:39.880 and show just the world it's not just technology, it's 0:12:39.920 --> 0:12:45.240 just broader trade. And is there real support for that 0:12:45.280 --> 0:12:46.600 type of policy in China? 0:12:48.160 --> 0:12:49.959 Well, I think, you know the way that she didn't 0:12:49.960 --> 0:12:52.080 Pink can drum up support for this, and so let 0:12:52.120 --> 0:12:55.280 me say, I think certainly not. I think that, you know, 0:12:55.320 --> 0:12:58.880 the private sector in China has certainly suffered over the 0:12:58.880 --> 0:13:01.560 past decade and some there. I don't think there is 0:13:01.600 --> 0:13:04.120 a lot of support. There were four oriented economists who've 0:13:04.160 --> 0:13:06.480 tried to get Hegen Pin to you know, take his 0:13:06.600 --> 0:13:10.559 hands off the controls. So I think, no, I don't 0:13:10.559 --> 0:13:13.160 think there's widespread support. But I do think to the 0:13:13.240 --> 0:13:16.760 extent that China feels as though it's under assault from 0:13:16.800 --> 0:13:20.880 things like terriffs or export controls, that bolsters siege in 0:13:21.000 --> 0:13:24.440 Pin's you know, argument for duel circulation, the argument that 0:13:24.520 --> 0:13:29.520 China can innovate, manufacturer and consue largely within itself. Again, 0:13:29.600 --> 0:13:32.960 teach and Pink doesn't want to close off you know all. 0:13:33.360 --> 0:13:36.680 He certainly wants China to export, and he wants companies 0:13:36.720 --> 0:13:39.360 to invest in China. He wants them to bring you know, 0:13:39.520 --> 0:13:43.320 high technology stuff that China doesn't have, Hey welcomes. But 0:13:43.400 --> 0:13:47.640 he's also committed to making China, you know, indigenously capable. 0:13:47.960 --> 0:13:50.680 What is your first I mean, I think about Jonathan 0:13:50.720 --> 0:13:52.280 Spence holding cord a Yale. 0:13:52.320 --> 0:13:54.280 What a privilege it would have been to be in 0:13:54.280 --> 0:13:55.160 that classroom. 0:13:55.720 --> 0:13:59.199 It's Stanford among the elite chair of Li's Economy. 0:13:59.480 --> 0:14:01.679 What's your first message in the first. 0:14:01.480 --> 0:14:05.360 Lecture on Liz Economy's China. 0:14:06.040 --> 0:14:10.160 China has a transformative vision for the international system and 0:14:10.240 --> 0:14:13.640 for China's place within it. And the United needs the 0:14:13.800 --> 0:14:15.600 United States needs to step up its game. 0:14:15.760 --> 0:14:17.880 Good Liz, we need another book. Get to work. I 0:14:17.880 --> 0:14:19.880 mean she's working like a four hour work week. 0:14:19.880 --> 0:14:22.440 Got at Stanford, Elizabet. 0:14:21.840 --> 0:14:23.160 At sixteen to do this. 0:14:23.280 --> 0:14:23.840 What do you mean? 0:14:24.160 --> 0:14:24.360 Yeah? 0:14:24.480 --> 0:14:27.680 Ce it Eli's coffee on Madison. Elizabe Economy. Thank you 0:14:27.800 --> 0:14:31.440 so much for joining us. She's professor at Stanford University. 0:14:31.640 --> 0:14:35.920 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:14:36.040 --> 0:14:39.240 starting at seven am Eastern on applecar Play and Android 0:14:39.280 --> 0:14:42.120 Auto with the Bloomberg Business app. You can also listen 0:14:42.240 --> 0:14:45.320 live on Amazon Alexa from our flagship New York station, 0:14:45.720 --> 0:14:49.440 Just say Alexa playing Bloomberg eleven thirty joining us. 0:14:49.480 --> 0:14:51.440 Now, I'm gonna give you a two short an introduction. 0:14:51.600 --> 0:14:55.400 He deserves a much longer one. Is Robert Hormats. Some 0:14:55.480 --> 0:14:59.400 people talk, others do. And back to the tenure of 0:14:59.480 --> 0:15:03.400 Secretary Kissinger. Bob Hormantz has traveled the miles of the 0:15:03.480 --> 0:15:07.720 Levant and Eastern Mediterranean and Chaos. Now to be clear here, 0:15:08.080 --> 0:15:11.400 you weren't there for the Great Syrian revolt of nineteen 0:15:11.440 --> 0:15:13.680 twenty five nineteen twenty seven. 0:15:13.760 --> 0:15:14.640 You missed that one. 0:15:15.360 --> 0:15:19.000 Why is Syria different now than the mess Paul Swenian 0:15:19.120 --> 0:15:23.320 I grew up with what's different now versus Kissinger and 0:15:23.400 --> 0:15:25.720 Hormats in the seventies Two things. 0:15:25.760 --> 0:15:30.440 Mainly One, you had hauffazilas On running the place, the 0:15:30.480 --> 0:15:34.800 father of the father of the son who's just vacated 0:15:34.840 --> 0:15:39.280 his throne to go to to go to Russia. But 0:15:39.360 --> 0:15:43.920 Huffazilason did not want big dust ups with the Israelis. 0:15:43.960 --> 0:15:45.400 As a matter of fact, he was the one who 0:15:45.960 --> 0:15:50.760 created that buffer zone that is now being occupied appropriately 0:15:50.800 --> 0:15:54.320 by Israel because Assyrians will pull out of it. But second, 0:15:54.720 --> 0:15:58.160 we in trying to get a settlement in the Sinai 0:15:58.280 --> 0:16:03.160 we always tried to keep good relations with the Saudis, 0:16:03.200 --> 0:16:10.120 Assyrians and others, the UAE and other countries in the region, 0:16:10.200 --> 0:16:14.280 including the Iraqis so and even the Iranians at that point, 0:16:14.400 --> 0:16:19.680 so there was a much better dialogue among the various 0:16:19.720 --> 0:16:23.800 countries to try to get some disengagement between the Israelis 0:16:23.840 --> 0:16:27.480 and the Egyptians, which ultimately did work, but it took 0:16:27.600 --> 0:16:29.320 You have in the Middle East, you have to see 0:16:29.360 --> 0:16:30.840 a lot of people because there are a lot of 0:16:30.840 --> 0:16:34.080 power centers. And the other thing in Syria is it's 0:16:34.120 --> 0:16:37.360 really an amalgam. We have the Kurds, you have the Allowhites, 0:16:37.440 --> 0:16:41.600 you have the Sunnis, you have the Shiites, and they're 0:16:41.680 --> 0:16:44.320 all taking different points of view. 0:16:44.680 --> 0:16:47.520 Hormance owns this. I just watched Lawrence of Arabia, but 0:16:47.640 --> 0:16:48.440 Hormance owns it. 0:16:50.280 --> 0:16:52.880 What does this mean, this change we're seeing taking place 0:16:52.880 --> 0:16:56.360 in Syria, what does it mean for Russia and Iran 0:16:56.480 --> 0:16:57.480 in that part of the world. 0:16:57.480 --> 0:17:03.160 There it dramatically weakens Russia's presence there. Russia is seen 0:17:03.200 --> 0:17:09.000 by the Syrian people as having supported Basha Alasad. They 0:17:09.000 --> 0:17:13.920 are not very well liked. They have one base, Latika, 0:17:14.119 --> 0:17:18.200 and then they have a seaport. They want to keep them. 0:17:18.520 --> 0:17:20.760 I think that'll be part of the negotiation, but I 0:17:20.800 --> 0:17:23.920 can't imagine the average Syrian wants them to stay there. 0:17:24.280 --> 0:17:29.760 And Iran has had its allies in effect get decapitated 0:17:29.920 --> 0:17:34.520 or weakened very badly, so all of its tentacles. The 0:17:35.720 --> 0:17:40.000 essentially the hoodies are still there, but the others are 0:17:40.240 --> 0:17:41.159 are are gone. 0:17:42.840 --> 0:17:45.720 Should the US folks let Erdawan take the northern border 0:17:45.880 --> 0:17:49.160 of Syria to the southern border of Turkey, worry about 0:17:49.160 --> 0:17:51.639 the Kurds. That's never going to go away. Should the 0:17:51.760 --> 0:17:57.000 United States project to south southern and southwestern Syria to 0:17:57.080 --> 0:18:02.479 try to provide stability around damasks north to homes or 0:18:02.480 --> 0:18:03.960 do there's there a different approach? 0:18:04.200 --> 0:18:06.919 Well, that's there are two really good points there. One, 0:18:07.240 --> 0:18:09.520 I think we have to work closely with the Turks, 0:18:09.520 --> 0:18:12.040 but I also think that we have to remember that 0:18:12.119 --> 0:18:16.760 the Kurds were part of the coalition of forces that 0:18:16.920 --> 0:18:23.040 overthrew assad and therefore we have done a lot of 0:18:23.119 --> 0:18:25.399 bad things to the Kurds and sort of pulled the 0:18:25.400 --> 0:18:27.560 red out from undum of the past. I think we 0:18:27.640 --> 0:18:31.000 want to try to convince the Turks to work with 0:18:31.680 --> 0:18:35.080 the Syrian Kurds and not go in there and take 0:18:35.080 --> 0:18:36.879 advantage of this and weaken them. 0:18:36.920 --> 0:18:38.120 Okay, this is. 0:18:38.080 --> 0:18:40.560 Too an important conversation. I'm not going to mince words. 0:18:40.760 --> 0:18:43.560 I got to tweet out this morning with the President 0:18:43.720 --> 0:18:47.679 elect making fun of Canada is a fifty first state. 0:18:48.320 --> 0:18:53.280 Do we have a potential sobriety and gravitas in state 0:18:53.920 --> 0:18:57.520 to handle these incredible nuances of the Levant. 0:18:57.600 --> 0:18:58.879 I don't see it well. 0:18:58.880 --> 0:19:01.600 It's very complicated. People in the past have been found 0:19:01.640 --> 0:19:05.000 have found it very difficult. But you know the the 0:19:05.240 --> 0:19:08.720 You have to work with the with the Kurds because 0:19:08.720 --> 0:19:10.520 they're part of this coalition. You have to work with 0:19:10.560 --> 0:19:13.840 the Turks because they're actually now the most powerful country 0:19:13.920 --> 0:19:17.760 other than Israel in the area. And Iran's ability to 0:19:18.040 --> 0:19:23.480 exercise influence has diminished dramatically. The Hesballah has been weakened. 0:19:24.520 --> 0:19:28.600 It's it's friends in Syria are gone. That whole notion 0:19:28.680 --> 0:19:35.919 of moving arms from from the Iran two Lebanon is 0:19:36.000 --> 0:19:41.560 really diminished, or if probably eliminated for the moment. So yeah, 0:19:41.680 --> 0:19:44.240 we have to have a very subtle diplomacy and you 0:19:44.280 --> 0:19:46.760 have to talk to all the parties. That's the one 0:19:46.800 --> 0:19:50.239 thing we learned about the Shuttle diplomacy. You couldn't just 0:19:50.280 --> 0:19:52.800 talk to the Egyptians and the Israelis. You had to 0:19:52.840 --> 0:19:55.960 talk to others because it's a complicated area. If you 0:19:56.000 --> 0:19:58.600 want to reserve preserve peace, you've got to have a 0:19:58.680 --> 0:20:02.280 dialogue with a lot of people, and that means sort 0:20:02.320 --> 0:20:03.240 of steady focus. 0:20:03.400 --> 0:20:06.440 What do you think under president like Trump, our role 0:20:06.720 --> 0:20:09.160 will likely be in that part of the world over 0:20:09.200 --> 0:20:10.520 the next several years. 0:20:10.640 --> 0:20:13.280 I think he's probably of the view that we should 0:20:13.480 --> 0:20:16.800 pull back and do relatively little. I don't think he. 0:20:17.119 --> 0:20:18.920 I mean, he has this fierce or a lot of 0:20:18.920 --> 0:20:22.840 people around him have his fierce anti Iranian point of view. 0:20:22.880 --> 0:20:26.359 And the Iranians now are probably going to be spending 0:20:26.440 --> 0:20:29.159 less money on their friends and allies in the region, 0:20:29.560 --> 0:20:33.240 who are now for the most part, decapitated or unable 0:20:33.280 --> 0:20:36.560 to perform anything like what the Iranians hope, which was 0:20:36.600 --> 0:20:40.360 their surrogates in the region. They can't play that role anymore. 0:20:40.400 --> 0:20:43.200 So the Iranians probably are going to spend more time 0:20:43.800 --> 0:20:47.320 on nuclear On the other hand, they to strengthen their 0:20:47.359 --> 0:20:50.480 own power. On the other hand, we have to demonstrate 0:20:51.040 --> 0:20:54.080 that we have good allies in the region, good friends 0:20:54.080 --> 0:20:56.520 in the region, and strength and relations both with Israel 0:20:57.000 --> 0:20:59.199 and with the Sunni Arabs on the other side of 0:20:59.200 --> 0:20:59.639 the Gulf. 0:21:00.040 --> 0:21:03.640 Anxiously awaiting Robert D. Hormats The Price of Liberty. 0:21:03.560 --> 0:21:06.680 Two point zero. We expect that book the movie rights 0:21:06.680 --> 0:21:09.080 have already been sold. The Heart and soul. 0:21:09.200 --> 0:21:14.359 A hormantce diplomacy is a fiscal soundness at home. What 0:21:14.600 --> 0:21:15.800 happened by mormance. 0:21:16.119 --> 0:21:19.520 What happened is that fiscal policy is broken in this country, 0:21:19.520 --> 0:21:24.040 that each side makes compromises with the other on tax 0:21:24.119 --> 0:21:28.280 cuts or spending increases. The budget deficit is really out 0:21:28.320 --> 0:21:32.000 of control, and so far there have been very little 0:21:32.280 --> 0:21:36.840 other than talk, very little in the way of specific 0:21:36.880 --> 0:21:41.399 measures to curb the budget deficit. And if the US 0:21:41.560 --> 0:21:44.520 continues to have a big budget deficit, it's going to 0:21:44.560 --> 0:21:48.800 dig into and reduce the ability to provide money for 0:21:48.880 --> 0:21:52.960 our defense. We need a strong defense system. 0:21:52.720 --> 0:21:55.120 In a world of war. We're in a world of. 0:21:55.080 --> 0:21:57.560 Trade wars and we're in the world of actual wars, 0:21:58.040 --> 0:22:00.560