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Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in

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Speaker 1: local communities, economies and a sustainable future. That's the power

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Speaker 1: of global connections. Mary Lynch, Pierce Fenner, and Smith Incorporated

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Speaker 1: member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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Speaker 1: of course on the Bloomberg Always good to speak with

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Speaker 1: Jim mccon with Principal Global Investors, their chief executive officer,

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Speaker 1: and really looking at the overarching linkage of investment into

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Speaker 1: all the other Econ Mumbo Jumbo we walk talk about

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Speaker 1: if nominal GDP is reduced, if it's a single digit world,

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Speaker 1: why are we seeing double digit equity gains. We're seeing

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Speaker 1: double digit equity games gainst term because of primarily the

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Speaker 1: deregulation and lower and lower tax um agenda of the

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Speaker 1: new administration in the United States. It's it's really just

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Speaker 1: arithmetic that lower tax makes equities more valuable. The deregulation

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Speaker 1: is seen for many companies as potentially increasing profits, for

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Speaker 1: example in the banking sector. So I think that's what's

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Speaker 1: going on here, rather than discounting of a lot more

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Speaker 1: future nominal growth. How does that affect how you're allocating

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Speaker 1: right now? Are still very keen on on US equities? Yeah?

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Speaker 1: Pretty keen on US equities. I think they are Keep

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Speaker 1: up to wait, keep up to your strategic weight, and

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Speaker 1: buy on setbacks would be my view on US equities.

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Speaker 1: I think in credit it's much more nuanced. I don't

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Speaker 1: really like too forty on the ten year. I think

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Speaker 1: you have to look at other classes of debt where

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Speaker 1: the yields are higher, where the spreads are maybe attractive,

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Speaker 1: like how yield bonds, perhaps real estate debt. I think

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Speaker 1: those are the areas to be allocating too. But I think,

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Speaker 1: you know, don't go don't go undervaluing the American private

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Speaker 1: sector because, regardless of the noise coming from the political system,

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Speaker 1: that actually is I think the strength of the US economy.

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Speaker 1: What are the bright spots as you see them in

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Speaker 1: in real estate? What what makes it attractive to you

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Speaker 1: right now? I think what makes it attractive is that

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Speaker 1: it's only really partially recovered from the financial crisis, it's

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Speaker 1: taken a long time, and if you take a quality

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Speaker 1: portfolio of US commercial real estate, you're still talking about

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Speaker 1: a yield over five with not much over supply. It's

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Speaker 1: quite localized. I think there are qualifications to what I'm saying,

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Speaker 1: Like I wouldn't have much interest in multi family apartments

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Speaker 1: in the major cities. Those have got bit up to much.

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Speaker 1: And maybe you've got some problems in retail land because

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Speaker 1: of the move to online, so a lot of shopping

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Speaker 1: malls are basically semi obsolete. But you know, having said that, offices,

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Speaker 1: distribution properties, um, industrial um, those are really pretty interesting

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Speaker 1: right now and have very attractive yields. How interesting is

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Speaker 1: Europe to you right now? He's looking at the Bloomberg

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Speaker 1: over the weekend. They now do betting odds for the

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Speaker 1: French election. Who's who's leading the odds there for for

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Speaker 1: the free French president. Given all of the political uncertainty

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Speaker 1: there is, is it possible to be optimistic about, say,

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Speaker 1: European equities right now. I think to be optimistic about

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Speaker 1: European equities you'd have to assume several positive surprises, like

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Speaker 1: fixing the banking system. I'm concerned that a weak banking system,

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Speaker 1: particularly in Italy and Germany, will continue to constrain European growth.

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Speaker 1: You've seen a bounce in Europe, even in the UK,

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Speaker 1: but certainly in the Eurozone in the last few months.

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Speaker 1: That's really just a result of weaker currency. I think

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Speaker 1: if if you get a currency as weak as the

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Speaker 1: EU in the pound wire last year, you have to

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Speaker 1: get some boots to growth. I don't see the fundamentals

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Speaker 1: driving it that way, and I think impaired credit in

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Speaker 1: the economy will continue to be a problem. The other

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Speaker 1: issue to watch for in Europe, and I don't know

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Speaker 1: any better than anybody else what's going to happen, is

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Speaker 1: the French election, then later the German and Dutch elections,

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Speaker 1: maybe an Italian election within the next year or so.

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Speaker 1: I mean, all of those appear likely to lead to

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Speaker 1: a swing against the European Union, and that would tend

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Speaker 1: to be bad for trade and be quite potentially disruptive.

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Speaker 1: So I think look out for that. You are, the

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Speaker 1: president here talks a lot about getting to four percent growth.

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Speaker 1: How likely is that? Do you think that that will

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Speaker 1: get there here in the in the near to medium term.

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Speaker 1: I think it's definitely medium term, rather than near term.

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Speaker 1: If it happens um the agenda that they're they're planning

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Speaker 1: to put in place, deregulation, lower taxes, infrastructure spend could

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Speaker 1: lead to four percent growth maybe two years out. But

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Speaker 1: the only way that happens if there is if there

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Speaker 1: turns out to be more spare capacity in the US

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Speaker 1: economy than most observers think. We're looking at a year

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Speaker 1: when fiscal and monetary policy might actually be quite out

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Speaker 1: a joint. Looking forward, you know, Janet Yellen has another

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Speaker 1: year as FED chair and has certainly talked about the

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Speaker 1: economy getting close to capacity. And so it'll be a

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Speaker 1: little bit of an experiment here to see if the

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Speaker 1: expansion of fiscal policy can counter both the monetary policy

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Speaker 1: and the low unemployment rate. Fundamentally, the new administration's plans

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Speaker 1: for the economy are dependent on more people coming back

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Speaker 1: into the workplace. Remains an open issue. Whether they will

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Speaker 1: help me here with the presumption of inflation, the presumption

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Speaker 1: of some kind of growth, do you follow right over

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Speaker 1: to a presumption of increased investment. I just don't buy it,

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Speaker 1: and I don't I don't get horse and cart there. No,

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Speaker 1: I think horse and cart is the right analogy term

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Speaker 1: because when the horse and cart was replaced by the railroad,

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Speaker 1: it changed the whole pattern of investment hundred and fifty

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Speaker 1: years ago. What we're seeing now is much of the

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Speaker 1: capital investment infrastructure is being replaced by technology. You're seeing

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Speaker 1: the sharing economy, You're seeing increased automation. I think that

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Speaker 1: means that because of it systems, the efficiency of capital

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Speaker 1: investments a lot higher than it used to be. I

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Speaker 1: see the structural excess of savings over investment continuing, which

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Speaker 1: is one of the reasons why I think yields will

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Speaker 1: be lower for longer than most people think, in spite

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Speaker 1: of the new administration's policies. Square that with what we've

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Speaker 1: heard on the campaign trail during the transition these first

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Speaker 1: few days of the Downtrimp presidency about a renaissance of manufacturing.

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Speaker 1: Bring back jobs. Not a whole lot of talk of

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Speaker 1: of of bring jobs that will be high tech were

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Speaker 1: in part automated, but bring back steel working. Say what

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Speaker 1: you said to the likelihood of that happening, In the

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Speaker 1: likelihood that the government could engineer something like that, I

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Speaker 1: think over the next five years, the chances of the

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Speaker 1: old industrial jobs returning is basically zero. If you built

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Speaker 1: steel works now in the United States, they wouldn't employ

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Speaker 1: all that many people. That'd be highly automated, and that's

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Speaker 1: of necessity in order to be competitive. The hope for

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Speaker 1: jobs is around technology, is around retraining and education, and

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Speaker 1: the hope for jobs is there, but it's not recreating

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Speaker 1: the nineteen fifties and some sort of image of of

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Speaker 1: old style manufacturing because technology has moved on. Do you

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Speaker 1: worry about a recession the prospect for recession at this point?

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Speaker 1: Are there any signs that make you somewhat worried about that?

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Speaker 1: It's two ways, David, that a that a recession could happen.

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Speaker 1: One is a nasty geopolitical incident. You could see it

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Speaker 1: from not so much and if not so much an

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Speaker 1: instance of terrorism, but more from a very negative reaction

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Speaker 1: to it by governments shutting down trade travel. You could

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Speaker 1: see it from tariffs in a trade war that would

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Speaker 1: cause a recession, would put people out of work, although

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Speaker 1: it would be designed to do the opposite. So I

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Speaker 1: think there are points like that. You know, a major

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Speaker 1: European bank going down, which is not impossible that would

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Speaker 1: cause that would cause a recession. Now, is that the

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Speaker 1: most likely outturned. No, it's not, but I think it

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Speaker 1: is possible. The negative tail risk in the economy is

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Speaker 1: more than it usually is, just because of these political, financial,

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Speaker 1: geopolitical points very quickly. Or one thing we haven't talked

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Speaker 1: about this morning, Jim, is the idea of US purchase

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Speaker 1: versus foreign purchase three years out, five years out, can

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Speaker 1: can foreign stocks again have a big year where they

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Speaker 1: catch up Well, they could have a big year where

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Speaker 1: they catch up term if some of these tail risks

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Speaker 1: don't happen, but I don't really expect it and I

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Speaker 1: wouldn't bank on it. I think for the next five

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Speaker 1: years I would prefer to be in the US than

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Speaker 1: in most foreign stocks. The only proviser to that is

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Speaker 1: on a certainly five To tell you of you, I

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Speaker 1: think the emerging market play has not gone I think

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Speaker 1: there will continue to be relative economic growth from emerging markets,

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Speaker 1: but it could be hard by these two risks in

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Speaker 1: the way. Stick with the US and you wonder what

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Speaker 1: it means currency and JUSTUS Jim Coohan, thank you so much.

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Speaker 1: With Principal Global Investors, David, I'm totally depressed you are.

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Speaker 1: Sam Row put out on Twitter a photograph of Robert hormats.

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Speaker 1: David mel Pass just selected by the Trump administration and myself.

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Speaker 1: You're twelve years ago when he was joining the administration,

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Speaker 1: Hormance has been like mummified. He has an age. Today

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Speaker 1: Hormance looks great. Male Pass and I look like we

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Speaker 1: just got out of college. You look so tanned, Tom, Yeah,

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Speaker 1: well you know that was my You know it's blood pressure.

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Speaker 1: Where do you think Donald Trump got The idea was

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Speaker 1: very orange. Slop formats though, does look the same. Yeah,

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Speaker 1: it's just thank you, Sam, making me depressed on a Monday,

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Speaker 1: Sam Row, it's only becausiness. Insider joining us right now

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Speaker 1: is Robert Sinch, and that is someone good to talk

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Speaker 1: to on a Monday to to sort of frame where

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Speaker 1: we are. Bob, I want you to give us a

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Speaker 1: primer on how following inflation trends links into where we're going.

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Speaker 1: We got a big inflation week in the U S

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Speaker 1: p P I, c p I with euro inflation resets today.

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Speaker 1: Everybody's sort of migrating higher inflation after the big oil move.

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Speaker 1: I get that. Why do I care sell me on

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Speaker 1: why I need to follow inflation trends? Well, we should care,

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Speaker 1: I think. Good morning guys by the way I think

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Speaker 1: we should care only if the central banks care, because

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Speaker 1: I think the primary transmission mechanism between the inflation numbers,

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Speaker 1: because even if they pick up towards two two and

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Speaker 1: a half percent in historic context, that's not a you know,

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Speaker 1: a devastating rate of inflation. So the only reason I

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Speaker 1: think that that markets need to care is whether the

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Speaker 1: central banks care. And we continue to get massive balance

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Speaker 1: sheet expansion out of the Bank of Japan. They've actually

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Speaker 1: have anything had to accelerate their asset purchases to try

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Speaker 1: to keep j GB yields down. The ECB continues to

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Speaker 1: expand its balance sheet and has pledged to do so

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Speaker 1: for the rest of this year. So it's only if

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Speaker 1: the central banks begin to adjust uh their policy stance

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Speaker 1: do I think markets have to be concerned about this

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Speaker 1: particular level of inflation, whether it's two percent or one

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Speaker 1: and a half percent or two and a quarter percent,

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Speaker 1: to what ex cent is the e c B care

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Speaker 1: right now? Bob? Remember that, I remember that press conference

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Speaker 1: mariw drawing maybe two back where it's like the elephant

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Speaker 1: of the room, and and he wasn't really addressed it. Yeah,

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Speaker 1: I mean, you know, the e c B Uh, it's

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Speaker 1: kind of incredulous when Dragging goes up there and says,

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Speaker 1: we didn't even discuss tapering at the meeting. Um, you know,

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Speaker 1: I don't know what else they would discuss for that

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Speaker 1: many hours. But um, look, the e c B is

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Speaker 1: now I think in a in a quandary because they

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Speaker 1: didn't expect the economy to be performing as well as

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Speaker 1: it is. It looks like growth picking up from about

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Speaker 1: one and a half percent, maybe closing in on two percent,

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Speaker 1: which by Eurozone standards is pretty robust. Um, the inflation

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Speaker 1: numbers headline at least will be picking up close to

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Speaker 1: two percent, the core rates still around one UM and

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Speaker 1: there's certainly a strong chorus within the e c B

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Speaker 1: leadership to step away from this continued accumulation of of

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Speaker 1: of assets on the balance sheet. So I think, you know,

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Speaker 1: the b o J. I just think they just don't

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Speaker 1: know what to do, and I'm not sure they will

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Speaker 1: change anything. I think the central bank to watch going

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Speaker 1: forward is the e c B. And and does Drag

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Speaker 1: you start to back away from his assurances that they'll

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Speaker 1: continue to purchase assets for the rest of this year

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Speaker 1: at a fairly aggressive pace. Give us the Bob since

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Speaker 1: read on this piece we were talking about a few

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Speaker 1: minutes ago on the Bloomberg by Brian Chippata, looking at

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Speaker 1: foreign holdings of US treasuries following by three or forty

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Speaker 1: billion from the March peak through the end of November.

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Speaker 1: What's your what's your sense of what we're seeing there? Well,

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Speaker 1: I think there's two things going on. One is reserves

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Speaker 1: are down around the world, and that's a function primarily

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Speaker 1: of the stronger dollar um and and some countries having

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Speaker 1: to to spend some of their dollars to support their currencies.

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Speaker 1: The one that's interesting for me is China because their

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Speaker 1: holdings of of reserves are down about a hundred and

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Speaker 1: ninety billion since March, whereas their reserves are only down

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Speaker 1: a hundred and sixty billion. So in the case of China,

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Speaker 1: it looks like at least that there's been an active

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Speaker 1: acid allocation shift away from treasuries to other securities. Now,

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Speaker 1: that can be an investment decision, that can be a

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Speaker 1: political decision. We don't know what's what's driving it, but

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Speaker 1: the numbers tell us that China's holdings of treasuries have

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Speaker 1: actually declined more than their total assets over the period

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Speaker 1: and now, folks, for your benefit this morning, Robert Sinch

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Speaker 1: on the quality of reserves. Do we have a clue

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Speaker 1: what any given nations effects reserves are. Isn't that something

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Speaker 1: that can be made up on a whim or is

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Speaker 1: it actually accountable statistic? Well, you you hope they are

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Speaker 1: accountable statistics. They're they're reported to the i m F

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Speaker 1: and and the i m F does keep a measure

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Speaker 1: of these reserve holdings, and certainly UM as any of

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Speaker 1: the data in China, it's it's released on a fairly

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Speaker 1: regular basis. Um. You know, I think we have a

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Speaker 1: reasonably good set of data on probably the top ten

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Speaker 1: or fifteen countries in the world in terms of the

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Speaker 1: reserve holdings, and beyond that. Frankly, the magnitudes aren't large

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Speaker 1: enough to really matter all that much. But but I

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Speaker 1: do think the data is UH is reasonably accurate, and

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Speaker 1: certainly in the case of China, you know, down over

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Speaker 1: a trillion dollars in reserves. Um. You know, it's it's

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Speaker 1: it's pretty substantial, and you can you can sort of

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Speaker 1: trace some of the movements in different markets. Now, remember

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Speaker 1: these holdings of treasuries that we talked about, UM that's

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Speaker 1: not Chinese data, that's US data. So that data is

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Speaker 1: coming from the U. S side. Um, And as long

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Speaker 1: as it's not fake data. Um, you know, that's something

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Speaker 1: that's been put out by the treasury or for for

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Speaker 1: years now in terms of who's holding um, treasury debt,

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Speaker 1: and they can trace that reasonably accurate. Okay. But but

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Speaker 1: like for example Russia, do they have claims on their

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Speaker 1: reserves that aren't visible? Have they been contractually linked to

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Speaker 1: obligations down the road? For the most part, um not um.

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Speaker 1: You have seen reserve holdings in the past being used.

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Speaker 1: For example, China use them oh more than a decade

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Speaker 1: ago now to to shore up their banking system. Um.

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Speaker 1: In some in some emerging market countries, there maybe some

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Speaker 1: some claim on reserves. But I think for the most part, um,

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Speaker 1: you know when you when you trace back some of

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Speaker 1: these holdings. Again, the check on this is whether data

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Speaker 1: from other countries in this case, you know, the treasuries

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Speaker 1: data on holding them insecurities sort of line up in

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Speaker 1: general movements with what the countries themselves are reporting for

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Speaker 1: their reserve positions. We're talking earlier to Jordan Rochester of

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Speaker 1: Nomura on the crime of trying to make money here,

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Speaker 1: and he did a Bob Sinsho me Bob. He talked

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Speaker 1: about sterling Kiwi, which was a great chart we put out.

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Speaker 1: Do you have within the oddities of the political economic

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Speaker 1: investment moment a trade that just screams opportunity? You know?

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Speaker 1: I think that that. I still think the dollar has

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Speaker 1: significant upside this year. I don't think the dollar necessarily

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Speaker 1: has significant upside in the next couple of months. UM.

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Speaker 1: So I think that that for people who want to

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Speaker 1: get you know, pretty exotic in the options market, maybe

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Speaker 1: you sell um, you know, dollar volatility in the in

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Speaker 1: the near term, uh, you know, over the next three months.

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Speaker 1: So for example, you could you could sell a UM

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Speaker 1: one twenty dollar yen call in the three months, but

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Speaker 1: then by it in the three to six months period.

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Speaker 1: Because I do think as we get into the second

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Speaker 1: half of the year, we are going to see the

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Speaker 1: movements in in fiscal policy, particularly tax policy, and I

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Speaker 1: do think that drives a dollar significantly higher. So one

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Speaker 1: twenty dollar yen in the second half of the year,

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Speaker 1: it's a reasonable thing to focus on. To translate that

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Speaker 1: into Monday morning, English folks are just set a primal

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Speaker 1: scream out stream. I believe what Mr Sins you saying

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Speaker 1: is bring in premium, bringing income to your account uh

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Speaker 1: in the short term, and then maybe use that income

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Speaker 1: or others to make a position farther out on a

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Speaker 1: dollar move and more volatility. I think David I got

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Speaker 1: that half right. Yeah, perfect. Uh quickly here, Bob, we've

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Speaker 1: got the Private Ministery of Canada in Washington today. What's

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Speaker 1: the one thing we should be paying attention to in

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Speaker 1: the Canadian economy right now? You know, the Canadian economy

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Speaker 1: quietly has sort of mirrored this improvement in oil prices

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Speaker 1: that we've seen since since early last year. Um. You know,

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Speaker 1: Canada just had an employment report out on on Friday,

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Speaker 1: over forty thousand jobs created again in Canada over the

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Speaker 1: last six months. Their average job gains been about just

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Speaker 1: under forty thousand, and believe it or not, that's been

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Speaker 1: the fastest six months of job gains in Canada since

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Speaker 1: back in two thousand and two. So the Canadian economy

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Speaker 1: is doing a little bit better. It'll be interesting to

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Speaker 1: see what the Bank of Canada does on March one,

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Speaker 1: which is their next policy meeting. Um, you know, whether

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Speaker 1: they hint that maybe there's some policy move later in

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Speaker 1: the year. Markets are not discounting or not expecting any

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Speaker 1: policy moves out of the rate hikes out of the

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Speaker 1: Bank of Canada between now and the end of the year.

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Speaker 1: So again there's another central bank respond to two sides

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Speaker 1: of higher influence. Let's come back with Bob said, this

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Speaker 1: is Bloomberg. Can a government have a stronger week dollar policy?

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Speaker 1: I don't buy it. I mean, I go back twenty years, Bob,

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Speaker 1: to what you and I remember, where strong dollar was

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Speaker 1: gospel each and every day. But what was the upcome

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Speaker 1: of that? Did we actually have a strong dollar? You know?

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Speaker 1: UH intervention verbal and actual is uh? The history suggested

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Speaker 1: unless policy backs it up, UM, very unlikely to have

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Speaker 1: much of a significant impact. And I think that's uh,

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Speaker 1: that continues to be the case. UM. Strong dollar policy

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Speaker 1: is something that I don't think over the last twenty

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Speaker 1: years has really been backed up with any changes in policy. UM.

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Speaker 1: So I'm not sure that strong dollar policy, whether it

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Speaker 1: exists or doesn't exist in in in uh in terminology,

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Speaker 1: really matters much at all. UM. You know, I'd go

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Speaker 1: to a little bit different view. Have you ever heard

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Speaker 1: anybody politically campaign on the fact that they're going to

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Speaker 1: strengthen or weaken their currency. Well, maybe we've had a

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Speaker 1: little bit of that here in the US, but I

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Speaker 1: don't think we've we've seen overt policy actions, uh that

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Speaker 1: are specifically designed to move the currency. UM. So I

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Speaker 1: don't think it really matters much at all. I think

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Speaker 1: the fundamentals will will win out. We've seen that in

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Speaker 1: the last couple of weeks where the administration was able

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Speaker 1: to talk down the dollar pretty significantly. But now over

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Speaker 1: the last six seven weeks is six seven days, the

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Speaker 1: things have quieted down. The dollars crept right back up again.

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Speaker 1: And crept is the right word, David Girl, I mean,

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Speaker 1: it's it's a very to screen you. You Bob, have

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Speaker 1: been looking at at oil, looking at energy and uh,

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Speaker 1: I noted a few minutes ago we saw this announcement

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Speaker 1: from the Saudiast They've they've announced their largest output cut

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Speaker 1: in eight years. You've been looking at US free counts

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Speaker 1: as well, those have been rising. What are you seeing

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Speaker 1: in the energy space right now? You know? I think

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Speaker 1: energy this year could be one of the more interesting markets. Um.

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Speaker 1: Interesting in the sense of what it tells us about

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Speaker 1: who the swing producer is. An oil you know, there

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Speaker 1: was a there was a time when you if you

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Speaker 1: had this combination of events. Let's recall that, you know,

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Speaker 1: manufacturing activity has picked up substantially around the world UM

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Speaker 1: over the last four or five months. You look at

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Speaker 1: the at the global manufacturing p m I, it's up

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Speaker 1: to almost the highest level since early two thousand and fourteen.

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Speaker 1: So you've had accelerating production activity around the world. You've

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Speaker 1: had a significant output cut by Saudi Arabia and other

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Speaker 1: members of OPEC and Russia, and yet the price has

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Speaker 1: gone nowhere. In fact, if you look at volatility in

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Speaker 1: the oil market, the price volatility is the lowest in

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Speaker 1: over two years. So you say, well, what's going on here?

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Speaker 1: And you look at the cuts coming out of OPEC,

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Speaker 1: and you look at, as you mentioned, the recount here

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Speaker 1: in the US, which is increasing right back up again.

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Speaker 1: It's up thirteen in the last four weeks. You say, well,

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Speaker 1: who is the swing producer here is Does OPEC still

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Speaker 1: have the same dominant power they used to UM or

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Speaker 1: is the power shifting back to the US. And I

385
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Speaker 1: think there's some growing evidence that in fact, the US

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Speaker 1: is becoming the swing producer and that has major implications

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Speaker 1: for US trade, uh, you know, trade balances for UM,

388
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Speaker 1: US foreign policy, a whole host of factors. So I

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Speaker 1: think this is really pretty critical. Even though the price

390
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Speaker 1: has been pretty stable, we have seen a major substitution

391
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Speaker 1: of US production for OPEC production UM as we've come

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Speaker 1: into the new year. And I think that that broad

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Speaker 1: reaching ramifications. Bob, you gave us a great, great call

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Speaker 1: in sterling. Everybody that consensus with our questions weaker sterling,

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Speaker 1: and you stood up on the show and said maybe

396
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Speaker 1: not like literally on a dime, even the Queen. The

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Speaker 1: Queen went along sterling off Cinch of Amber's Pierpont said,

398
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Speaker 1: enlighten us on sterling right now? Wise, when have you

399
00:23:11,840 --> 00:23:15,280
Speaker 1: seen the cinch move? And do we just presume now

400
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Speaker 1: we finally get weaker sterling at you know, we did

401
00:23:20,280 --> 00:23:24,280
Speaker 1: get up close to one thirty, we've dipped down momentarily

402
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Speaker 1: below one sitting right in the middle of that range

403
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Speaker 1: right now. I do think as we go forward, the

404
00:23:30,800 --> 00:23:36,000
Speaker 1: combination of a stronger dollar and weaker sterling probably gets

405
00:23:36,080 --> 00:23:39,760
Speaker 1: us now down below one UM as we go later

406
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Speaker 1: in the year UM. And I think part of that

407
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Speaker 1: is that that in the UK the economy showed a

408
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Speaker 1: lot of resilience in the second half of last year

409
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Speaker 1: after the breakdit vote. But I think a lot of

410
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Speaker 1: that if you look at it, were consumers, and I

411
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Speaker 1: think consumers were buying in anticipation of higher prices to come.

412
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Speaker 1: We're now starting to see those higher prices filtered into

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Speaker 1: the UK economy and that suggests to me that after

414
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Speaker 1: you know, pre buying a lot last year to beat

415
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Speaker 1: the price increases, we could see a meaningful slowdown in

416
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Speaker 1: UK consumption as we can go through two thousand seventeen

417
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Speaker 1: um and that's probably gonna way down on sterling a

418
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Speaker 1: little bit. So yeah, I do think it was oversold.

419
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Speaker 1: I think markets are getting a bit more neutral at

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Speaker 1: one At this juncture. I'd rather be a seller than

421
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Speaker 1: a buyer Sterling. Well, there it is, folks. That's why

422
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Speaker 1: you listen to Bloomberg. Servan's Robert since thank you so much.

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Speaker 1: He's with Amer's Pure Pint. You know that's you market down, David.

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Speaker 1: I mean, it's this is the nuance. We look at

425
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Speaker 1: vectors of what different people say, and we also look

426
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Speaker 1: at sort of the rated change of the vector, and

427
00:24:44,160 --> 00:24:48,119
Speaker 1: there's a not not a cell on sterling, but nevertheless

428
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Speaker 1: a pause and what has been a brilliant calling Strunger,

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00:24:51,359 --> 00:25:05,320
Speaker 1: You're stronger Sterling. That was great Robert pure Pint brought

430
00:25:05,400 --> 00:25:09,040
Speaker 1: you by Bank of America. Mary Lynch. Dedicated to bringing

431
00:25:09,040 --> 00:25:12,760
Speaker 1: our clients insights and solutions to meet the challenges of

432
00:25:12,760 --> 00:25:17,320
Speaker 1: a transforming world. That's the power of global connections, Mary Lynch,

433
00:25:17,440 --> 00:25:25,200
Speaker 1: Pierce fennerin Smith Incorporated, Member s I p C. Great

434
00:25:25,240 --> 00:25:27,520
Speaker 1: pleasure now to bringing John Allison. He's former chairman and

435
00:25:27,560 --> 00:25:30,520
Speaker 1: CEO of BB and T Corporation, a former president CEO

436
00:25:30,520 --> 00:25:32,119
Speaker 1: of the Cato Institute, as well as he's now at

437
00:25:32,560 --> 00:25:34,240
Speaker 1: Wake Forest and Tom I find this you know he

438
00:25:34,680 --> 00:25:36,800
Speaker 1: we've talked about this before, but he occupies an amazing

439
00:25:36,800 --> 00:25:39,399
Speaker 1: trifect as someone who's gone to UNC and Duke and

440
00:25:39,440 --> 00:25:42,560
Speaker 1: now is it at wake Forest. So much confusion there

441
00:25:42,560 --> 00:25:45,560
Speaker 1: in John Allison, you were interviewed to be Treasury Secretary.

442
00:25:45,560 --> 00:25:47,800
Speaker 1: You've met with Steven Manuch and the man picked ultimately

443
00:25:47,840 --> 00:25:50,119
Speaker 1: to be Treasury sector due to be confirmed by all

444
00:25:50,160 --> 00:25:52,520
Speaker 1: accounts today by the U. S. Senate. You've spoken with him.

445
00:25:52,520 --> 00:25:56,080
Speaker 1: What's your sense of the direction this administration is going

446
00:25:56,119 --> 00:25:59,760
Speaker 1: to take when it comes to economic policy? Well, um,

447
00:26:00,040 --> 00:26:01,960
Speaker 1: something Steve's a very smart guy, but he is he

448
00:26:02,080 --> 00:26:03,679
Speaker 1: is a Wall Street guy, which I think, you know,

449
00:26:04,119 --> 00:26:05,960
Speaker 1: means that you're probably gonna get some of the same

450
00:26:06,040 --> 00:26:08,479
Speaker 1: kind of policies you've seen in the past when I

451
00:26:08,560 --> 00:26:12,240
Speaker 1: when I talked with with Stephen and met with President Trump.

452
00:26:12,760 --> 00:26:15,600
Speaker 1: Their goal with growth and they are very focused on growth,

453
00:26:16,640 --> 00:26:20,719
Speaker 1: which means lower taxes, less regulation, but it's quite willing

454
00:26:20,800 --> 00:26:24,040
Speaker 1: to run very high deficits, UH and the belief that

455
00:26:24,160 --> 00:26:26,439
Speaker 1: ultimately growth will take care of the deficits. So I

456
00:26:26,480 --> 00:26:30,879
Speaker 1: think you'll see UM implemented strategies that they believe will

457
00:26:31,040 --> 00:26:33,679
Speaker 1: will drive economic growth. John, how does a guy like

458
00:26:33,760 --> 00:26:36,639
Speaker 1: you who has been critical of government sacks, of the

459
00:26:36,720 --> 00:26:39,160
Speaker 1: of the role of Wall Street and government reckon with

460
00:26:39,240 --> 00:26:41,560
Speaker 1: the cabinet we're seeing put in place in Washington, d C.

461
00:26:41,680 --> 00:26:43,199
Speaker 1: How much does it concern you that we have so

462
00:26:43,240 --> 00:26:45,040
Speaker 1: many lumbs of golden sacks there, that we have such

463
00:26:45,040 --> 00:26:49,760
Speaker 1: a Wall Street influence in this president's cabinet. UM. Uh,

464
00:26:49,760 --> 00:26:53,320
Speaker 1: it concerns me some, you know. I I was hoping

465
00:26:53,320 --> 00:26:55,000
Speaker 1: in some of those positions to have people with a

466
00:26:55,080 --> 00:26:57,760
Speaker 1: very different perspective. I think if you're really concerned about

467
00:26:58,600 --> 00:27:02,960
Speaker 1: UM helping the so called common man and and and

468
00:27:03,000 --> 00:27:06,080
Speaker 1: a lot of the support base that President Trump received.

469
00:27:06,119 --> 00:27:08,520
Speaker 1: You need people that understand those kind of markets and

470
00:27:09,080 --> 00:27:11,960
Speaker 1: having work in a community bank environment and also dealt

471
00:27:12,000 --> 00:27:14,359
Speaker 1: with Wall Street. Uh there is a kind of different

472
00:27:14,400 --> 00:27:19,600
Speaker 1: mindset in community banking, community finance than there is on

473
00:27:19,680 --> 00:27:22,760
Speaker 1: Wall Street, and I wish there was more representation there.

474
00:27:22,760 --> 00:27:26,840
Speaker 1: Although I would say this, overall, the cabinet is a

475
00:27:26,960 --> 00:27:30,560
Speaker 1: very impressive group and very smart people. And uh so,

476
00:27:30,840 --> 00:27:34,520
Speaker 1: I think that's a positive when we see Mr Tarula

477
00:27:34,760 --> 00:27:38,000
Speaker 1: resigned who I'm going to clearly state and there's a

478
00:27:38,040 --> 00:27:40,960
Speaker 1: great esteem for Mr Trulla across all of the academics

479
00:27:41,440 --> 00:27:46,840
Speaker 1: and clearly a more liberal treatment of regulation. How do

480
00:27:46,880 --> 00:27:51,280
Speaker 1: you replace Mr Tarula? I'm not sure I understand how

481
00:27:51,320 --> 00:27:56,760
Speaker 1: a quote conservative or quote Rockefeller or quote libertarian government

482
00:27:57,280 --> 00:28:01,720
Speaker 1: replaces Mr Tarula. Who do they put that slot? Well,

483
00:28:01,720 --> 00:28:05,199
Speaker 1: that is an interesting question. Um. What I would like

484
00:28:05,280 --> 00:28:07,119
Speaker 1: to see is a different kind of answer. I'm a

485
00:28:07,160 --> 00:28:10,320
Speaker 1: big supporter of the Choice Act, which Chef Henzerling has

486
00:28:10,359 --> 00:28:14,040
Speaker 1: proposed in Congress, and basically, under the Choice Act, banks

487
00:28:14,040 --> 00:28:17,359
Speaker 1: could choose to opt out of the dov Frank by

488
00:28:17,400 --> 00:28:20,800
Speaker 1: having proper level of capital and they've used ten percent capital.

489
00:28:20,880 --> 00:28:23,480
Speaker 1: You can argue about the level, but the idea I

490
00:28:23,480 --> 00:28:26,040
Speaker 1: think the real clear one. And so it's because I

491
00:28:26,080 --> 00:28:29,320
Speaker 1: don't think any regular here's the dolma. As long as

492
00:28:29,480 --> 00:28:33,440
Speaker 1: the financial institutions are effectively guaranteed by the f d

493
00:28:33,560 --> 00:28:36,400
Speaker 1: i C and we really haven't effectively dealt with too

494
00:28:36,400 --> 00:28:40,360
Speaker 1: big to fail, um, there's gotta be regulations. On the

495
00:28:40,360 --> 00:28:43,520
Speaker 1: other hand, the failure rate of property capitalized institutions is

496
00:28:43,560 --> 00:28:47,600
Speaker 1: extremely false small, and we've never had a systematic failure

497
00:28:47,600 --> 00:28:50,719
Speaker 1: where every bank, all the banks were property capitalized. So

498
00:28:50,920 --> 00:28:53,520
Speaker 1: I don't I don't think anybody knows the right answer

499
00:28:53,560 --> 00:28:57,280
Speaker 1: for regulations. I think you're one of the great global

500
00:28:57,440 --> 00:29:02,400
Speaker 1: experts on this. Republicans On the same page is the

501
00:29:03,040 --> 00:29:06,400
Speaker 1: certitude of Mr Henseling of Texas A and M. I mean,

502
00:29:06,560 --> 00:29:10,600
Speaker 1: is there a cohesive Republican view, John, or is it

503
00:29:10,800 --> 00:29:15,400
Speaker 1: eight views as we go to replace governor? I think

504
00:29:15,400 --> 00:29:18,000
Speaker 1: they're views, unfortunately, and I think a lot of the

505
00:29:18,080 --> 00:29:20,840
Speaker 1: views are ignorant. And I don't mean that is an

506
00:29:20,840 --> 00:29:22,560
Speaker 1: insult to anybody, but you know, if you really but

507
00:29:23,040 --> 00:29:26,280
Speaker 1: you just did. What I'm really saying is you don't

508
00:29:26,280 --> 00:29:29,840
Speaker 1: really have expertise in the financial arena, letting go of

509
00:29:29,920 --> 00:29:34,080
Speaker 1: regulation it can be scary. So if you don't really understand,

510
00:29:34,120 --> 00:29:36,560
Speaker 1: and if you've kind of heard what the popular press

511
00:29:36,600 --> 00:29:39,280
Speaker 1: says about how the financial christis happened, which I think

512
00:29:39,360 --> 00:29:42,200
Speaker 1: is a very long wrong. I think the Federals are

513
00:29:42,320 --> 00:29:44,760
Speaker 1: played a big roan causing the financial crisis, and housing

514
00:29:44,800 --> 00:29:47,880
Speaker 1: policy played the biggest role, and that was government sponsored

515
00:29:48,240 --> 00:29:52,720
Speaker 1: and and and so if if you have a wrong history,

516
00:29:53,400 --> 00:29:57,040
Speaker 1: uh understanding of what happened wrong quote story, then it's

517
00:29:57,080 --> 00:30:00,880
Speaker 1: hard to let go of something because it increase risk

518
00:30:01,280 --> 00:30:06,520
Speaker 1: on the superficially, it also increases opportunity in reality. You've

519
00:30:06,600 --> 00:30:09,080
Speaker 1: you've been reportedly someone who the President might look at

520
00:30:09,160 --> 00:30:11,320
Speaker 1: for one of these spots on the federest reported gunners,

521
00:30:11,360 --> 00:30:13,360
Speaker 1: you've spoken out against the feed of having the feed

522
00:30:13,440 --> 00:30:15,520
Speaker 1: in the first place. Just give us a sense here

523
00:30:15,560 --> 00:30:17,920
Speaker 1: the hypothetical play that out for us. If you were appointed,

524
00:30:17,960 --> 00:30:21,120
Speaker 1: how you would navigate that thorny thicket. As somebody who

525
00:30:21,160 --> 00:30:23,840
Speaker 1: has called for the dissolution of the institution itself, I

526
00:30:23,840 --> 00:30:28,240
Speaker 1: think that would be trick. Yeah, because I do really

527
00:30:28,240 --> 00:30:30,080
Speaker 1: think that the FIT has done a lot of damage,

528
00:30:30,360 --> 00:30:33,320
Speaker 1: and I think that the fan itself would admit they

529
00:30:33,320 --> 00:30:35,720
Speaker 1: caused a great depression. I think twenty years from now

530
00:30:35,760 --> 00:30:38,200
Speaker 1: they'll admit they calls the two thousand and seven two

531
00:30:38,240 --> 00:30:42,960
Speaker 1: thousand nine great recession, uh that that they've made mistakes

532
00:30:42,960 --> 00:30:46,320
Speaker 1: in monetary policy that have had severe consequences. I think

533
00:30:46,480 --> 00:30:48,840
Speaker 1: twenty years and now, they'll admit they actually kept the

534
00:30:48,880 --> 00:30:51,960
Speaker 1: economy from growing as fast as it should by tightening

535
00:30:52,040 --> 00:30:55,120
Speaker 1: lending standards too much after the after the recession, which

536
00:30:55,160 --> 00:31:01,600
Speaker 1: is a classic bureaucratic reaction, anomizing risk. So it would be,

537
00:31:02,240 --> 00:31:05,760
Speaker 1: you know, the reason to participate would be hopefully to

538
00:31:06,000 --> 00:31:08,040
Speaker 1: help them understand they aren't as smart as they think

539
00:31:08,040 --> 00:31:11,840
Speaker 1: they All right, well, let's come back. John Allison with

540
00:31:11,960 --> 00:31:14,160
Speaker 1: us at wake Forest. I like saying that at weak

541
00:31:14,880 --> 00:31:18,600
Speaker 1: it's got a certain ring to it. Very beautiful campus.

542
00:31:19,920 --> 00:31:24,640
Speaker 1: Distinguished Professor of Practice at wake Forest, John, before David

543
00:31:25,040 --> 00:31:28,360
Speaker 1: hits you over the head with the current events, I

544
00:31:28,400 --> 00:31:30,960
Speaker 1: need you to define because I had this in about

545
00:31:31,000 --> 00:31:34,600
Speaker 1: six cocktail conversations in the last four days. John Tucker,

546
00:31:34,680 --> 00:31:39,840
Speaker 1: you can't believe I've had six cocktail conversations in four days.

547
00:31:39,560 --> 00:31:43,080
Speaker 1: That's more than one. John Ellison, help me here with

548
00:31:43,120 --> 00:31:47,200
Speaker 1: a definition. Of libertarian I tell people that Kato has

549
00:31:47,240 --> 00:31:52,680
Speaker 1: a sense of individual liberty associated with a traditional libertarian

550
00:31:52,840 --> 00:31:57,280
Speaker 1: theme versus what I call pseudo liber libertarianism of the

551
00:31:57,360 --> 00:32:02,840
Speaker 1: day or sort of almost neo Austrian libertarianism. Explain the

552
00:32:02,960 --> 00:32:09,720
Speaker 1: Cato difference versus a modern altar libertarian views. Okay, we

553
00:32:09,840 --> 00:32:13,560
Speaker 1: say that mission is to create free and prosperous society

554
00:32:14,080 --> 00:32:18,120
Speaker 1: based based on the principles of individual liberty, free markets,

555
00:32:18,280 --> 00:32:22,800
Speaker 1: limited government, and peace. And we are serious about limited government.

556
00:32:22,840 --> 00:32:24,200
Speaker 1: We think the government ought to stay out of your

557
00:32:24,200 --> 00:32:27,040
Speaker 1: pocket book. We also say that that it should say

558
00:32:27,040 --> 00:32:30,000
Speaker 1: out of your bedroom. We do think government has a role,

559
00:32:30,440 --> 00:32:34,040
Speaker 1: but it's role is to protect individual rights, to keep

560
00:32:34,120 --> 00:32:36,520
Speaker 1: me from using force of fraud to take what you earned,

561
00:32:36,840 --> 00:32:38,760
Speaker 1: and to keep you from taking force of fraud from

562
00:32:38,760 --> 00:32:40,960
Speaker 1: what I've earned. So we think the government has three

563
00:32:41,040 --> 00:32:44,320
Speaker 1: legitimate functions. We need a national defense to protect us

564
00:32:44,320 --> 00:32:47,400
Speaker 1: from bad guys overseas, police to protect us from bad

565
00:32:47,400 --> 00:32:50,680
Speaker 1: guys in our neighborhood, and a far more effective court

566
00:32:50,760 --> 00:32:53,840
Speaker 1: system than we have today, so that you and I,

567
00:32:53,840 --> 00:32:55,719
Speaker 1: if we have a dispute, we don't have to resort

568
00:32:55,760 --> 00:32:59,400
Speaker 1: to violence to settle that dispute. In our world, we'd

569
00:32:59,480 --> 00:33:03,720
Speaker 1: have nine fine percent less regulations and far more effective

570
00:33:03,720 --> 00:33:07,000
Speaker 1: and efficient courts than we have today. Where does regulation

571
00:33:07,040 --> 00:33:09,200
Speaker 1: fit into that? There's a lot of talk about repealing

572
00:33:09,240 --> 00:33:12,760
Speaker 1: or repairing, uh, Dodd Frank, what would you like to

573
00:33:12,760 --> 00:33:14,880
Speaker 1: see done to that within the Cato framework, within that

574
00:33:14,960 --> 00:33:18,320
Speaker 1: libertarian framework? What what kind of financial regulation should exist

575
00:33:18,360 --> 00:33:21,240
Speaker 1: in the US today? Well, I mean it depends on

576
00:33:21,680 --> 00:33:23,440
Speaker 1: let me tell you what our pipe dream would be,

577
00:33:23,480 --> 00:33:25,400
Speaker 1: recognizing it with we're a long way from there. We

578
00:33:25,480 --> 00:33:28,160
Speaker 1: believe that that there's no reason the government should be

579
00:33:28,160 --> 00:33:30,880
Speaker 1: in the money business any more than it should be

580
00:33:31,280 --> 00:33:35,240
Speaker 1: running x on. Uh. We think that that money is

581
00:33:35,280 --> 00:33:38,600
Speaker 1: a natural phenomenon, it was developed long before governments took

582
00:33:38,600 --> 00:33:40,680
Speaker 1: control of it, and that that that we ought to

583
00:33:40,720 --> 00:33:44,520
Speaker 1: have a private banking system where individuals put money in

584
00:33:44,600 --> 00:33:47,760
Speaker 1: banks and banks keep proper amount of security for that

585
00:33:47,840 --> 00:33:51,560
Speaker 1: and uh moneys. As how the traditional banking system really

586
00:33:51,680 --> 00:33:54,760
Speaker 1: was until the FED and and and the government got

587
00:33:54,760 --> 00:33:59,120
Speaker 1: heavily involved in banking. So in that in that that

588
00:33:59,200 --> 00:34:03,960
Speaker 1: kind of world markets with discipline banks, and interestingly enough

589
00:34:04,000 --> 00:34:08,640
Speaker 1: before that exists before we got the government involved in banking,

590
00:34:08,719 --> 00:34:11,200
Speaker 1: or in countries where we've had what we call free banking,

591
00:34:11,239 --> 00:34:12,799
Speaker 1: which is we've never had in the United States. By

592
00:34:12,800 --> 00:34:14,560
Speaker 1: the way, the eighteen hundreds were not a free banking

593
00:34:14,560 --> 00:34:17,840
Speaker 1: in the United States. Banks had much more capital and

594
00:34:17,880 --> 00:34:21,120
Speaker 1: their failure rate was very small. Canada had a free

595
00:34:21,120 --> 00:34:25,600
Speaker 1: banking system and they had very figures. But we expanded

596
00:34:25,640 --> 00:34:28,279
Speaker 1: credit coming out of the depression in World War Two

597
00:34:28,360 --> 00:34:32,560
Speaker 1: for a host of larger strategic reasons. I would suggest

598
00:34:32,719 --> 00:34:37,279
Speaker 1: that Mr Jefferson, his colleague and crime Mr Madison, and

599
00:34:37,320 --> 00:34:41,360
Speaker 1: their arch enemies Adams and Hamilton's never had to worry

600
00:34:41,360 --> 00:34:46,239
Speaker 1: about derivative instruments and a modern finance. I mean, your

601
00:34:46,280 --> 00:34:50,600
Speaker 1: critics would say you're working with a nostalgic view. No,

602
00:34:50,840 --> 00:34:52,520
Speaker 1: I don't think we ought to go back to the

603
00:34:52,520 --> 00:34:55,000
Speaker 1: eighteen hundreds. That's that's my naive. I don't think we

604
00:34:55,040 --> 00:34:57,200
Speaker 1: ought to go back to horse and Buddy Bud. But

605
00:34:57,320 --> 00:35:00,200
Speaker 1: I do not believe it is self evidence as a

606
00:35:00,280 --> 00:35:02,680
Speaker 1: system we have today is the best system. We do

607
00:35:02,840 --> 00:35:05,600
Speaker 1: know we had the Great Depression when we had central banking,

608
00:35:06,280 --> 00:35:08,319
Speaker 1: and that we didn't have anything like that before we

609
00:35:08,320 --> 00:35:10,719
Speaker 1: had central banking. We know we just had the most

610
00:35:10,760 --> 00:35:14,640
Speaker 1: serious economic correction since the Great Depression, and not very

611
00:35:14,680 --> 00:35:18,200
Speaker 1: long ago when we had the federal Reserve. So so no,

612
00:35:18,520 --> 00:35:19,680
Speaker 1: I don't think we ought to go back to the

613
00:35:19,760 --> 00:35:22,399
Speaker 1: eighteen hundreds. What I do think is that there may

614
00:35:22,440 --> 00:35:26,480
Speaker 1: be market based solutions, and what markets do is experiment.

615
00:35:26,560 --> 00:35:28,680
Speaker 1: But when the government controlled that, it's very similar to

616
00:35:28,680 --> 00:35:32,600
Speaker 1: the public school system. Uh. It's like naive to believe

617
00:35:32,600 --> 00:35:34,719
Speaker 1: we couldn't have better schools in the public schools. Now,

618
00:35:34,880 --> 00:35:36,600
Speaker 1: does that mean the public schools are all bad? No?

619
00:35:37,000 --> 00:35:39,080
Speaker 1: Doesn't mean the federal reserves all bad? No? But are

620
00:35:39,120 --> 00:35:41,640
Speaker 1: there better solutions that markets would derive? And I think

621
00:35:41,640 --> 00:35:44,040
Speaker 1: the answer to that is self evident if you look

622
00:35:44,080 --> 00:35:47,439
Speaker 1: at markets when the government had an interfered technology UH

623
00:35:47,719 --> 00:35:52,200
Speaker 1: as a classic example. So what we need is experimentation

624
00:35:52,280 --> 00:35:56,440
Speaker 1: and then markets come up with solutions that bureaucrats can't do.

625
00:35:56,840 --> 00:35:59,279
Speaker 1: To think about the job of the Federal Reserve, we

626
00:35:59,360 --> 00:36:02,840
Speaker 1: know that fixing never works, right. We've seen it in

627
00:36:02,880 --> 00:36:05,240
Speaker 1: all kinds of areas well. Here's a group of people

628
00:36:05,280 --> 00:36:08,359
Speaker 1: trying to fix the price of money interest rates. It's

629
00:36:08,400 --> 00:36:11,279
Speaker 1: the most complicated price in the world and the most

630
00:36:11,280 --> 00:36:13,919
Speaker 1: important price. Can you imagine if we had a group

631
00:36:13,920 --> 00:36:16,360
Speaker 1: of people trying to set the price of wheat every

632
00:36:16,440 --> 00:36:19,040
Speaker 1: six meet every two months. I guarantee you we'd have

633
00:36:19,120 --> 00:36:22,040
Speaker 1: gluts of wheat and shortages of wheat constantly. I mean

634
00:36:22,160 --> 00:36:24,719
Speaker 1: market suggests those prices every few minutes, right, or every

635
00:36:24,880 --> 00:36:27,799
Speaker 1: literally every second, but that every few minutes. And I

636
00:36:27,840 --> 00:36:32,279
Speaker 1: just don't think that central driven institutions in a complex

637
00:36:32,360 --> 00:36:35,320
Speaker 1: world are optimal solutions. No, No, I don't want to

638
00:36:35,320 --> 00:36:38,200
Speaker 1: go back in the eighteen hundreds. But but we got

639
00:36:38,400 --> 00:36:41,400
Speaker 1: jet planes now in the Federal Reserve. Really hadn't involved

640
00:36:41,600 --> 00:36:44,480
Speaker 1: very analogous to public schools in my few John Allison,

641
00:36:44,520 --> 00:36:46,600
Speaker 1: help me understand the role that Peter TiAl is playing

642
00:36:46,640 --> 00:36:48,600
Speaker 1: at this administration. He's somebody who's written for the Kada

643
00:36:48,600 --> 00:36:52,759
Speaker 1: went to do before, very public libertarian thinker. Uh, you

644
00:36:53,120 --> 00:36:55,080
Speaker 1: have the technology industry looking to him as maybe a

645
00:36:55,160 --> 00:36:57,400
Speaker 1: conduit to get to Washington, to the Trump White House.

646
00:36:57,600 --> 00:37:00,280
Speaker 1: Do you see him similarly as a libertarians. He's somebody

647
00:37:00,360 --> 00:37:03,200
Speaker 1: within the administration, albeit not formally, but who has the

648
00:37:03,239 --> 00:37:05,440
Speaker 1: ear of the president, who could voice some of the

649
00:37:05,480 --> 00:37:09,080
Speaker 1: suggestions and concerns that you have. I think he has

650
00:37:09,120 --> 00:37:12,040
Speaker 1: the year of the president. How much a fact he has,

651
00:37:12,080 --> 00:37:13,960
Speaker 1: I mean, I you know, I had the pleasure of

652
00:37:14,040 --> 00:37:17,239
Speaker 1: meeting with President Trump and my my observation, he's very

653
00:37:17,239 --> 00:37:19,600
Speaker 1: attentive at that time, but he seems to be influenced

654
00:37:19,600 --> 00:37:23,120
Speaker 1: by the first the next person, which seems so you know,

655
00:37:23,160 --> 00:37:25,600
Speaker 1: how how you sustain his attention to something I don't

656
00:37:25,600 --> 00:37:28,520
Speaker 1: have the I don't have the answer to you. Libertarians

657
00:37:28,520 --> 00:37:31,839
Speaker 1: are very split by the way on the Trump presidency. Uh.

658
00:37:31,840 --> 00:37:35,640
Speaker 1: They liked the deregulation, the reducing attaxes. Uh. They like

659
00:37:35,760 --> 00:37:37,839
Speaker 1: the fact that the kind of people he's he's talking

660
00:37:37,880 --> 00:37:40,640
Speaker 1: about putting on Supreme Court. But they're scared to death

661
00:37:40,800 --> 00:37:44,240
Speaker 1: of his immigration policy, of his lack of free trade support,

662
00:37:44,239 --> 00:37:47,480
Speaker 1: because libertarians are very much free trade, uh, and they're

663
00:37:47,480 --> 00:37:50,320
Speaker 1: also worried that he's not gonna do anything about deathicis

664
00:37:50,320 --> 00:37:53,640
Speaker 1: so so that you kind of got a real mix

665
00:37:53,680 --> 00:37:57,320
Speaker 1: among libertarians about their feelings about the president. Let me

666
00:37:57,400 --> 00:37:59,759
Speaker 1: ask one last question. You're selfishly about the state of

667
00:37:59,800 --> 00:38:02,239
Speaker 1: North Carolina where you are and where I'm from. What's

668
00:38:02,280 --> 00:38:05,200
Speaker 1: the what's the status of libertarianism in North Carolina? Right now?

669
00:38:05,239 --> 00:38:08,319
Speaker 1: You've seen Governor mcqruory lose has bid for reelection. Is

670
00:38:08,360 --> 00:38:11,360
Speaker 1: social conservatism on the wayne and his libertarian rising? How

671
00:38:11,360 --> 00:38:13,080
Speaker 1: do how do you see the rule of libertarianism there

672
00:38:13,120 --> 00:38:15,759
Speaker 1: in North Carolina in the South more generally, I think

673
00:38:15,840 --> 00:38:18,960
Speaker 1: libertarian is rising, but it's still definitely a minority position.

674
00:38:19,400 --> 00:38:23,040
Speaker 1: I think that the state is still mostly socially conservative,

675
00:38:23,480 --> 00:38:27,280
Speaker 1: and that's where, of course libertarians are socially liberal. So

676
00:38:29,160 --> 00:38:31,680
Speaker 1: I think the state is moving in that direction in

677
00:38:31,719 --> 00:38:34,040
Speaker 1: some ways, but there's kind of split, like a lot

678
00:38:34,080 --> 00:38:37,240
Speaker 1: of places. Of the urban markets, I think are becoming

679
00:38:37,280 --> 00:38:40,359
Speaker 1: more libertarians in some ways, they're becoming more liberal, which

680
00:38:40,400 --> 00:38:43,360
Speaker 1: is not libertarian. In other ways they're becoming more libertarian,

681
00:38:43,400 --> 00:38:47,480
Speaker 1: but the rural areas remain very socially conservative. Great to

682
00:38:47,480 --> 00:38:54,120
Speaker 1: speak with you, the most inside baseball question. Pretty soon

683
00:38:54,160 --> 00:38:59,680
Speaker 1: you're gonna talk about craft Vieer and no cop drop

684
00:38:59,719 --> 00:39:05,520
Speaker 1: and or door Red Angel. You know, I you know

685
00:39:05,719 --> 00:39:13,080
Speaker 1: that's your bigger expert that Ilana days. John. I think

686
00:39:13,080 --> 00:39:16,319
Speaker 1: we've got to do some upstate New York questioning over

687
00:39:16,400 --> 00:39:18,560
Speaker 1: the North Carolina do it. Do you know what I

688
00:39:18,600 --> 00:39:20,840
Speaker 1: watch this weekend? I mean, how can you have a

689
00:39:20,880 --> 00:39:23,719
Speaker 1: weekend like this and not watch slap Shot. It was

690
00:39:23,760 --> 00:39:26,520
Speaker 1: good to see the Charleston Chiefs take him take them on.

691
00:39:27,280 --> 00:39:31,440
Speaker 1: We continue worldwide coast to coast in Syracuse. This is Bloomberg.

692
00:39:44,920 --> 00:39:47,360
Speaker 1: There were a number of pieces over the weekend looking

693
00:39:47,880 --> 00:39:50,560
Speaker 1: at the National Security Council under Donald Trump. President Donald

694
00:39:50,600 --> 00:39:54,080
Speaker 1: Trump moving away from the orthodoxy, doing things different, a

695
00:39:54,120 --> 00:39:56,839
Speaker 1: bit of tension within the ranks of the NFC as well.

696
00:39:57,000 --> 00:39:58,879
Speaker 1: Who better to talk about that than Peter Fever, who's

697
00:39:58,880 --> 00:40:01,440
Speaker 1: a professor of political science and public policy at Duke University,

698
00:40:01,560 --> 00:40:04,040
Speaker 1: who is a special advisor for Strategic Planning and institution

699
00:40:04,120 --> 00:40:07,200
Speaker 1: reform on the NSC during the George W. Bush administration.

700
00:40:07,320 --> 00:40:09,160
Speaker 1: Peter's great to have you with us. Let's let's start

701
00:40:09,160 --> 00:40:11,840
Speaker 1: by talking about the way the NSC is supposed to operate, indeed,

702
00:40:11,840 --> 00:40:15,800
Speaker 1: how different it is from administration to administration. Well, thanks

703
00:40:15,800 --> 00:40:19,240
Speaker 1: for having me. Let me first distinguish between the NSC,

704
00:40:19,560 --> 00:40:24,240
Speaker 1: which refers to the committee of cabinet level officials chaired

705
00:40:24,280 --> 00:40:28,279
Speaker 1: by the President, and the NFC staff, which is a

706
00:40:28,320 --> 00:40:32,200
Speaker 1: group of some two hundred or so professionals drawn from

707
00:40:32,239 --> 00:40:37,480
Speaker 1: all departments and agencies that are staffing the that National

708
00:40:37,520 --> 00:40:41,600
Speaker 1: Security Council. So the reports today were really about uh

709
00:40:41,680 --> 00:40:45,640
Speaker 1: turmoil on the National Security Council Staff, which is the

710
00:40:45,680 --> 00:40:50,040
Speaker 1: group that helps the National Security Council advised the President

711
00:40:50,480 --> 00:40:52,920
Speaker 1: how big an operation is that? How big has the

712
00:40:53,200 --> 00:40:57,560
Speaker 1: staff of the NSC become. Well, it's grown to become

713
00:40:57,600 --> 00:41:01,640
Speaker 1: too big under President Obama, and there was a general consensus,

714
00:41:01,680 --> 00:41:06,400
Speaker 1: including President Obama's National Security Advisor herself, Susan Rice, that

715
00:41:06,480 --> 00:41:08,920
Speaker 1: it had gone too large. It reached US north of

716
00:41:09,000 --> 00:41:14,239
Speaker 1: four hundred people. But that includes UH professional staff as

717
00:41:14,280 --> 00:41:17,640
Speaker 1: well as technical support staff, the people who man the

718
00:41:18,400 --> 00:41:23,399
Speaker 1: situation room, communications hubs. All of those are added into

719
00:41:23,400 --> 00:41:26,960
Speaker 1: that number, including all the people on Homeland Security UH,

720
00:41:27,000 --> 00:41:31,080
Speaker 1: and all of those functions put together added up to

721
00:41:31,080 --> 00:41:33,400
Speaker 1: four hundred. The President Trump came in and said he

722
00:41:33,440 --> 00:41:36,240
Speaker 1: was going to shrink the staff, and he's been doing

723
00:41:36,280 --> 00:41:40,480
Speaker 1: that UM. But the problem isn't, frankly, is not one

724
00:41:40,560 --> 00:41:43,839
Speaker 1: of the size of the staff, but rather how well

725
00:41:43,880 --> 00:41:48,160
Speaker 1: it functions together and in particular, how well it's connected

726
00:41:48,160 --> 00:41:51,839
Speaker 1: to what the President actually says and does. And that's

727
00:41:51,880 --> 00:41:54,839
Speaker 1: where the Trump team has been struggling so far. How

728
00:41:54,880 --> 00:41:56,959
Speaker 1: worried are you about it in light of what you've read,

729
00:41:56,960 --> 00:41:58,440
Speaker 1: the articles that we've read in the Times and the

730
00:41:58,520 --> 00:42:02,080
Speaker 1: Journal this weekend, Foreign Policy and other outlets. But before that,

731
00:42:02,880 --> 00:42:05,120
Speaker 1: are you concerned about the way it's running. I know

732
00:42:05,160 --> 00:42:06,839
Speaker 1: that a number of those pieces have highlighted the fact

733
00:42:06,880 --> 00:42:08,920
Speaker 1: that there isn't a paper trail, that there aren't places

734
00:42:08,920 --> 00:42:12,200
Speaker 1: for staff members to air their grievances or counter opinions.

735
00:42:13,320 --> 00:42:17,200
Speaker 1: How worried are you right now? I am concerned. I

736
00:42:16,520 --> 00:42:20,279
Speaker 1: I think that under President Obama, the criticism was that

737
00:42:20,320 --> 00:42:23,520
Speaker 1: the National Security Council staff had become too strong, that

738
00:42:23,640 --> 00:42:27,400
Speaker 1: it was micromanaging the inner agency, it was in the

739
00:42:27,480 --> 00:42:32,400
Speaker 1: knickers of the departments um UH in operational matters that

740
00:42:32,440 --> 00:42:34,880
Speaker 1: it probably shouldn't have been involved in. And then the

741
00:42:34,960 --> 00:42:38,919
Speaker 1: committees on the NSC system, we're dealing with very low

742
00:42:39,000 --> 00:42:43,319
Speaker 1: level tactical decisions rather than the bigger picture strategic So

743
00:42:43,480 --> 00:42:46,799
Speaker 1: all of those criticisms were in the last administration. I

744
00:42:46,840 --> 00:42:49,560
Speaker 1: think the problem we're facing today is very different, and

745
00:42:49,640 --> 00:42:52,360
Speaker 1: that is an NFC staff that might be too weak,

746
00:42:52,600 --> 00:42:57,080
Speaker 1: not too strong, but too weak, unable to run the system,

747
00:42:57,160 --> 00:43:01,160
Speaker 1: unable to um UH. Ever with the boss on key

748
00:43:01,200 --> 00:43:03,960
Speaker 1: policy issues. That that's a different problem. Peter favor of

749
00:43:04,040 --> 00:43:05,799
Speaker 1: Duke with us right now, folks, as we look at

750
00:43:05,800 --> 00:43:09,879
Speaker 1: the n S and see this is fabulous, Professor, has

751
00:43:09,880 --> 00:43:15,279
Speaker 1: there been an historical before of a week n SC

752
00:43:15,760 --> 00:43:20,920
Speaker 1: like where we're heading right now or is this absolutely original? No,

753
00:43:21,120 --> 00:43:25,200
Speaker 1: We've had stronger and weaker nfc s over time. The

754
00:43:25,360 --> 00:43:30,799
Speaker 1: early Reagan National Security Council staff structure was was was

755
00:43:30,840 --> 00:43:36,640
Speaker 1: fairly weak. UM. The early President Clinton National Security Council

756
00:43:36,760 --> 00:43:39,239
Speaker 1: staff was weaker. I served on that one myself. I

757
00:43:39,280 --> 00:43:44,640
Speaker 1: was on the NFC staff in as well, and that one, uh,

758
00:43:44,840 --> 00:43:49,080
Speaker 1: compared to strong n scys, was weak. But but this

759
00:43:49,160 --> 00:43:52,680
Speaker 1: one UM has has two problems. One is it's just

760
00:43:52,840 --> 00:43:54,880
Speaker 1: still in the transition phase. It's a little bit slow

761
00:43:54,920 --> 00:43:59,160
Speaker 1: and started. And then, of course the other is you

762
00:43:59,200 --> 00:44:02,799
Speaker 1: have a very unconventional president who has promised to uh

763
00:44:02,840 --> 00:44:05,960
Speaker 1: set up unconventional systems, and that's been hard for the

764
00:44:06,040 --> 00:44:09,920
Speaker 1: NFC to adjust to. The uproar that David and I

765
00:44:09,960 --> 00:44:15,320
Speaker 1: have witnessed is singularly on the military presence on the NSC.

766
00:44:16,120 --> 00:44:18,759
Speaker 1: Is the NSC is supposed to be pentagon like in

767
00:44:18,880 --> 00:44:22,480
Speaker 1: civilian or is it a big deal that the chairman

768
00:44:23,040 --> 00:44:26,120
Speaker 1: of the Joint Chiefs of Staff has been removed? Is

769
00:44:26,160 --> 00:44:29,680
Speaker 1: that correct? Uh? That is not correct. That's the I

770
00:44:30,000 --> 00:44:34,560
Speaker 1: know those reports were out there, but those reports were misleading. UM.

771
00:44:34,640 --> 00:44:38,719
Speaker 1: The way the Trump team plans to to use the

772
00:44:38,760 --> 00:44:42,280
Speaker 1: Chairman of the Joint Chiefs of Staff. It's exactly how

773
00:44:42,320 --> 00:44:46,600
Speaker 1: it was used, how the Chairman functioned under the Obama administration.

774
00:44:47,000 --> 00:44:50,160
Speaker 1: And then the wording for it is word for word

775
00:44:50,200 --> 00:44:55,120
Speaker 1: what it was under President Bush. Push for the O

776
00:44:55,360 --> 00:44:59,040
Speaker 1: was just uh misreading. Um, I think there's part part

777
00:44:59,040 --> 00:45:01,279
Speaker 1: of it is Trump to arrangeman Central, you know, the

778
00:45:01,320 --> 00:45:05,840
Speaker 1: people overreacting to everything that President Trump did. What was

779
00:45:05,960 --> 00:45:10,319
Speaker 1: unusual was elevating the position of of Bannon, the president's

780
00:45:10,600 --> 00:45:14,680
Speaker 1: top political advisor, and elevating him to be a um

781
00:45:14,719 --> 00:45:18,520
Speaker 1: a regular invitee to both the NSC and to the

782
00:45:18,560 --> 00:45:22,160
Speaker 1: Principles Committee meeting. That was unusual. That deserved a lot

783
00:45:22,160 --> 00:45:25,520
Speaker 1: of comment. It's getting a lot of comment and um

784
00:45:25,560 --> 00:45:28,319
Speaker 1: that that's a different matter. But the there wasn't a

785
00:45:28,400 --> 00:45:31,279
Speaker 1: downgrading of the Chairman of the Joint Cheess Staff. That

786
00:45:31,440 --> 00:45:34,600
Speaker 1: that's just a misreading of how the NFC functions. It's

787
00:45:34,640 --> 00:45:37,520
Speaker 1: always been the case that if there's a Principles Committee

788
00:45:37,520 --> 00:45:40,760
Speaker 1: meeting that does not cover issues directly related to the military,

789
00:45:40,800 --> 00:45:43,680
Speaker 1: or even indirectly related to the military, then the Chairman

790
00:45:43,760 --> 00:45:46,480
Speaker 1: might not attend. He might send a lower ranking subordinate

791
00:45:46,520 --> 00:45:49,719
Speaker 1: to to represent him and that and that that's that's

792
00:45:49,719 --> 00:45:52,440
Speaker 1: how Obama operated, That's how Bush operated, and and it

793
00:45:52,480 --> 00:45:55,560
Speaker 1: wouldn't be unusual for the Trump administration operate the same way.

794
00:45:55,800 --> 00:45:57,239
Speaker 1: We'll come back in just a second. Let me ask

795
00:45:57,239 --> 00:45:59,960
Speaker 1: you about how the involvement of Steve Bannon would change

796
00:46:00,120 --> 00:46:02,040
Speaker 1: or complicate the way the NFC is running. There was

797
00:46:02,040 --> 00:46:04,840
Speaker 1: a reporting Eric Schmidt UH and David Sanger's piece yesterday

798
00:46:04,840 --> 00:46:08,080
Speaker 1: about uh, Stephen Miller. I'm curious if you taught Steven

799
00:46:08,080 --> 00:46:10,600
Speaker 1: Miller when he was a duke running a deputies meeting?

800
00:46:10,680 --> 00:46:13,480
Speaker 1: Just does their involvement change the sort of tenor of

801
00:46:13,480 --> 00:46:18,160
Speaker 1: of those meetings? That is different? And I was surprised

802
00:46:18,200 --> 00:46:20,680
Speaker 1: to see in that New York Times report that Stephen

803
00:46:20,719 --> 00:46:24,800
Speaker 1: Miller UM reportedly chaired the Deputy's committee meeting. That that

804
00:46:24,840 --> 00:46:29,120
Speaker 1: would be very unusual. UM and I I was one

805
00:46:29,160 --> 00:46:32,160
Speaker 1: of those who criticized President Obama for the extent to

806
00:46:32,200 --> 00:46:36,000
Speaker 1: which he involved his political staff in the national security

807
00:46:36,000 --> 00:46:39,920
Speaker 1: planning process. I I thought that that was incorrect. I

808
00:46:39,920 --> 00:46:42,719
Speaker 1: thought President Bush had set the right tone with a

809
00:46:43,360 --> 00:46:46,759
Speaker 1: bright line between his national security planning process and then

810
00:46:46,760 --> 00:46:50,760
Speaker 1: the separate political planning process and and bringing that together

811
00:46:50,800 --> 00:46:53,680
Speaker 1: in the Oval Office, but not at lower levels on

812
00:46:53,760 --> 00:46:56,600
Speaker 1: the NSC. So Bush had it right. I thought President

813
00:46:56,600 --> 00:46:59,960
Speaker 1: Obama had it wrong, and and frankly President Trump had

814
00:47:00,040 --> 00:47:03,200
Speaker 1: has gone even further in the direction that President Obama

815
00:47:03,239 --> 00:47:07,120
Speaker 1: took us, and I think he's opened himself up for criticism.

816
00:47:07,280 --> 00:47:10,880
Speaker 1: But it also leads to a a process that is

817
00:47:11,360 --> 00:47:16,840
Speaker 1: um a little bit undisciplined, perhaps chaotic, and that produces

818
00:47:16,840 --> 00:47:21,120
Speaker 1: a concern throughout the the inter agency and frankly throughout

819
00:47:21,160 --> 00:47:24,719
Speaker 1: our alliance and relationships around the world. I go back

820
00:47:24,800 --> 00:47:29,400
Speaker 1: a bit to a foreign affairs article, Professor, just about

821
00:47:29,400 --> 00:47:31,879
Speaker 1: the idea of what America should do, what should be

822
00:47:31,960 --> 00:47:37,960
Speaker 1: our global vision given the politics we've been handed well,

823
00:47:38,000 --> 00:47:40,600
Speaker 1: I think in a sense that's part of what the

824
00:47:40,600 --> 00:47:44,800
Speaker 1: Trump administration is has launched, and that is a national

825
00:47:44,800 --> 00:47:47,520
Speaker 1: debate about the role of the United States should play

826
00:47:47,680 --> 00:47:51,359
Speaker 1: in in the globe. And there's been a seventy year

827
00:47:51,400 --> 00:47:55,960
Speaker 1: consensus about what made sense for the US to do, namely,

828
00:47:56,080 --> 00:47:58,920
Speaker 1: take a global leadership role, even aff that meant that

829
00:47:59,440 --> 00:48:02,800
Speaker 1: the US would bear a disproportionate amount of the burden

830
00:48:03,480 --> 00:48:07,160
Speaker 1: UM and the President Trump from his inaugural address, but

831
00:48:07,200 --> 00:48:10,080
Speaker 1: also things he said in the campaign and since has

832
00:48:10,480 --> 00:48:13,799
Speaker 1: questioned the value of of of that role and and

833
00:48:13,960 --> 00:48:17,360
Speaker 1: looked for more of a what he calls America first

834
00:48:17,719 --> 00:48:20,000
Speaker 1: and only America first. That's how he described it in

835
00:48:20,120 --> 00:48:23,800
Speaker 1: the the inaugural um. What that actually means in practice,

836
00:48:23,800 --> 00:48:26,480
Speaker 1: though he hasn't laid hasn't fleshed that out. That's part

837
00:48:26,560 --> 00:48:29,760
Speaker 1: of what we would expect to see from the new team.

838
00:48:29,840 --> 00:48:33,680
Speaker 1: And uh, they've had they struggled outside out of the gate,

839
00:48:33,719 --> 00:48:37,560
Speaker 1: you know, stumbled in on a number of process points,

840
00:48:37,560 --> 00:48:40,240
Speaker 1: but they've also been slow and fleshing out their team,

841
00:48:40,640 --> 00:48:45,200
Speaker 1: and so that's meant that they've been behind the times

842
00:48:45,239 --> 00:48:48,000
Speaker 1: in terms of laying out a larger vision. I expect

843
00:48:48,000 --> 00:48:49,759
Speaker 1: that to come though in the in the weeks and

844
00:48:49,800 --> 00:48:52,440
Speaker 1: months to come. I think the president as team is

845
00:48:52,440 --> 00:48:55,720
Speaker 1: going to lay out in more detail what he means,

846
00:48:56,200 --> 00:49:01,080
Speaker 1: what his vision for the country is. And um, I

847
00:49:01,080 --> 00:49:03,880
Speaker 1: think a lot of people expected to be very unconventional.

848
00:49:04,520 --> 00:49:07,399
Speaker 1: I wonder if he won't revert closer to the mean

849
00:49:07,960 --> 00:49:12,120
Speaker 1: under the pressure of the world events, pressure of reality,

850
00:49:12,200 --> 00:49:16,040
Speaker 1: whether he might go back closer to something like has

851
00:49:16,080 --> 00:49:19,319
Speaker 1: governed US foreign policy for the last seventy years. You've

852
00:49:19,320 --> 00:49:22,880
Speaker 1: written the strategic communications matter. Let's use Saturday night as

853
00:49:22,880 --> 00:49:25,440
Speaker 1: an example. We got that email saying the President was

854
00:49:25,440 --> 00:49:27,440
Speaker 1: going to deliver a statement at mar Lago about ten

855
00:49:27,560 --> 00:49:30,319
Speaker 1: thirty pm Wall Street time. In fact, he did that

856
00:49:30,360 --> 00:49:33,000
Speaker 1: with the pre Minister Japansion Zoab. It was very brief statement,

857
00:49:33,560 --> 00:49:36,120
Speaker 1: I think just two sentences. The whole thing lasted about

858
00:49:36,160 --> 00:49:38,040
Speaker 1: two minutes. Let's use that as a as a prison

859
00:49:38,080 --> 00:49:40,919
Speaker 1: through which to look at how he's communicated his foreign

860
00:49:40,960 --> 00:49:45,160
Speaker 1: policy vision thus far. That was very effective. That one

861
00:49:45,320 --> 00:49:49,200
Speaker 1: was very effective because he said something that may be

862
00:49:49,320 --> 00:49:52,440
Speaker 1: surprised some people because it was a full throated h

863
00:49:52,719 --> 00:49:56,720
Speaker 1: endorsement of UM the alliance with Japan. And of course

864
00:49:56,800 --> 00:50:03,160
Speaker 1: previously he's uh opined in interviews that that maybe we're

865
00:50:03,160 --> 00:50:06,080
Speaker 1: not getting a good deal from the US Japanese alliance.

866
00:50:06,480 --> 00:50:09,160
Speaker 1: But here he stood right next side by side with

867
00:50:10,080 --> 00:50:14,520
Speaker 1: the Japanese leader and said we're backing him. And as

868
00:50:14,520 --> 00:50:18,719
Speaker 1: strategic communications go, that was very effective, uh and I

869
00:50:18,760 --> 00:50:22,239
Speaker 1: think reassured quite a few people in quite a few

870
00:50:22,320 --> 00:50:26,960
Speaker 1: leaders in Asia. That was effective. What was ineffective was

871
00:50:27,080 --> 00:50:32,680
Speaker 1: the rollout of the order on um how to the

872
00:50:32,760 --> 00:50:36,560
Speaker 1: ban on incoming refugees from seven countries, they were not

873
00:50:36,719 --> 00:50:41,400
Speaker 1: prepared for the blowback. They didn't have good answers. It

874
00:50:41,440 --> 00:50:45,120
Speaker 1: turns out they had misthought some of the technical issues.

875
00:50:45,160 --> 00:50:47,240
Speaker 1: What about people with green cards, They had to change

876
00:50:47,320 --> 00:50:50,640
Speaker 1: that within twenty four hours. And they did not equip

877
00:50:50,719 --> 00:50:55,160
Speaker 1: their supporters with arguments and evidence and and so the

878
00:50:55,280 --> 00:50:57,960
Speaker 1: rollout of that was very ineffective. Those are sort of

879
00:50:58,200 --> 00:51:01,320
Speaker 1: bookends of how to do it and not to do it. Professor,

880
00:51:01,360 --> 00:51:03,720
Speaker 1: give us a primer right now. Back to the NFC

881
00:51:04,520 --> 00:51:07,920
Speaker 1: on security clearances. David Gura took months to get his

882
00:51:08,000 --> 00:51:12,759
Speaker 1: security clearance to surveillance. But it's just a big deal.

883
00:51:12,880 --> 00:51:16,239
Speaker 1: I mean General Flynn's really at risk. I get that

884
00:51:16,680 --> 00:51:20,359
Speaker 1: one of his cohorts could not be appointed because I

885
00:51:20,400 --> 00:51:23,400
Speaker 1: believe c I A said they can't have the right

886
00:51:23,480 --> 00:51:27,600
Speaker 1: security clearance. Discuss that. Just get an open question. Inform

887
00:51:27,719 --> 00:51:33,040
Speaker 1: us about what security clearances mean. So a security clearance

888
00:51:33,520 --> 00:51:38,120
Speaker 1: means that you have been vetted by UM, the government,

889
00:51:38,719 --> 00:51:43,680
Speaker 1: by the Office of Presidential Management UM, and they hire

890
00:51:43,719 --> 00:51:47,200
Speaker 1: out contractors who check everything about your background, what your credit,

891
00:51:47,640 --> 00:51:50,880
Speaker 1: where you lived, your friends, what you've said to your friends,

892
00:51:51,640 --> 00:51:56,800
Speaker 1: your personal habits, UM. And this is UH. This says

893
00:51:56,920 --> 00:52:00,640
Speaker 1: if you've passed this vetting, then we can the minimum

894
00:52:00,719 --> 00:52:04,720
Speaker 1: level of trust in you and you can hold classified information.

895
00:52:04,760 --> 00:52:07,920
Speaker 1: You can be you know, deal and classified information. So

896
00:52:08,440 --> 00:52:12,200
Speaker 1: there's different levels of classes of security clearances, and to

897
00:52:12,239 --> 00:52:14,040
Speaker 1: work at the White House, you have to have one

898
00:52:14,080 --> 00:52:17,600
Speaker 1: of the highest levels that there is, that's Top secret SEI.

899
00:52:17,760 --> 00:52:23,319
Speaker 1: Then secure SEI stands for Secure Compartmented Information UM, and

900
00:52:23,440 --> 00:52:26,080
Speaker 1: everyone who works in the national security community at the

901
00:52:26,080 --> 00:52:28,719
Speaker 1: White House has to hold one of those clearances, and

902
00:52:28,760 --> 00:52:31,920
Speaker 1: they're they're hard to get because, uh, if there are

903
00:52:32,400 --> 00:52:36,879
Speaker 1: if there are questions in your background, uh, then um,

904
00:52:37,520 --> 00:52:41,360
Speaker 1: you could be denied that clearance. The last question a

905
00:52:41,640 --> 00:52:43,640
Speaker 1: being I was just gonna say, being denied a clearance

906
00:52:43,640 --> 00:52:47,240
Speaker 1: doesn't mean that you're a problem, but but it means

907
00:52:47,320 --> 00:52:51,479
Speaker 1: that the security agency that was vetting you had had

908
00:52:51,520 --> 00:52:54,319
Speaker 1: some concerns. So maybe you had too many friends who

909
00:52:54,320 --> 00:52:58,000
Speaker 1: were UM for nationals that they couldn't track down and

910
00:52:58,000 --> 00:53:02,200
Speaker 1: and ascertain, you know, their stories. Maybe you travel too

911
00:53:02,280 --> 00:53:05,440
Speaker 1: much and there were gaps in your foreign travel that

912
00:53:05,480 --> 00:53:07,959
Speaker 1: they couldn't figure out where you were at such time,

913
00:53:08,480 --> 00:53:10,680
Speaker 1: And those kinds of things can can get you in

914
00:53:10,719 --> 00:53:14,040
Speaker 1: trouble with security clearance. As quickly here I wondered about

915
00:53:14,040 --> 00:53:16,320
Speaker 1: the role of relationships and foreign policy. We've been focused

916
00:53:16,320 --> 00:53:19,040
Speaker 1: on the bureaucracy of it here, but we saw every

917
00:53:19,080 --> 00:53:21,040
Speaker 1: the weekend the president, at least to my eyes, trying

918
00:53:21,120 --> 00:53:25,880
Speaker 1: very doggedly to establish a personal relationship with another foreign leader. Uh.

919
00:53:26,000 --> 00:53:27,480
Speaker 1: Is that something that all presidents try to do? What

920
00:53:27,560 --> 00:53:29,680
Speaker 1: you see, it's somehow different in this case that Donald Trump,

921
00:53:30,040 --> 00:53:32,040
Speaker 1: being new to the job, being new to politics generally,

922
00:53:32,120 --> 00:53:34,560
Speaker 1: is trying to go out in that way to forge

923
00:53:34,560 --> 00:53:38,520
Speaker 1: sort of close personal relationships with these leaders. All presidents

924
00:53:38,600 --> 00:53:41,960
Speaker 1: need to develop those personal relationships. When you have them,

925
00:53:42,040 --> 00:53:45,600
Speaker 1: they help, When they're poor, they hurt. And so President

926
00:53:45,640 --> 00:53:48,839
Speaker 1: Trump is absolutely right to try to forge close relationships

927
00:53:48,880 --> 00:53:53,080
Speaker 1: with all of our partners and allies. And and I

928
00:53:53,120 --> 00:53:56,880
Speaker 1: applaud his efforts with I think that was that was

929
00:53:56,960 --> 00:53:59,319
Speaker 1: well done and obviously quite effective on the golf course

930
00:53:59,480 --> 00:54:04,160
Speaker 1: using golf course diplomacy. Very good, professor, thanks so much,

931
00:54:04,200 --> 00:54:15,440
Speaker 1: with Duke University Peter Fever as well. Thanks for listening

932
00:54:15,480 --> 00:54:20,239
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews

933
00:54:20,320 --> 00:54:25,640
Speaker 1: on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm

934
00:54:25,680 --> 00:54:28,680
Speaker 1: out on Twitter at Tom Keene. David Gura is at

935
00:54:28,800 --> 00:54:33,160
Speaker 1: David Gura. Before the podcast, you can always catch us worldwide.

936
00:54:33,560 --> 00:54:49,479
Speaker 1: I'm Bloomberg Radio, brought you by Bank of America. Mary Lynch.

937
00:54:49,600 --> 00:54:53,839
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938
00:54:53,880 --> 00:54:57,360
Speaker 1: the challenges of a transforming world. That's the power of

939
00:54:57,400 --> 00:55:02,520
Speaker 1: global connections. Mary Lynch, Pierce, Fenner and Smith Incorporated, Member

940
00:55:03,120 --> 00:55:03,800
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