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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Applecarplay and Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Latch of economic data today.

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Speaker 3: We got the PCEE data, the inflation data, which is

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Speaker 3: key for the Federal Reserve. I got the University of

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Speaker 3: Michigan a sentiment data which is becoming more and more

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Speaker 3: important to a lot of people's people try to sess

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Speaker 3: out any potential impacts on this economy from changing terraff policies.

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Speaker 3: So Michael McKee joins is here Bloomberg International Economics and

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Speaker 3: Policy corspot It might be a lot of data points today.

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Speaker 3: What kind of were you focusing on?

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Speaker 4: Well, a couple of things, because the income and spending

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Speaker 4: numbers were interesting. In their incomes were up, A lot

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Speaker 4: of that was transfer payments, but wages still growing strongly

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Speaker 4: about half a percent a month, and spending was rebounded

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Speaker 4: some but most of that was durable goods and it

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Speaker 4: probably was people buying ahead, trying to get ahead of

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Speaker 4: tariffs which then are reflected in the University of Michigan numbers.

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Speaker 4: The big drop in the headline number and the inflation

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Speaker 4: numbers of one year inflation is now up to five

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Speaker 4: percent and five to ten years up to four point

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Speaker 4: one percent. That's going to get the FEDS attention. Inflation

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Speaker 4: in the PCE numbers wasn't a big deal because it

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Speaker 4: came in very close testaments. Although the core rose two

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Speaker 4: point eight percent from two point seven percent, so that

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Speaker 4: is a bit of bad news. And on a three

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Speaker 4: month basis, the numbers are bad, but everybody kind of

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Speaker 4: knew was coming with that.

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Speaker 5: How much weight are you placing on this you miss report.

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Speaker 4: It's a data point to look at and it gives

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Speaker 4: you sort of context around what's going on. But consumer

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Speaker 4: behavior doesn't necessarily follow consumer sentiment. People don't. It's not

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Speaker 4: a good predictor for what's going to happen with consumer spending.

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Speaker 4: It's more of a coincident predictor. And we've seen this

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Speaker 4: decline for Michigan sentiment. When we get the retail numbers

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Speaker 4: for March next month, we will probably see some softness

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Speaker 4: because people were if they were feeling bad, they probably

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Speaker 4: weren't spending.

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Speaker 2: But it doesn't tell you what.

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Speaker 4: They're going to do in the future.

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Speaker 3: Consumers expect prices to rise at an annual rate of

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Speaker 3: four point one percent over the next five to ten years,

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Speaker 3: the highest since February of nineteen ninety three.

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Speaker 2: So you were right to call that out.

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Speaker 3: That's that's not nothing.

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Speaker 2: So that you're right. That's going to get defense.

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Speaker 4: Yeah, that's going to get defense attention. They don't like

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Speaker 4: the idea that inflation expectations start to get unmoored. A

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Speaker 4: lot's going to depend on what comes out of the

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Speaker 4: White House next week. And because we're all just flying

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Speaker 4: blind at this point, Tom Barkin from the Richmond FED

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Speaker 4: said yesterday there's a fog of uncertainty. But this isn't

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Speaker 4: your usual fog. This is a pull over to the

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Speaker 4: side of the road and turn your brights on the

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Speaker 4: kind of fog because you can't see a thing out there.

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Speaker 4: And once we get some idea of what the tariffs

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Speaker 4: are actually going to be, then people can start modeling

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Speaker 4: them and we'll get a much better impression of what

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Speaker 4: it might do to the economy.

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Speaker 5: With all this uncertainty out there, how do you think

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Speaker 5: that the FED is really mapping out their next steps.

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Speaker 2: Well, they can't.

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Speaker 4: I mean, they're doing some what if scenarios right now.

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Speaker 4: But I think starting on Wednesday, everybody's gonna be working

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Speaker 4: overtime at all the FED offices trying to come up

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Speaker 4: with ideas for this. And then Friday we hear from j. Powell,

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Speaker 4: so we'll get straight from the horse. We'll get what

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Speaker 4: the FED thinks of all this. They may not have

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Speaker 4: a great idea yet, and as some Albert Alberto Musselam

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Speaker 4: from Saint Louis said earlier this week, it's the second

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Speaker 4: round effects that worry you. It's you know, obviously prices

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Speaker 4: are going to go up for certain goods that come

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Speaker 4: across the border, but then how does that affect other

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Speaker 4: goods that are either manufactured here or brought in, and

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Speaker 4: how does it affect consumers expectations.

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Speaker 2: It's probably gonna take some.

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Speaker 4: Months before we have a real view.

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Speaker 3: Well, last night up in Greenwich, Connecticut, I had an

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Speaker 3: interviewed former FED Vice Chairman Richard Clarida, and I think

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Speaker 3: the biggest takeaway was he doesn't think DOSEE is going

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Speaker 3: to come to the Federal Reserve Bank, but you can't

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Speaker 3: say for sure. But that was one of the questions

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Speaker 3: from the crowd, you know.

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Speaker 4: So, yeah, it's an interesting situation because the FED is

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Speaker 4: theoretically an independent agency under law, and the Trump administration

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Speaker 4: seems to not care about that being the law.

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Speaker 2: The twelve regional banks.

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Speaker 4: Are essentially private, they're not, They're only quasi governmental, and

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Speaker 4: so the theory is doose can't affect them, right, but

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Speaker 4: who Yeah, what.

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Speaker 2: Good is theory these days? Exactly?

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Speaker 3: All right, Michael McKay, thank you so much for joining us.

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Speaker 3: As always, Michael McKey, international economics and policy correspondent for

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Speaker 3: Bloomberg News, joining us live here in our Bloomberg Inactive

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Speaker 3: Brokers studio.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Applecarclay and Android Auto

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Speaker 1: with the Bloomberg Business Appum. Listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 3: Let's check in with Nathan Dean. Nathan Dean is our

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Speaker 3: senior policy Alice or Bloomberg Intelligence. He's down in Washington,

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Speaker 3: d C. That's his lot in life, and he follows

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Speaker 3: all the policy stuff coming out of Washington. You know,

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Speaker 3: there's so much stuff coming out there that all I

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Speaker 3: do is just read his stuff because I know he's

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Speaker 3: focusing on the important stuff, and if he's looking at it,

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Speaker 3: I'm going to look at it. Nathan Dean, thanks so

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Speaker 3: much for joining us. Nathan, talk to us about terroris.

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Speaker 3: I think we've got Liberation Day next Wednesday. What's the

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Speaker 3: feeling inside the beltwagh about how this administration's pursuing trade policy.

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Speaker 6: Yeah, so you know, April second, Liberation Day, it's going

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Speaker 6: to be a really fast day.

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Speaker 2: Lots of red lines on the terminal that day.

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Speaker 6: But I think that what's going to happen is you're

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Speaker 6: going to see a combination of tariffs that actually come

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Speaker 6: in immediately, you know, President Trump. You know, we've been

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Speaker 6: talking about automobiles all week, for example. You're also going

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Speaker 6: to see some additional tariffs that are maybe just announcements

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Speaker 6: saying and I think this is going to be more

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Speaker 6: in the reciprocal camp, saying, like a tariff on a

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Speaker 6: certain country. We're looking at the European Union and we're

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Speaker 6: interested to see what the White House does in terms

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Speaker 6: of value added tacks, because the White House has taking

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Speaker 6: the approach that that is considered a tariff, and then

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Speaker 6: subsequently you are going to see the creation of this

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Speaker 6: external revenue service. I think this is just a rebranding

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Speaker 6: of an already existing agency or an already existing group.

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Speaker 2: And I think this is more of a pr.

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Speaker 6: Exercise to showcase how many tariffs come in so ultimately

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Speaker 6: the Republicans can pass a tax package later this year.

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Speaker 6: But again, lots of things happening, and we just continue

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Speaker 6: to go back to our clients and say there's a

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Speaker 6: lot of bluster out there, but incrementally these tariffs are

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Speaker 6: coming on board. And for those in the auto space,

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Speaker 6: you know exactly how the impact is.

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Speaker 5: I mean, everyone really is bracing for April. Second, what

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Speaker 5: are people feeling on the ground as you talk to sources,

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Speaker 5: especially since we did get that tariff news for autos

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Speaker 5: that was a bigger magnitude than expected.

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Speaker 6: So you know, this is where it's kind of hard

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Speaker 6: because there is a boy crying wolf mentality going around

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Speaker 6: some people, and especially I think in some of the

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Speaker 6: investors I talked to you from New York because they

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Speaker 6: say that President Trump says we're going to do reciprocal tariffs,

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Speaker 6: We're going to do on everything, and then Bloomberg News

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Speaker 6: has great reportings saying no it's going to be sectoral instead.

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Speaker 6: But I do think that there is this anticipation that

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Speaker 6: something is going to happen on Tuesday. Look, President Trump

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Speaker 6: is hyped it up. So if it's automobiles, it's pharmaceutical,

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Speaker 6: potentially it could be recicrable tariffs on countries like that,

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Speaker 6: that something is coming on April. Second, I would look

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Speaker 6: for the reporting over this weekend to see if we

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Speaker 6: get any indication of that, because usually it will start

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Speaker 6: to leak out. I would say about twelve twenty four

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Speaker 6: hours in advance of Tuesday. But you know, come Tuesday,

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Speaker 6: there's going to be a lot of red lines on

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Speaker 6: the terminal.

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Speaker 3: It's interesting, Nathan. We were talking to major Garrett CBS

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Speaker 3: Television and he's going to be hosting Face Nation this Sunday.

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Speaker 3: He says their program has been out to the White

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Speaker 3: House asking for a voice on TARIS and they've gotten

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Speaker 3: no response. And he was suggesting that perhaps that means

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Speaker 3: the White House is not ready to really talk about

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Speaker 3: their policies because they don't haven't decided on it yet.

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Speaker 3: Would that surprise you No.

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Speaker 6: Actually, I think that's in line with our expectation as well.

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Speaker 6: I mean, look, ultimately it's just one person, this is

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Speaker 6: President Trump. So yes, you could talk to the Department

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Speaker 6: of Commerce, you could talk to the US Trade Representative,

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Speaker 6: you could talk to State and you're going to get

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Speaker 6: three separate different answers on what.

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Speaker 2: This tariff policy is.

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Speaker 6: Now, why do we think President Trump's doing tariffs fairness?

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Speaker 6: But ultimately I think a lot of it is trying

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Speaker 6: to drive manufacturing back to the United States. But if

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Speaker 6: you are another country and you give President Trump a

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Speaker 6: great deal, he could say, I want to have a

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Speaker 6: great deal. So again, it's very hard to predict. But

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Speaker 6: incrementally these tariffs are coming on board. And we just continued,

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Speaker 6: why is our clients that you have to prepare for them?

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Speaker 6: Because you don't want to be the boy who's cried

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Speaker 6: wolf too many times.

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Speaker 5: Nathan's the leadest with this department. That's been in all

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Speaker 5: the headlines. What's going on with Doze right now?

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Speaker 6: So you know, bloomerg News is reporting the DOGE has

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Speaker 6: just meant gone over to the SEC this morning. This

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Speaker 6: is the first time that you know, it's been reported

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Speaker 6: that they're over there. But Elon Musk also just gave

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Speaker 6: a little bit of a tidbit yesterday saying that he

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Speaker 6: anticipates a lot of DOGE work we up by the

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Speaker 6: end of May, and that could be good for Tesla investors,

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Speaker 6: especially those that want Elon Musk to return back to

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Speaker 6: the car companies. So I would say that, you know,

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Speaker 6: the DOGE Committee is still going through all the different

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Speaker 6: agencies and they're still looking for areas to cut, but

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Speaker 6: in terms of cutting the deficit, they really need Congress

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Speaker 6: to do that because mandatory spending, there's not so much

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Speaker 6: DOACHE can do there unilaterally. So I would just say

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Speaker 6: that I think what's going to happen is the DOGE

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Speaker 6: is going to continue to work in these agencies for

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Speaker 6: the next few months. But as we get closer to

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Speaker 6: this tax extension debate, in this mandatory spending and debates

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Speaker 6: on Medicaid for example, that's and I think a lot

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Speaker 6: of the big ticket items are going to be debated

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Speaker 6: because DOJ I don't think is going to be able

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Speaker 6: to touch the mandatory spending right now.

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Speaker 3: All right, So we got the DOGE, we got the tarriffs.

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Speaker 3: Big one for Wall Street is taxes. Talk to us

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Speaker 3: about just the broad tax package and the tax discussion

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Speaker 3: as it kind of fits in with budgets and all

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Speaker 3: that kind of stuff.

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Speaker 2: That's the big stuff.

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Speaker 6: Yeah, this is the big, beautiful bill that President Trump

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Speaker 6: likes to talk about. Essentially, they want to extend the

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Speaker 6: twenty seventeen tax cuts. Now, in order to do that,

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Speaker 6: using this process they called reconciliation, Congress has to figure

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Speaker 6: out how to pay for around four point six trillion

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Speaker 6: dollars and they have lots of time.

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Speaker 2: They have to do it by the end of this year.

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Speaker 6: But next week we are seeing momentum on the Senate

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Speaker 6: adopting a budget resolution. Now, if you see this headline

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Speaker 6: comes out says Senate adopts tax package, they're adopting a blueprint.

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Speaker 2: There's no specifics in here.

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Speaker 6: All they're doing is adopting a blueprint that allows them

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Speaker 6: to continue to negotiate. Now, Speaker Johnson wants everything wrapped

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Speaker 6: up by Memorial Day. I don't think he can get there.

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Speaker 6: I would be more I would think it's going to

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Speaker 6: more likely be after the August recess. But the biggest

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Speaker 6: question what comes to the taxes is that, yes, I

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Speaker 6: do think the taxes are going to be extended, but

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Speaker 6: what's the impact on the deficit. Because if they Republicans

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Speaker 6: can't figure out a way to make this budget neutral,

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Speaker 6: then potentially you could get in a situation where the

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Speaker 6: deficit increases even more than what the Doge Committee's trying

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Speaker 6: to do. I think they'll eventually try and figure something out,

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Speaker 6: but it's one of the biggest questions for investors at

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Speaker 6: this point.

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Speaker 5: And how are Democrats viewing this?

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Speaker 6: The Democrats are out of the picture on this because

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Speaker 6: what the Republicans are doing is that they're using this

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Speaker 6: process called reconciliation. This is the same way President Biden

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Speaker 6: put the Inflation Reduction Act, the same process that President

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Speaker 6: Obama put Obamacare through, but allows you to avoid the

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Speaker 6: Democrats and avoid the filibuster. And you need a majority

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Speaker 6: vote in the House, the majority vote in the Senate.

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Speaker 2: And this is why at least the Phonic.

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Speaker 6: Was pulled back from the un ambassadorship, because the Republicans

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Speaker 6: need every single vote in that House in order to

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Speaker 6: move this tax package forward.

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Speaker 3: So what's the timing here of some of this? Like

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Speaker 3: again I got back to I'm going to pay attention

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Speaker 3: when there's money involved, when Congress has going to be

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Speaker 3: allocating money here. So for some of these tax packages,

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Speaker 3: is it really a year end do we have that

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Speaker 3: much time or do we have some interim mileposts that

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Speaker 3: need to be hit.

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Speaker 6: Well, you know, the biggest interim on I would say

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Speaker 6: there's really three things the markets should be paying attention

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Speaker 6: to for twenty twenty five. The first is tariffs. We

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Speaker 6: talked about that. The second is the debt ceiling. Now

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Speaker 6: there's a lot of debt ceiling discussion and when this

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Speaker 6: is going to happen. Most people think that X date,

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Speaker 6: the date in which treasury runs out, is going to

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Speaker 6: be in late.

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Speaker 2: July and August. Congress is going to have to figure

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Speaker 2: out something.

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Speaker 6: Now President Trump wants to include this in that one big,

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Speaker 6: beautiful bill, but we're telling our clients it doesn't matter

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Speaker 6: whether it's included or not. We do think Congress is

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Speaker 6: going to raise the debt ceiling, and I don't think

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Speaker 6: you know, you could see some headlines and some scary

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Speaker 6: headlines associated with fixed ink of markets, but I think

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Speaker 6: Congress is going to be able to figure that out

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Speaker 6: and then this tax debate extending it by the end

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Speaker 6: of the year. And I would just say that you know,

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Speaker 6: Congress in Washington, whether it's Republican controlled, they're Democrat controlled,

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Speaker 6: they don't like doing things until.

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Speaker 2: They absolutely have to do it.

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Speaker 6: So you see this debate, you see these political headlines,

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Speaker 6: and you see these red lines in the terminal. But

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Speaker 6: I don't think until they're actually faced with this idea

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Speaker 6: that unless they do something, then bad things happen.

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Speaker 2: That's when you get a deal.

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Speaker 3: Headline crossing the Bloomberg terminal. Trump Carney agreed to meet

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Speaker 3: after Canada's election, So again, maybe they can dial the

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Speaker 3: rhetoric down a little bit. They're speaking of raising the

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Speaker 3: debt sling my number four offspring call for me yesterday.

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Speaker 3: He wanted to raise effectively the debt ceiling. I said no,

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Speaker 3: And this is what Congress has to say. I told him,

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Speaker 3: do one of two things, or both cut your spending

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Speaker 3: or generate more revenue for yourself. And that's basically I

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Speaker 3: don't know why Congress can't say that.

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Speaker 5: If only a transferred. I'm curious here we're talking about.

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Speaker 5: We're looking at Paul Atkins, right. This is Trump's nominee

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Speaker 5: to the chair of the SEC. He's saying that his

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Speaker 5: top priority in that role would be establishing a new

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Speaker 5: framework for crypto regulation. What are you hearing on this?

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Speaker 6: Yeah, so yesterday, Senator sorry, a Commissioner ACT. Former Commissioner

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Speaker 6: Akins had his Senate confirmation hearing, and it was very

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Speaker 6: positive for the crypto industry. In his opening statement, he said, look,

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Speaker 6: and I'm paraphrasing here, I want to bring regulatory clarity

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Speaker 6: to an industry that doesn't have it, and that's just

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Speaker 6: the noise to you know, that's what essentially Robinhood and

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Speaker 6: coinbase and a lot of these other crypto players want

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Speaker 6: to hear. Now, you know, we do think he's going

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Speaker 6: to be confirmed. We don't think that there's really going

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Speaker 6: to be any hiccups with that. And I think he's

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Speaker 6: going to have three major priorities in twenty twenty five,

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Speaker 6: crypto essentially making the enforcement risk decrease to the point

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Speaker 6: where it's not so much of a risk anymore. I

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Speaker 6: would also note that crypto and the ICEC only has

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Speaker 6: authority over securities, so for things like bitcoin or considered commodities,

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Speaker 6: Congress still needs to act on this. The second thing

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Speaker 6: is just bringing capital formation back. This is you know,

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Speaker 6: a lot of things in terms of private credit, making

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Speaker 6: it easier for investors to invest into private funds. There's

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Speaker 6: some rule makings that he potentially could do there and

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Speaker 6: then finally market structure. Now this is important for like

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Speaker 6: the New York Stock Exchange NASDAK Commissioner Atkins, it didn't

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Speaker 6: really exactly like the way that market structure developed back

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Speaker 6: in the early two thousands.

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Speaker 2: So I think he could do some tweaking.

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Speaker 6: There, but that's going to be more of a long

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Speaker 6: term strategy than a short term.

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Speaker 3: You're a fount of knowledge, dude, I don't know how

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Speaker 3: you keep it all straight. Nathan Dean, senior policy analyst

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Speaker 3: at Bloomberg Intelligence down there in DC, he's in the swamps.

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Speaker 3: We throw him down there. Somehow he figures it all

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Speaker 3: out and he puts it down. He's got great research.

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Speaker 3: Go to b I, go look at the policy stuff.

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Speaker 3: He tells you what's going on in Washington, what it

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Speaker 3: means for markets, what it means for individual industries, individual companies.

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Speaker 3: That's kind of research Nathan and his team are doing

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Speaker 3: down there in Washington. And as we can tell just

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Speaker 3: in the market performance this year, you got to know

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Speaker 3: what's going on in DC because it moves markets in

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Speaker 3: a big way.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Applecarclay and Android Auto

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Speaker 1: with the Bloomberg Business app. Listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 3: Let's not geopolitics here, because that remained front and center,

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Speaker 3: not just on a geopolitical front, but also for investors

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Speaker 3: and financial markets. Kristin Sorry, Kirsten Fontain Rose joins us.

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Speaker 3: She's a president of Red six Solutions. She's also a

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Speaker 3: senior Fellow at the Atlanta Council. I was a senior

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Speaker 3: director for the Middle East in the last US administration.

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Speaker 3: Kirsten talk to us about how this world order is

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Speaker 3: being reshaped here, the US pulling back on a lot

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Speaker 3: of its prior commitments, whether you know it's some Europe

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Speaker 3: or other parts of the world, and we saw some

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Speaker 3: European countries, most notably Germany, say we're going to have

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Speaker 3: to step up here. How do you think this process

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Speaker 3: is going to play out over the next six months, year,

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Speaker 3: two years, three years.

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Speaker 7: In the US perspective, this europe stepping up is really

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Speaker 7: good news. It's an ask that has been taking place

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Speaker 7: for several years now and wasn't really taken seriously by

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Speaker 7: Europe until the US came in and said the post

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Speaker 7: World War two global order that gave a US security

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Speaker 7: umbrella and provided sort of unlimited assistance in terms of

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Speaker 7: both humanitarian assistants and development assistance is crazy expensive and frankly,

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Speaker 7: it's been bankrupting the US, and for this kind of

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Speaker 7: world order to continue, the rest of the world is

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Speaker 7: going to have to put some skin in the game.

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Speaker 7: So the US has a national debt right now that

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Speaker 7: costs it two billion dollars per day to simply pay

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Speaker 7: the interest on That is the cost of maintaining this

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Speaker 7: kind of security umbrella, this kind of assistance umbrella, and

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Speaker 7: without other countries carrying a little bit more of the burden,

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Speaker 7: the US simply can't continue that kind of world order.

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Speaker 7: So this is more balancing in the US view. It's

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Speaker 7: more asking others to just put a little more of

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Speaker 7: their own money, resources, manpower time into the places around

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Speaker 7: the world that they are closer to that are more

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Speaker 7: relevant to their own national security interests than.

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Speaker 2: To the US.

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Speaker 5: Let's talk a little bit more about defense spending in Europe.

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Speaker 5: I cover US defense contractors and people have been a

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Speaker 5: bit curious about what the implications will be of a

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Speaker 5: potential Titan military spending budget, but when you put that

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Speaker 5: against a lot of European arms makers, they're actually doing

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Speaker 5: quite well, especially as they're amping up their defense spend.

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Speaker 5: Can you just talk a bit about what's going on there.

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Speaker 7: Sure this might be really good for the European defense

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Speaker 7: sector that often loses out to larger companies in the

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Speaker 7: US that have a lot more money to put into

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Speaker 7: R and D and the like, and recently even to

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Speaker 7: Israeli companies as they've expanded their offerings. But for the

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Speaker 7: US right now, this means we will see some of

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Speaker 7: our own companies around the world losing contracts. We've seen

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Speaker 7: that already, even in places like the UAE where other

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Speaker 7: offerings have been preferred in recent years. So this might

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Speaker 7: give Europe a chance to boost its own domestic economies

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Speaker 7: with a little more of the defense sector becoming more

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Speaker 7: robust as they're buying more of their own products and

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Speaker 7: selling to each other. The US readiness requirements will sustain

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Speaker 7: our own defense industry, so that's not really a concern here.

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Speaker 7: The one problem is that for Europe this could impact

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Speaker 7: NATO's interoperability. NATO is an example of one of those

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Speaker 7: times when the whole is greater than the sum of

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Speaker 7: its parts, and if each country is producing its own

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Speaker 7: defense platforms, this could use NATO forces some of its hearts,

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Speaker 7: you know, that whole. It could also lead to defense

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Speaker 7: sector fratricide potentially where there's not enough budget in any

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Speaker 7: single country to do the kind of R and D

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Speaker 7: that would be required or to sustain an independent industry.

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Speaker 7: The result could be kind of reductions in production or

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Speaker 7: in quality. So we hope we don't see that happen.

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Speaker 7: One of the other concerns is that watching Europe have

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Speaker 7: these competitive defense sector rising plans means that if you're putent,

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Speaker 7: you're watching this and saying, my plan is working. I'm

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Speaker 7: driving wedges between Western States.

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Speaker 3: That was kind of one of my thoughts here. I

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Speaker 3: kind of thought NATO was a good thing since nineteen

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Speaker 3: forty five, but maybe that needs to change in composition,

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Speaker 3: I think to me, as a guide in the wool

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Speaker 3: Wall Street Guide, to me, it all comes down the money.

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Speaker 3: I can see a scenario where Germany's got the money.

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Speaker 3: Maybe Poland can do it because of their geographic proximity Russia.

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Speaker 3: They've been doing it anyway, But how about everybody else?

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Speaker 3: Is Spain Italy portrait and some of these other countries.

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Speaker 3: Do they have the money to do anything meaningful here?

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Speaker 7: They may not be able to hear right, Places like

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Speaker 7: Germany and Poland and Sweden will probably be able to

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Speaker 7: sustain the increases in the defense budget that they've been promising.

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Speaker 7: Other places may have a tougher time. But if I'm Europe,

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Speaker 7: what I'm going to do is divide up competencies. Instead

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Speaker 7: of every country trying to create an entirely independent defense sector,

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Speaker 7: I'm going to look at where there are competitive advantages

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Speaker 7: of each one of those defense sectors, who's good at what,

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Speaker 7: and perhaps then put all the eggs in those baskets,

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Speaker 7: if you will, kind of divide and conquer about what

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Speaker 7: kind of capabilities need to be built, and understand that

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Speaker 7: perhaps all of NATO would buy this one thing from

439
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Speaker 7: this one country or the like. And I'm not recommending

440
00:20:41,760 --> 00:20:44,000
Speaker 7: pushing the US to where it is no longer a player.

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Speaker 7: That interoperability is entirely critical. But if Europe sees that

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00:20:47,920 --> 00:20:49,399
Speaker 7: it needs to get more skin in the game to

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00:20:49,480 --> 00:20:51,879
Speaker 7: keep the US there, that's the way they could do it.

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Speaker 5: We had a story in the Bloomberg Terminal today that

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00:20:54,840 --> 00:20:57,560
Speaker 5: said Russia says it wants to balance relations with the

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Speaker 5: US and China. As we think about these dyni between

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00:21:00,720 --> 00:21:05,520
Speaker 5: these three countries, the US, ourselves, Russia, and China, how

448
00:21:05,640 --> 00:21:07,119
Speaker 5: is that developing and how are we thinking about that

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Speaker 5: when we think about defense.

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Speaker 7: We've heard this kind of argument before, and it's almost

451
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Speaker 7: like Russia's taking a page of the playbook of Saudi Arabia,

452
00:21:16,000 --> 00:21:20,399
Speaker 7: for instance, And what it means to us is, if

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Speaker 7: you are Russia, you have seen such a depleted state

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Speaker 7: of readiness in your own military, such a depleted position

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Speaker 7: in your own defense sector. I mean, they've been forced

456
00:21:28,200 --> 00:21:31,119
Speaker 7: to buy drone blueprints from Iran, and they used to

457
00:21:31,160 --> 00:21:33,119
Speaker 7: be the great innovators in that part of the world.

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00:21:33,560 --> 00:21:36,560
Speaker 7: So they're talking about turning to China because China continues

459
00:21:36,640 --> 00:21:39,920
Speaker 7: to develop at a pretty rapid pace new defense technologies

460
00:21:40,160 --> 00:21:42,680
Speaker 7: in preparation for what they see is also a standoff

461
00:21:42,720 --> 00:21:44,960
Speaker 7: with the US, and Russia is hoping that this will

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Speaker 7: be a little bit of a threat when they come

463
00:21:47,200 --> 00:21:50,440
Speaker 7: to the table on negotiations with the US and separately

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Speaker 7: with Ukraine. Russia is saying, we have this lever, we

465
00:21:54,119 --> 00:21:56,800
Speaker 7: have this bargaining chip because we plan to grow closer

466
00:21:56,840 --> 00:21:59,960
Speaker 7: to China. Who will then help us bolster our own defense.

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Speaker 7: The question we would have for Russia is with what money?

468
00:22:03,240 --> 00:22:05,800
Speaker 7: How are you going to finance any kind of large

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00:22:06,920 --> 00:22:10,760
Speaker 7: defense spends or joint ventures with China. China's economy also

470
00:22:10,760 --> 00:22:12,439
Speaker 7: would have a tech time affording it, So we think

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00:22:12,480 --> 00:22:14,399
Speaker 7: there's a lot of brain power, but maybe not a

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Speaker 7: lot of resource behind that.

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Speaker 3: Kirsten, thank you so much for joining us. We really

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Speaker 3: benefit from getting a few minutes of your time. Kirsten

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Speaker 3: fontin Rose. She is the president of Red six Solutions,

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00:22:23,880 --> 00:22:28,240
Speaker 3: more than twenty years in the US national defense apparatus

477
00:22:28,320 --> 00:22:30,480
Speaker 3: in various roles here, so getting her thoughts on I

478
00:22:30,600 --> 00:22:36,199
Speaker 3: at the changing landscape here in global armaments, global military alliances.

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Speaker 3: So we'll see how that plays out.

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Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

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00:22:43,280 --> 00:22:46,720
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00:22:46,800 --> 00:22:50,240
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00:22:50,680 --> 00:22:54,120
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

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00:22:54,640 --> 00:22:57,520
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00:22:57,960 --> 00:23:00,119
Speaker 1: and always on the Bloomberg term on

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Speaker 3: Yeah