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Speaker 1: This is Bloomberg surveillance often perceived to the UK only

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Speaker 1: then wider than that. But I think they will most

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Speaker 1: likely vote to remain within the European Union, saying the

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Speaker 1: UK could leave. So it's definitely a risk of the

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Speaker 1: market has had the price. Then if you look at

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Speaker 1: the spread between the federal fund strate and at Kenya,

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Speaker 1: it is flattened enormously, even if the federal fund strate

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Speaker 1: were to increase. Bloomberg surveillance, You're linked to the world

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Speaker 1: of economics, finance, and investment on Bloomberg Radio. Good morning

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Speaker 1: at seven am on Wall Street. It is one pm

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Speaker 1: in France, where you'd better not be out of gas

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Speaker 1: to strike there. Surprised and of gas station tanks are

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Speaker 1: apparently empty, No worries. We're fully powered up here on

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Speaker 1: surveillance Today, a deep dive into politics and monetary policy.

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Speaker 1: The dollar beginning to move as futures traders pricing a

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Speaker 1: July rate increase for the first time, but in factuty trader,

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Speaker 1: they're worried. They're not showing it. Nor does there appear

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Speaker 1: to be Brexit concerns today in Europe these stock six

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Speaker 1: hundred is up four points one point two percent. The

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Speaker 1: decks in Germany ninety one points higher nine tenths of

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Speaker 1: a percent. France, maybe out of gas, but forty is

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Speaker 1: the best performing index in the continent right now, one

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Speaker 1: point four percent higher on the day. In London, Bank

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Speaker 1: of England Governor Mark Carney, testifying today on Brexit, says

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Speaker 1: he's not taking sides, but it's his obligation to assess

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Speaker 1: the risks of a Brexit vote. The foot Sea not worried.

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Speaker 1: Forty nine points higher right now, eight tenths of eight

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Speaker 1: percent in the pound on the day, one forty six

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Speaker 1: oh five, up by eight tenths of eight percent. In

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Speaker 1: the US, the Dollar index beginning to move six up

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Speaker 1: by two tenths this morning, but no impact on equities

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Speaker 1: right now. Futures S and P futures up by seven points,

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Speaker 1: three tenths, Dow futures up forty nine. That's a three

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Speaker 1: tense game, and it's a four tens game for nastac On,

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Speaker 1: meaning if faers, they're up sixteen points right now. By

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Speaker 1: the way, the yen one oh nine sixty three earlier today,

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Speaker 1: Finance Mr Tarrell also suggested a five yen move over

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Speaker 1: two days might be the trigger for intervention. Keep an

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Speaker 1: eye on that bond yields here ratcheting higher the two

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Speaker 1: year note yield up to ninety one basis points, the

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Speaker 1: five year, one eight and the ten yere one four.

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Speaker 1: Richard hasks, as President of the Council on Foreign Relations,

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Speaker 1: we always ask you when you come by about this

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Speaker 1: bad news or that bad news. So I'm gonna rip

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Speaker 1: up the script here and point to the markets and say,

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Speaker 1: there's a lot going on in the world, a presidential election,

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Speaker 1: of Brexit vote, everything that's happening in the Middle East, etcetera.

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Speaker 1: And yet the world seems to feel a little bit

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Speaker 1: better than it did, say in January. I'm wondering if

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Speaker 1: if you've noticed anything changed out there, or or a

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Speaker 1: feeling that will will muddle through somehow or something. I

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Speaker 1: think it's a muddle through since so much of the

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Speaker 1: bad news has become the new normal that I don't

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Speaker 1: think the markets get shaken by. You assume the Middle

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Speaker 1: East is chaotic, you you assume that there's tensions in

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Speaker 1: Asia or tensions in Europe, and there's impeachment in Brazil

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Speaker 1: and whatever, and I think the markets essentially have internalized

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Speaker 1: all that. So at this point, do we where do

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Speaker 1: we go from here? Do you think that does does

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Speaker 1: the mood darken in the country as the election campaign

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Speaker 1: gets underway and everybody is gonna be terrible or it's summertime?

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Speaker 1: Do we start to feel better now that we've got

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Speaker 1: five and a half months of what's going to be

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Speaker 1: a brutal slog of an election, And you've got two

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Speaker 1: candidates already who's unfavorable or through the roof, and each

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Speaker 1: one is determined to raise the unfavorables of the other,

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Speaker 1: and they may well succeed at that. So I think

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Speaker 1: we've got to assume that. And the rest of the

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Speaker 1: world is going to watch this. And the part of

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Speaker 1: the coin of the realm of being a great power

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Speaker 1: is the sense that you give some comfort to others

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Speaker 1: and they admire what they see there, and there's a

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Speaker 1: sense of reliability and predictability, and I think we're about

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Speaker 1: to work our way through that in a rather unfavorable way.

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Speaker 1: Tom's looking so forward to that it's gonna be exceptional.

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Speaker 1: Let's dive into this with Richard House of CFR. Good

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Speaker 1: morning everyone, Bloomberg Surveillance This morning, Mart you by Investco.

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Speaker 1: Investco believe it's time to say goodbye to the traditional

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Speaker 1: a court part of modern portfolios. Learn more at investco

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Speaker 1: dot com slash alts. I guess the modern portfolio, Richard

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Speaker 1: House of Politics is negative ratings and and all that.

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Speaker 1: My foggy memory says eighteen o two, maybe it was eight.

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Speaker 1: There were a few other bitter elections in this nation's history,

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Speaker 1: but certainly in the modern era, this is absolutely original,

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Speaker 1: isn't it. Oh? I don't know any observer who is

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Speaker 1: not surprised by what she has seen this year. And

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Speaker 1: within both parties, no one, no one could or would

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Speaker 1: have predicted I was able to predict in both parties

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Speaker 1: that we'd be where we are, that the Hillary Clinton

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Speaker 1: still hasn't sewn up the Democratic nomination, and the most

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Speaker 1: powerful old political movement in the party is is this

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Speaker 1: anti globalization movement led led by Senator Sanders the Republican Party.

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Speaker 1: Very few people predicted that Donald Trump would beat out

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Speaker 1: the other sixteen or so candidates with the kind of

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Speaker 1: economic nationalist platform that that he is. So here we are,

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Speaker 1: but but no one could have predicted, and which also

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Speaker 1: makes it awfully hard to know where we're going to

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Speaker 1: be in five or six months. But the heart and soul,

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Speaker 1: the heritage of the Council on Foreign Relations is a smart,

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Speaker 1: informed debate that then moves to the middle into a

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Speaker 1: constructive compromise. Somehow, That's not where I think we're heading.

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Speaker 1: I don't mean November, but I mean January of next year.

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Speaker 1: That's the most July of next year, right, that's the

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Speaker 1: more serious issue, which, thank god, one day this this

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Speaker 1: campaign will be over exactly. And but then it's not

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Speaker 1: exactly happy days of here again. There's there's nothing that's

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Speaker 1: being said or done in this campaign that paves the

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Speaker 1: way for for governing, for compromise, for better relations either

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Speaker 1: within the parties, between the parties, between the Congress and

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Speaker 1: and and the White House. And you know, I look

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Speaker 1: at the inbox, I look at what's going to await

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Speaker 1: the President of the United States, and I look at

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Speaker 1: this raft of international problems, from what to do about

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Speaker 1: China and Asia to North Korea, which could be a

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Speaker 1: real crisis. We just saw the Afghanistan situation isn't getting

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Speaker 1: anybody who got the Middle East, which continues to churn.

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Speaker 1: We could go on and on and on, and then

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Speaker 1: you see domestically the fact that we're not growing at

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Speaker 1: levels that we should be. There's two thirds of the

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Speaker 1: American people are unhappy with the status quo and in

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Speaker 1: principle want change, but can't agree on what it is.

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Speaker 1: I look at that inbox and it's gotta it's gotta

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Speaker 1: give you, give you pause, I mean within the pause.

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Speaker 1: And to go back to the CFRs Mandate church Zion

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Speaker 1: Curtain speech which all of us were confronted with, is

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Speaker 1: being something almost ecumenical Churchill forward primacy and power is

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Speaker 1: also awe inspiring accountability to the future. Where is our well?

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Speaker 1: I mean, I understand in the heat of a campaign

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Speaker 1: there's no accountability. The sole goals to get elected. What

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Speaker 1: is your best foreign policy? The fourth Wednesday of November.

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Speaker 1: But what I want to see is is a foreign

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Speaker 1: policy that, to use a legal concept, the starry deceases

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Speaker 1: that we don't we don't change more than we we

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Speaker 1: should or or need to. We've got to understand that

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Speaker 1: a lot of the world is based upon assessments of

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Speaker 1: American reliability, of of continuity, and you know, so that

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Speaker 1: to me would say, you know, the bias ought to

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Speaker 1: be towards continuity. I think we ought to be very

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Speaker 1: careful about getting more involved in the in the Middle East,

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Speaker 1: though I think we ought to have learned transforming the

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Speaker 1: Middle East as a fools eron. We've got to do

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Speaker 1: more in Asia to keep that part of the world

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Speaker 1: as stable and as prosperous as it's been. You've got

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Speaker 1: to find a way to do a little bit more

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Speaker 1: in uh in Europe. One of the first test tom

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Speaker 1: of the new president could be the Trade Agreement, which

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Speaker 1: is a central patific the TPP the Transpacific Partnership, which

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Speaker 1: is a central part of the quote unquote pivot to

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Speaker 1: Asia and for many people around the world, is going

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Speaker 1: to become something of a test case for American reliability.

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Speaker 1: And what's so interesting is whether it's Hillary Clinton or

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Speaker 1: Donald Trump. Both of campaigned against t p P, which

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Speaker 1: I think opens up an interesting conversation after election. You

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Speaker 1: can't renegotiate it. The question then as Canada next president

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Speaker 1: and Congress work out some kind of a side arrangement

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Speaker 1: which would allow the United States then to sign on

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Speaker 1: to t p P, and that could be one of

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Speaker 1: the most interesting tests of the first few months. We

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Speaker 1: could go into the weeds and I could ask you about.

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Speaker 1: You know, it could it could just sit there like

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Speaker 1: salt too. But what does the world you say, you

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Speaker 1: talk about reliability, what does the world want them the

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Speaker 1: next US president? What the world wants is more continuity

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Speaker 1: than uh than change. The world has gotten used to

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Speaker 1: the fact that the United States is the most important

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Speaker 1: country out there. Are many of our allies, from Japan

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Speaker 1: to Create to those in Europe. They essentially are betting

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Speaker 1: their futures that the United States is there for them,

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Speaker 1: even are our foes or or countries that are kind

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Speaker 1: of not allies or friends. And the Chinese, the Russians

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Speaker 1: and others want a degree of of of American predictabilities

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Speaker 1: simply so they can gauge what they're going to do.

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Speaker 1: So I think the bias of the world is towards

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Speaker 1: a more familiar United States. What's so interesting to a

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Speaker 1: lot of the world. And I bet it's the dominant

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Speaker 1: conversation at the G seven. It's not the official conversation.

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Speaker 1: The dominant conversation during every break is going to be

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Speaker 1: to the President of the United States, what the hell

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Speaker 1: is going on in your country? How? How should we

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Speaker 1: read it? How should we interprets in this country? But

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Speaker 1: there is a frustration, and to the extent of the

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Speaker 1: presidential candidates have tapped into it that the you know,

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Speaker 1: the world's says, uh, we don't like the U. S

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Speaker 1: And it's foreign policy and what they do and and

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Speaker 1: all that, and yet whenever anything happens, the US has

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Speaker 1: to take care of it. Well, absolutely, and that's why,

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Speaker 1: you know, we don't much like what you're doing. But

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Speaker 1: whenever there's a crisis, the dollar goes up because it's

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Speaker 1: it's still the safest game, uh in town. Look, the

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Speaker 1: alternative to a US led world is not a somebody

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Speaker 1: else led world. It's to a world that doesn't have leadership.

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Speaker 1: And the glimpse of what that looks like is the

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Speaker 1: Middle East. That's a world on that's essentially out there

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Speaker 1: on its own, and it's not a pretty picture. Let's

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Speaker 1: come back with Richard Hawks to the Council on Foreign Relations.

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Speaker 1: A green on the screen. Futures up, eight down, futures

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Speaker 1: up fifty four. Eels are higher this morning the ten

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Speaker 1: year point nine one percent, excuse me, the two year

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Speaker 1: point nine one percent, with curve flattening. This morning, there's

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Speaker 1: hour of Savellance, brought to you by Monkisco Volvo visit

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Speaker 1: Montkisco Volvo dot com. Here's Michael Barr with news headline,

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Speaker 1: Mike Tom, thank you very much. There is more information

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Speaker 1: that in Egypt air flight that crashed last week could

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Speaker 1: have been brought down by an explosion. A senior Egyptian

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Speaker 1: forensic official who is part of the Egyptian investigative team

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Speaker 1: says the indications are based on examination of recovered body parts.

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Speaker 1: The official, who asked not to be identified, says all

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Speaker 1: ad piece has brought to Cairo so far are small

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Speaker 1: and that quote, there isn't even a whole body part

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Speaker 1: like an arm or a head. They was flying from

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Speaker 1: Paris to Cairo with sixty six people on board when

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Speaker 1: it crashed into the Mediterranean last week. President Obama has

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Speaker 1: spent his second full day in Vietnam meeting with activists,

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Speaker 1: including a pastor and advocates for the disabled. After the meeting,

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Speaker 1: the President, during a speech in Hanois, says the country

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Speaker 1: should allow greater freedoms for its citizens. Global News twenty

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Speaker 1: four hours a day, powered by our twenty four journalists.

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Speaker 1: I'm Michael Bar, Mike Tom, Michael, thanks so much. Gold

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Speaker 1: downe ten dollars twelve forty two. The answer ether that

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Speaker 1: bears watching with oil weaker fractionally with Richard Hass the

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Speaker 1: Council on Foreign Relations. This is Bloomberg Surveillance. Bloombergh Avalance

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Speaker 1: global cash wherever the road to growth leads. That's the

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Speaker 1: power of global connections. Bank of America, North America. Remember

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Speaker 1: fd I s Global Business News twenty four hours a

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Speaker 1: and on your radio. This is a Bloomberg Business Flash.

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Speaker 1: Good morning, I'm John Tucker. We have the futures ahead

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Speaker 1: on the market open at Wall Street. They are higher

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Speaker 1: half the best levels of the session of SMP futures

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Speaker 1: right now, six points higher as a three tense seven

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Speaker 1: percent of down futures of forty nine nastaki many futures

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Speaker 1: of fifteen uh sing some weakness of the euro dollar

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Speaker 1: strength today Euro one eighty three again one O mine

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Speaker 1: sixty two. That's down about four tense of a present

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Speaker 1: sterling one twelve. The two year notes in the US,

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Speaker 1: the yield point nine zero five three. The tenure yield

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Speaker 1: right now one four My mixed cruis lower. That's down

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Speaker 1: twelve centers at forty seven ninety six. Red crude is

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Speaker 1: down cents a barrel at forty eight eleven. And this

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Speaker 1: data check being brought to you by Sector Spider E

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Speaker 1: t S. And you're listening to Bloomberg Surveillance the Brexit

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Speaker 1: vote coverage on Bloomberg Radio. All right, we're going to

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Speaker 1: continue our conversation with Richard hass the President of the

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Speaker 1: Council on Foreign Relations, with questions about the British vote

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Speaker 1: on membership in the European Union, because it does seem

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Speaker 1: to be the major risk event of the next month

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Speaker 1: for for the globe. But you know, just putting it

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Speaker 1: in the context of the U S and what FED

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Speaker 1: officials are saying about it, they were worried. Now they

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Speaker 1: seem to be downplaying it as a threat. How much

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Speaker 1: of a threat to the global order is it if

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Speaker 1: Britain were to leave the EU, it's it would just

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Speaker 1: be piling on one more thing. And you saw what

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Speaker 1: the Treasury came out with over the last forty eight

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Speaker 1: hours in Britain essentially talking about the consequences there to

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Speaker 1: board to their economy. I think the threats to the

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Speaker 1: global economy would be more psychological and political than actual.

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Speaker 1: Given the scale of the British economy, the biggest effect

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Speaker 1: would be on the British economy, right, which which right?

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Speaker 1: But that's why where I want to go with it

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Speaker 1: is uh, not just economically, but politically and um in

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Speaker 1: the sense of global order. Would it make a significant difference,

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Speaker 1: It would be another sign that traditionalism is losing ground,

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Speaker 1: that populism is gaining. We had a close call in

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Speaker 1: the Austrian elections the other day. You see what's happening

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Speaker 1: here in both parties. If the British vote goes in

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Speaker 1: favor of Brekxit, that will be another sign that you

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Speaker 1: simply there there aren't any givens anymore. And I think

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Speaker 1: that's what will unnerve people more than any of the

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Speaker 1: details of the specifics. In April, Mr Trump it made

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Speaker 1: a bit of a splash saying NATO is absolutely Richard

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Speaker 1: huss this morning, UH said the idea that we need

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Speaker 1: to RENATO wise or or advanced NATO's mandate. That seems

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Speaker 1: to be opposing Mr Trump. What would you explain to

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Speaker 1: Mr Trump is the importance of NATO and the importance

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Speaker 1: of keeping Britain part of the EU system. In terms

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Speaker 1: of NATO, you still have elements of of a Russian threat.

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Speaker 1: NATO after the end of the Cold War was there

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Speaker 1: not simply as a hedge against Russia, but also to

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Speaker 1: help democratize and stabilize the newly independent countries that had

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Speaker 1: been under the Soviet Union. We took most of our

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Speaker 1: troops out where now we're introducing some after the Ukraine crisis.

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Speaker 1: I would think the return on investment, to use a

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Speaker 1: financial idea is is very good. Most of the local

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Speaker 1: costs are offset by local countries by host nation support.

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Speaker 1: But we benefit from stability in Europe. It's easy to

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Speaker 1: take Europe for granted, but it's still bought a quarter

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Speaker 1: of the world's economy, and we want there to be

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Speaker 1: uh stability there. We're seeing signs of populism and we

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Speaker 1: don't want to see that get out of hand. And

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Speaker 1: I'd say that in some ways the same argument for Asia.

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Speaker 1: The United States depends upon a global economy. We depend

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Speaker 1: upon stability in large parts of the world, and stability

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Speaker 1: simply can't be assured without a continuing American role. My

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Speaker 1: argument is simply that the costs of doing this are

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Speaker 1: relatively modest. We're spending what three three and a half

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Speaker 1: percent of our GDP on defense. By Cold War standards,

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Speaker 1: that's roughly half, So we can more than afford this

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Speaker 1: and still thrive at home. What's holding us back at home, Tom,

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Speaker 1: is not what we're spending on national security. It's weren't

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Speaker 1: what we're not doing domestically. So even if we do

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Speaker 1: less farm policy, you might make the world a messier place,

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Speaker 1: that doesn't mean we make the United States a better place.

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Speaker 1: Talking with Richard Hass of the Consul on Foreign Relations

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Speaker 1: here on Bloomberg surveillance brought to by sector spider ets

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Speaker 1: called one six six sector et F. You were just

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Speaker 1: talking about the importance of Britain to NATO and the

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Speaker 1: importance of Britain uh TO to the global order. Is

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Speaker 1: Britain important to Europe? Does? Does Europe need Britain as

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Speaker 1: part of it? I would make the argument, I don't

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Speaker 1: know the words need, but it's certainly better off with it.

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Speaker 1: It's one of the principal countries of Europe. I'm worried

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Speaker 1: that without Britain, then you have Germany in some ways

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Speaker 1: without a constellation of countries that are there of comparable scale,

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Speaker 1: really only leaving France and France, as we've seen historically,

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Speaker 1: on its own. I can't manage in some ways Germany.

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Speaker 1: I don't want to make Europe interesting again Europe. Europe

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Speaker 1: was also interesting in the twenties uh century. We want

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Speaker 1: Europe to be boring and stable, and the great accomplishment

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Speaker 1: of the post World War two era wasn't many ways.

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Speaker 1: What began as the Coal and Steel Community became the

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Speaker 1: European Community now is the European Union, and it has

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Speaker 1: made war unthinkable. It has made instability on a large

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Speaker 1: scale unthinkable in Europe. It's also the foundation of a

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Speaker 1: great economic success. I don't want to see any of

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Speaker 1: them begin to begin to unravel beautifully, beautifully, explain ambassador.

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Speaker 1: But the reality is all of England is looking for

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Speaker 1: some statement gesture from the considered nations of the continent,

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Speaker 1: or from Brussels in particular. Do you see any indication

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Speaker 1: that the EU really wants to sway the vote within

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Speaker 1: the United Kingdom, Well, they're not gonna do things and

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Speaker 1: they're not gonna buy Britain's vote and if that's what

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Speaker 1: it's going to take. And the Cameron renegotiation was more

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Speaker 1: an image thing than than uh than a substantive thing.

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Speaker 1: So sure, the Europeans want Britain, and I mean Europe

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Speaker 1: has enough on its plate without Brexit, thank you very much.

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Speaker 1: If you know, we've talked about the Greece before, you

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Speaker 1: have the refugee crisis, you have the ukinan crisis, you

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Speaker 1: have low growth. The last thing Europe needs is a

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Speaker 1: Brexit crisis on on on top of everything else. The

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Speaker 1: real question I think is for the is for the

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Speaker 1: British people, which is whether the populism of the day

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Speaker 1: will manifest itself. This is this is the this is

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Speaker 1: the vehicle to express it or whether what you might

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Speaker 1: call traditional British conservatism will well well and traditionalism will

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Speaker 1: carry But very quickly, are you mentioned that the exogenous

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Speaker 1: event just getting to the end of June, the outside

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Speaker 1: populist event, could be the wild card, both in Britain

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Speaker 1: and in here. If there were a major crisis involving refugees,

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Speaker 1: are involving terrorism, that could actually sway the British vote

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Speaker 1: in favor of Brexit, just like if they were God

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Speaker 1: forbid of terrorist event here of one sort or another,

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Speaker 1: it could have real implications for American politics. Thank you

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Speaker 1: so much for your time. Where do you travel next?

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Speaker 1: Go there? Very good Richards come back that we the

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Speaker 1: Council on Foreign Relations looks at Foreign Affairs Magazine. Can't

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Speaker 1: say enough about it. Just just very very smart. Also

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Speaker 1: big type which helps fossils like me is Bloomberg's surveillance.

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