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Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.

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Speaker 1: Daily we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. He

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Speaker 1: is Lurid from Columbia. Uh. He is a gentleman of

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Speaker 1: liberal thought who, unfortunately conservatives have to read to try

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Speaker 1: to keep up to speed on the outrages on income,

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Speaker 1: on wealth, the pushback from conservatives as well. The classic

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Speaker 1: two thousand two is globalization and as discontents. There's a

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Speaker 1: long new afterward. It's not just like a six page afterward.

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Speaker 1: You really put some thought into it when you wrote

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Speaker 1: the afterward. I'm sure you had an idea in your

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Speaker 1: mind and then you had to rewrite the afterward. What

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Speaker 1: was the rewrite like of the new afterward? Well, the

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Speaker 1: big idea it was that when I wrote Globization Discontent,

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Speaker 1: I just left uh. Being Chief Economists of the World Bank,

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Speaker 1: I saw the discontent in the developing world, and I

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Speaker 1: saw that there was a real rationale behind that discontent.

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Speaker 1: Globalization had been unfair, particularly for say Africa, up and afterwards, yeah, exactly.

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Speaker 1: And then uh Trump becomes president the United States and

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Speaker 1: he says globalization is unfair to the United States. And

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Speaker 1: you have to ask the question, how can globalization be

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Speaker 1: unfair to the United States, unfair to the developing world.

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Speaker 1: How can it be that something that was supposed to

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Speaker 1: be so good for everybody while winds up being hated

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Speaker 1: by everybody. And one of the reasons for writing the

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Speaker 1: book was to try to to unravel that that dilemma.

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Speaker 1: Another one was that Trump says, uh, NAFTA and every

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Speaker 1: one of our other trade deals or the worst deal ever.

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Speaker 1: And what he seems to suggest is that actually almost

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Speaker 1: said is that our trade negotiations got snookered by the

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Speaker 1: smart trade negotiators from Mexico. And come on, he said

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Speaker 1: in China, Joe Joe stickless with us from Columbia, Folks,

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Speaker 1: Professor Stiglets, he said in Shina, he blamed past presidents exactly,

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Speaker 1: that that that we that we have been taken advantage

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Speaker 1: of by by those in other countries, and that you know,

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Speaker 1: I've watched these trade negotiations for thirty five years, and

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Speaker 1: the idea that we were snookered by by those in

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Speaker 1: other countries that they took advantage of us is absolutely wrong.

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Speaker 1: We got what we asked for. The real question was

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Speaker 1: were we asking for the right thing? Okay, but whether

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Speaker 1: this Joe is you grew up in blue collar Gary, Indiana,

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Speaker 1: Mr Trump fact represents a huge swath of disaffected blue

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Speaker 1: collar America. Now why is this blue collar now different

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Speaker 1: from the blue collar you knew in Gary, Indiana long

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Speaker 1: ago and far away? Well, first, he doesn't represent those

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Speaker 1: they voted for him. Voted for him, but they voted

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Speaker 1: for him because he says that he's going to put

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Speaker 1: forward a set of economic policies that are going to

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Speaker 1: let's make their play better. And that was the third

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Speaker 1: reason I wrote the book. I wanted to answer the question,

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Speaker 1: would the policies that he put forward actually do what

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Speaker 1: he promises? Or is there in third way another way? Uh,

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Speaker 1: it's clear that the policies that we did in the past,

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Speaker 1: it's clear that. And my argument was that his protectionism

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Speaker 1: was not gonna work either. It was actually going to

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Speaker 1: make them worse off. Okay, I learned people go, how

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Speaker 1: did you learn to wear a bow tie? Tom? And

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Speaker 1: it wasn't that I got it from Senator Simon of Illinois.

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Speaker 1: But that was a good in the esteemed economists from

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Speaker 1: Illinois long ago and far away. Where are the Democrats

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Speaker 1: in your party who can move centrist to assuage the

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Speaker 1: fears of more traditional, non Trumpian Republicans. Do you have

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Speaker 1: any optimism the Democratic Party can get out of its

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Speaker 1: own way in its own recent historical baggage. I think

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Speaker 1: so I do have some money. Why do you say that, Well,

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Speaker 1: I think one of the elements, Uh, they're beginning to grasp. Uh.

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Speaker 1: One of the elements of correcting where the problem is

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Speaker 1: where things have gone wrong is market power. Uh that Uh.

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Speaker 1: One of the reasons that globalization is being so bad

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Speaker 1: is that it has weakened UH workers marketing power and

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Speaker 1: UH play provided a framework in which large corporations have

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Speaker 1: gotten larger and larger. So there's an increasing concentration of

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Speaker 1: market power, uh, just like there was in the goaded

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Speaker 1: age at the end of the nineteenth century. Uh. And

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Speaker 1: they've grasped that and says we uh, And I said,

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Speaker 1: we have to do something about that. A second element

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Speaker 1: is that we have to have systems of social protection

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Speaker 1: without protectionism. UM. And part of social protection is having

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Speaker 1: a tax system that's fair. Uh. So underlying one of

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Speaker 1: the elements of of making our economic system work is

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Speaker 1: that those who gain have to share some of the

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Speaker 1: benefits with those who have lost. Show the primal screen

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Speaker 1: from conservative the four conservative Democrats that are out there,

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Speaker 1: but a huge body of people who I would suggest

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Speaker 1: didn't want to vote for President Trump is there's the

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Speaker 1: Democratic Party, his law its way from the wards of Gary,

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Speaker 1: Indiana from years ago, and from other geographers, well, Pat

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Speaker 1: Toomey of Senator from Pennsylvania's to deal with us every day?

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Speaker 1: Why is your world you grew up in so embarrassing

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Speaker 1: to East coast and left coast Democrats. Well, that's a

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Speaker 1: political issue. Uh, let's get back to Mike McKie political classes.

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Speaker 1: They're the only ones that don'ts no. But uh, there

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Speaker 1: are many complexities to these political dynamics. We all know

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Speaker 1: that in the United States, Uh, money matters in politics.

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Speaker 1: And I'm afraid that that the search for money has distroyed.

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Speaker 1: It has led to a focus on where the money is,

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Speaker 1: you know, exact simple and and I'm for you only.

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Speaker 1: I think we have to get back to the roots

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Speaker 1: of where where the voters are, and the voters are

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Speaker 1: ordinary citizens who have not done very well, and you know,

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Speaker 1: just the real the reality is that most Americans have

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Speaker 1: lost uh as a result what has going on in

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Speaker 1: the last thirty third of a century. And globalization, as

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Speaker 1: I point out in my book, is a part, not

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Speaker 1: the only part of the story, but an important part

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Speaker 1: of the story. And we have to restructure globalization. It's

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Speaker 1: not with globalization itself, it's with the way we manage globalization.

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Speaker 1: So let me ask one quick set up, please, you

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Speaker 1: only get thirty seconds, and then we can delve into

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Speaker 1: this later. The tax bill argument that the administration makes

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Speaker 1: is especially the repatriation that their their concept is sevent

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Speaker 1: of corporate earnings go to labor, go to labor, and

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Speaker 1: only to capital, which is kind of the opposite of

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Speaker 1: what most people have said. So do you disagree with them? Uh?

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Speaker 1: Their analysis of what will happen as a result of

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Speaker 1: the corporate income tax cut is uh. But if we'll

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Speaker 1: get into I want to ask that because that's one

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Speaker 1: of their major arguments that they make, that workers will

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Speaker 1: get a big raise out of this. And you were

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Speaker 1: talking how even the CEOs, even the CEOs have said

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Speaker 1: that's wrong. I mean, it's really striking that We've gotten

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Speaker 1: a big dose of honesty from a lot of the CEOs,

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Speaker 1: you know. Uh. Cone asked a group of CEOs what

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Speaker 1: were they going to do with the tax cut, and

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Speaker 1: only three of them their hands and said, maybe we'll

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Speaker 1: show a little investment traditional economics. Uh. Research shows that

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Speaker 1: workers get maybe of profit corporate profits, whereas capital the

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Speaker 1: owners get, which, as you were just saying, makes logical sense. Uh.

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Speaker 1: And yet the the argument for the tax bill reverses

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Speaker 1: that do you know of any economic research supporting that idea? No? Uh, no,

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Speaker 1: no credible research actually. Uh. After the Console of Economic

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Speaker 1: Advisors came out with the report, uh uh, there were

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Speaker 1: two very good articles that were very quickly published on

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Speaker 1: the internet, uh, analyzing where what the weight of evidence was.

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Speaker 1: And and it was quite frankly an embarrassment because for

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Speaker 1: uh fifty years, the SIN sixth creation the Console of

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Speaker 1: Economic Advisors has always tried to be reflect the best

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Speaker 1: of economic science, you know it when the evidence was

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Speaker 1: against it, they would be totally silent, you know. And

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Speaker 1: and sometimes politicians do put forward something, but it was

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Speaker 1: never actually going on the record, uh, and and uh

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Speaker 1: saying things that we're against what economic science. Ha said

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Speaker 1: and this was an embarrassment for UH what has has

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Speaker 1: been a very strong institution in our government, UM, one

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Speaker 1: that tries to give the American people, and I'm bipartisan

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Speaker 1: basis the what economics says about various policies being advocated

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Speaker 1: by administrations. You see what I've done here, Tom, I've

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Speaker 1: set up a shameless plug for Bloomberg News is to

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Speaker 1: lou On Eurompeia and his story this morning on this Uh,

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Speaker 1: if you look at Bloomberg dot com, he's looked at

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Speaker 1: what CEOs are saying they will do with the cash.

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Speaker 1: So there's a third good story out there for you, Joe. UM.

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Speaker 1: The other thing we're talking about during the break is

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Speaker 1: the tax trigger that they're putting into this and UH,

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Speaker 1: let's leave aside the the idea of you know, the

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Speaker 1: value of this tax plan and the politics of this

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Speaker 1: tax plan, but just uh, from a from an economic

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Speaker 1: point of view, tax trigger bad idea. What the basic

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Speaker 1: problem is that, UH, when the nature of the tax

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Speaker 1: trigger is that when if the tax revenues are less

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Speaker 1: than they say, and almost surely they will be, uh,

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Speaker 1: it raises taxes. That's what economists call is pro cyclical

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Speaker 1: tax policy. In other words, tax policy is supposed to

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Speaker 1: run against the tax so that when the economy is weak,

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Speaker 1: taxes are cut to stimulate the economy. When the economy

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Speaker 1: is strong, uh, you raise taxes. We're doing just the opposite.

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Speaker 1: The economy is relatively strong and we're lowering taxes. That's

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Speaker 1: going to be pro you know, exaggerate the movements of

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Speaker 1: the economy, and the tax trigger will do just the opposite.

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Speaker 1: If the economy gets weak, tax revenues go down, and

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Speaker 1: the tax trigger says, now we're gonna raise taxes um

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Speaker 1: and that will weaken economy further. It's the worst kind

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Speaker 1: of economic say that you could imagine. And I tried

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Speaker 1: to read it yesterday. Man, he's glazed over by paragraph

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Speaker 1: three and forty two numbers of it's formulaic beyond believe Joe.

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Speaker 1: There's a lot of people out there who have grown

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Speaker 1: up Republican who want to find an alternative. Can your

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Speaker 1: Democratic Party generate an alternative for two thousand twenty Yes,

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Speaker 1: I think they can. Uh, Well, who is going to

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Speaker 1: be a long process. I mean, I think one of

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Speaker 1: the reasons that you don't see people uh putting their

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Speaker 1: names for it is we know the political what the

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Speaker 1: political process works. It looks like whoever there there there, Joe,

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Speaker 1: everybody who's running is older than you. Uh, not everybody.

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Speaker 1: There are some some people who are who are younger,

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Speaker 1: who have a lot of ability. The real question is

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Speaker 1: what will the central messages of and the central platform

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Speaker 1: of the Democratic Party look like. And I think uh

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Speaker 1: to come back say in my book, Uh, one of

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Speaker 1: my messages of my book Globalization, it's discontents to revisit

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Speaker 1: it is we have to manage globalization better. It's not

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Speaker 1: with the problem with globalization, it's the way we managed it.

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Speaker 1: When it's working well, it can lead the economy you

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Speaker 1: do well. But the problem when it's not well managed.

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Speaker 1: Even if the economy does well, more than of the

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Speaker 1: benefits go to the people at the top. And so

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Speaker 1: you have to have systems of social protection without protectionism,

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Speaker 1: which is the route that the Republicans are going. So

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Speaker 1: it has to be a different message. Part of that

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Speaker 1: message is market power, ugglomeration of market and within you're afterwards,

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Speaker 1: we've got the phrase market power just took us. Congratulations

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Speaker 1: from two thousand two on a strong new edition of

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Speaker 1: his classic Globalization, Globalization and its disc Well, we've got

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Speaker 1: to go. I know you do. I mean we've got

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Speaker 1: to um get you into our London studios as well.

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Speaker 1: When you're over there. We migrate now to a careful

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Speaker 1: discussion in uh too short a time here this morning

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Speaker 1: with vage matel of I n G on the foreign

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Speaker 1: exchange space verage. I'm sure you saw the news on

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Speaker 1: Britain with an attendant strength in cable. What euro Sterling?

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Speaker 1: I haven't talked about it in a while. Is a

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Speaker 1: euro Sterling a profitable place to play the back and

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Speaker 1: forth of Brexit. Well, for most of your Sterling has

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Speaker 1: kind of been a political gauge for rest risks, political

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Speaker 1: risk in both Europe and and the UK. Earlier this

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Speaker 1: year was the French elections. He saw the Euro sort

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Speaker 1: of pricing a bit of political streaming over summer, the

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Speaker 1: Euro turned into a safe haven and it's kind of

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Speaker 1: demonstrating these characteristics at the moment as well. Our outlook

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Speaker 1: going into next year for US we see two cyclical

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Speaker 1: forces offsetting each other for Eurosterling. So whilst you're going

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Speaker 1: to get a positive repricing in on the Sterling side

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Speaker 1: as Brexit talks make some good progress in the UK economy,

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Speaker 1: maybe instill some animal confidence. Equally, the Eurozone economy looks

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Speaker 1: pretty upbeating that's right where I wanted to go. They're

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Speaker 1: both strengthening as the I n G car right exactly.

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Speaker 1: So for us, we actually see we've we've got a

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Speaker 1: nuanced profile. We actually think the first quarter might be

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Speaker 1: relatively better for Sterling against the Euro, just purely because

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Speaker 1: you have the specter of the Italian election risks for

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Speaker 1: the Eurozone and also a positive repricing on the Brexit front.

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Speaker 1: We're seeing part of that today, a transition deal with

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Speaker 1: the next catalyst that we think could drive Sterling even higher.

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Speaker 1: We're looking sort of for the low eight five eight

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Speaker 1: five level that that's our sort of mid early sort

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Speaker 1: of next year. A target after that. We're kind of

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Speaker 1: then in sort of this period where it will net

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Speaker 1: around that sort of a five level and sort of

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Speaker 1: cycle thats fluctuate around there unless we get another layer

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Speaker 1: of positive steering in the UK economy towards a soft Brexit. Uh.

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Speaker 1: We're not making any big calls here. That's the that's

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Speaker 1: the twenty nineteen story. But for now, eighty five is

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Speaker 1: what we're looking at. What is your single best idea

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Speaker 1: in the next year, just grab it up here. What

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Speaker 1: does a cross rate where you think alpha can be made? Well,

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Speaker 1: so we we were sort of running with this sort

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Speaker 1: of monetary convergence theme going into next year. So it's

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Speaker 1: it's it's where the low yielders can play sort of

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Speaker 1: catch up against the sort of against the sort of

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Speaker 1: higher yielders. The yend actually looks like a pretty good

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Speaker 1: place that I want it finds the peak dollar yen

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Speaker 1: sort of finding a peak up in one fifteen. But

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Speaker 1: yen crosses as well, especially against sort of some of

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Speaker 1: the some of the higher yielders which are suffering like

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Speaker 1: as the year, et cetera. So we were quite like

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Speaker 1: these sort of convergence trades for US. We're also quite

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Speaker 1: like euros, so euro against the Aussi dollar again another

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Speaker 1: convergence trade there, the ECB tightening, the Australian, your curves

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Speaker 1: thaying relatively flat, going into neetka, all of these convergent,

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Speaker 1: your convergent trades. Well, right, we're gonna have fun and

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Speaker 1: this in the Bloomberg folks, you'll see this chart first

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Speaker 1: out on Twitter. Thank you for listening to Bloomberg Radio.

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Speaker 1: You're looking for stronger yen which and dollar yen is

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Speaker 1: from one eleven down to one oh nine one oh eight.

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Speaker 1: Do I have that right exactly exactly? And so for us,

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Speaker 1: what we're looking at, it's this idea of a V

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Speaker 1: shaped invertive V shaped profile for Dollienne. You may get

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Speaker 1: arrived just purely. Is this that the tax still goes

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Speaker 1: through maybe at the turn of the year, but I

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Speaker 1: think it'll be quickly faded. I think markets have learned

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Speaker 1: their lesson from translation earlier this year. They want to

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Speaker 1: see the evidence in the growth. They want to see

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Speaker 1: the evidence in the data. I don't think we don't

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Speaker 1: think we're going to get that sort of evidence coming

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Speaker 1: through at all the US economy going into next year.

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Speaker 1: Where's your target? And Aussie And I'm going to put

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Speaker 1: this chart out folks, based on what Varage says, where's

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Speaker 1: your target on Ozzie again, Well, so I think when

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Speaker 1: we look at it, it's sort of it's it's it's

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Speaker 1: kind of around the sort of potentially could go back

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Speaker 1: to sort of those low low seventy five, sort of

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Speaker 1: low seventies level, so to ciclically, that's where direction of

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Speaker 1: travel seems to be going. I'm making the Varage Patel

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Speaker 1: circle on my Bloomberg chart right now down at the

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Speaker 1: seventies six level, folks, we're gonna put this is what

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Speaker 1: I love about surveillance. We can have a pro like

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Speaker 1: Verage Patel on we can make the chart is he

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Speaker 1: speaks and in this case with radio, you can see

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Speaker 1: it out on Twitter just like that. That's very good

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Speaker 1: from my m G. Varage Patel, Thank you so much. Rage.

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Speaker 1: We gotta get you back on longer next time. Sorry

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Speaker 1: for this the abruptness this time. Jeff Kerry, are you

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Speaker 1: see with us with Golden sax? He looks at come

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Speaker 1: on days and particularly oil Will you go to Vienna two?

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Speaker 1: S's like watching I mean, let's be honest here, is

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Speaker 1: it like watching paint dry? I mean you look at

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Speaker 1: the list of planary speakers and closing comments. Is it

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Speaker 1: like the definition of watching paint dry? There's a reason

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Speaker 1: why I haven't been back for a little Yes, exactly,

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Speaker 1: That's what I thought. You say. The story with this

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Speaker 1: opaque is the mystery over inventories. Is that like where's

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Speaker 1: the oil? Well? I mean there's different metrics to measure

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Speaker 1: the inventories, and if you go with the opaque data,

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Speaker 1: it would suggest that rebalancing is roughly complete. Now, if

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Speaker 1: you use the I A data, it would say it's yes,

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Speaker 1: it's roughly complete. Now that's not the end of the uncertainty.

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Speaker 1: Then if you add in what metrics do you use?

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Speaker 1: Do you use days of forward consumption or do you

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Speaker 1: use the inventory levels? Um? That will if you use

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Speaker 1: days of forward consumption of the rebalancing. So how far

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Speaker 1: we are along the rebalancing path. There's a high level

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Speaker 1: of uncertainties, which is enough for you to make a call.

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Speaker 1: I mean, if we're an arrange bond quality of a

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Speaker 1: vector up vector, well are our base case is that

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Speaker 1: we're still having the cut ending in April of next year,

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Speaker 1: and then we have a you know, a a gradual

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Speaker 1: increase in both OPEC and Russian production after that. Now,

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Speaker 1: obviously the meeting is going to lead to most likely

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Speaker 1: some extension beyond that um. You know, of the three

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Speaker 1: outcomes that you would have, you know, than the nine

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Speaker 1: month extension UM, which would be I think the market

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Speaker 1: really has not priced that in yet, a six month extension,

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Speaker 1: which is roughly what the market has priced in, and

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Speaker 1: then a three month month extension with a reassessment or

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Speaker 1: a taper discussing how you would actually create an exit strategy.

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Speaker 1: Have you ever seen this this almost negotiated or discourse

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Speaker 1: driven dynamics and oils supply. No, And and I think

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Speaker 1: one of the key the key issues is that there's

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Speaker 1: so much debate eight right now on what you're going

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Speaker 1: to use as a metric. So if you go back

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Speaker 1: to November two thousand and fourteen, that one was viewed

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Speaker 1: as having a high level uncertain it really didn't because

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Speaker 1: it was either cut or don't cut. This one is

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Speaker 1: where are we in the rebalancing process and how much

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Speaker 1: do we need to actually still do to get a

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Speaker 1: rebalanced market. And that's where the core the debate is

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Speaker 1: that is less of a black and white and much

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Speaker 1: more of a gray area to be in. We should

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Speaker 1: mention the West Texas four right now brent significantly higher

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Speaker 1: than they were earlier this year, and everybody says, you know,

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Speaker 1: the deal is why, But there were a lot of

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Speaker 1: predictions at the time that they were making a deal

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Speaker 1: among these countries that what that's going to do is

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Speaker 1: bring American fract oil back into the marketplace and scent

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Speaker 1: producers and that would put a cap on prices doesn't

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Speaker 1: seem to have happened yet. Well, first I want to

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Speaker 1: correct there. You know, are we at fifty seven fifty

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Speaker 1: due to the OPEC cut strictly no demand, Let's do

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Speaker 1: not underestimate demand in on globally is on fire right

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Speaker 1: because the economies are getting exactly I mean that that's

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Speaker 1: because you got to look at the fact that copper

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Speaker 1: is sitting near right now, which has nothing to do

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Speaker 1: with an opeca. But anyway, let's go back to your

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Speaker 1: question about the supply response from the shale producers. We

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Speaker 1: saw earlier this year when we got up around fifty

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Speaker 1: six dollars of barrel, we saw a substantial response from

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Speaker 1: US shale producers in terms of the rig count. We

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Speaker 1: aren't seeing it this time. One of the key issues

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Speaker 1: is the fact that the investors um after May and

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Speaker 1: June this year, UM, we're less willing to accept um

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Speaker 1: large CAPEX programs. And I would say that if the

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Speaker 1: dicipline being imposed on the producers by the investors, it's

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Speaker 1: leading to a very different outcome, much more constrained in

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Speaker 1: terms of why did they not want to accept it.

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Speaker 1: They want returns and they want they want cash, they

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Speaker 1: want dividends they are no that they're no longer going

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Speaker 1: to allow them to deficit spend. So, um, what's the

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Speaker 1: break even return price now for for oil? Particularly you

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Speaker 1: know coming out of the the United States? You know,

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Speaker 1: just looking at the behavior of the producers of the

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Speaker 1: last last year, looking at the financial data coming out

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Speaker 1: of out of the companies, that put us somewhere in

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Speaker 1: that fifty seven range. So thirty dollars is not gonna

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Speaker 1: happen again? Well, I mean you're gonna say it's not

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Speaker 1: gonna happen again. You have a train wreck and demand.

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Speaker 1: You could easily see that again. But you know, barring

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Speaker 1: a train wreck and demand, the answer is unlikely. What

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Speaker 1: about much higher than we are right now? I mean,

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Speaker 1: is there is there? Does the supply that we provide

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Speaker 1: now uh put a cap? Well? Actually, I think given

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Speaker 1: the the strength we've seen in the fundamental day data recently,

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Speaker 1: the level of you know, geopolitical uncertainty out there, combined

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Speaker 1: that with the rhetoric around the OPEC cut of a

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Speaker 1: potential nine month extension, it's actually kind of surprising that

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Speaker 1: this market hasn't moved higher. I mean, I like to

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Speaker 1: point out, you know, during that hurricane season back in

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Speaker 1: late August of this year. These markets just really did

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Speaker 1: not move, which is an indication that you know that

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Speaker 1: volatility both to the upside and downside really has been

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Speaker 1: capped recently. Jeff Curry, thank you so much. Don't be

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Speaker 1: a stranger. He's with Goldman Saxons, look at comodies and

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Speaker 1: particularly the OPEC meeting to come all sources and perfectly

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Speaker 1: Mr Curry emphasizing that there's a huge uncertainty out of

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Speaker 1: this meeting as well, arguably in terms of international relations.

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Speaker 1: My interview of the week, if not the month, he

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Speaker 1: has James Travitas is at the Fletcher School, Toughs University,

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Speaker 1: formal Admiral of the Navy with a modest knowledge of

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Speaker 1: our history of jaw boning and such. Admiral, My book

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Speaker 1: of the summer was your fantastic leader's bookshelf, but easily

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Speaker 1: could be my book of the year, but I wanted

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Speaker 1: to get it out right away. Is my book of

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Speaker 1: the summer, and in it is the heartbreak of a

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Speaker 1: four fifty page book where you want to just die

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Speaker 1: through the first forty seven pages. It is John Keegan's

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Speaker 1: The First World War. He begins with the European tragedy

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Speaker 1: and then the heartbreak and arrogance and lack of humility

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Speaker 1: of a set of world leaders. In chapter two, war Plans.

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Speaker 1: Are we planning ourselves into a defense or war position

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Speaker 1: with the policy of the United States on this Wednesday,

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Speaker 1: I worry a lot in that regard Tom about North Korea. Um.

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Speaker 1: The common phrase about World War One is that the

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Speaker 1: great Powers sleepwalked into that war and didn't take the

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Speaker 1: kind of diplomatic economics steps that were necessary to definitively

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Speaker 1: avoid it. And I kind of feel where edge in

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Speaker 1: that way with North Korea and the uh intransigence on

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Speaker 1: our side and on Kim Jong inside is creating a

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Speaker 1: real collision course. And frankly, Um, I think the chances

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Speaker 1: of war and that peninsula have gone up and up

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Speaker 1: and up, and pretty much the only thing left in

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Speaker 1: the locker between us and an absolute necessity to go

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Speaker 1: in and take him on is whether he detonates a

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Speaker 1: hydrogen bomb over the ocean. And I think that's next.

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Speaker 1: John Keegan is so good at the minutia and pulling

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Speaker 1: it into the present. For example, I didn't know about

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Speaker 1: the League of the Three Emperors, and this is ancient

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Speaker 1: eighteen seventy history. But what you learn in n is

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Speaker 1: if we do this, they'll do that. But they do that,

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00:26:48,720 --> 00:26:51,240
Speaker 1: and they do that and that and that. Are we

430
00:26:51,320 --> 00:26:55,959
Speaker 1: in that same sequential framework in an X y Z

431
00:26:56,160 --> 00:27:00,879
Speaker 1: space that they were in. We are. And it's called

432
00:27:01,040 --> 00:27:04,639
Speaker 1: war plans and we have them, and Kim Jong un

433
00:27:04,840 --> 00:27:08,359
Speaker 1: has them in North Korea and in the First World

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Speaker 1: War time, as you know, they mobilized into this uh

435
00:27:12,680 --> 00:27:16,560
Speaker 1: step by step by step process. Here it's an escalation

436
00:27:16,680 --> 00:27:20,359
Speaker 1: of events from North Korea and then we're going to respond.

437
00:27:20,840 --> 00:27:24,359
Speaker 1: And those war plans can drive you inexorably forward in

438
00:27:24,600 --> 00:27:29,320
Speaker 1: less leaders step up and walk back from the abyss.

439
00:27:29,359 --> 00:27:31,879
Speaker 1: But I see no indication of that at the moment. Okay,

440
00:27:31,920 --> 00:27:34,440
Speaker 1: let's go technical on this right now, folks. Youre aerospace

441
00:27:34,520 --> 00:27:38,480
Speaker 1: engineering with James te Vida's only I'm Bloomberg surveillance. All

442
00:27:38,560 --> 00:27:41,040
Speaker 1: you need to know, folks is the equation is V

443
00:27:41,200 --> 00:27:44,800
Speaker 1: equals the square root of gr squared over our plus H.

444
00:27:45,000 --> 00:27:48,560
Speaker 1: That's galileo. You put a rocket in the air and

445
00:27:48,600 --> 00:27:51,360
Speaker 1: you want to point at forty five degrees. I got

446
00:27:51,359 --> 00:27:54,640
Speaker 1: a little upset this morning, Appal, because we're not reporting

447
00:27:54,640 --> 00:27:58,439
Speaker 1: in the media that basically they took this ginormous rocket

448
00:27:58,920 --> 00:28:02,000
Speaker 1: and put it st eight up in the air, not

449
00:28:02,160 --> 00:28:05,080
Speaker 1: at forty five degrees, but weighs deeper and it comes

450
00:28:05,080 --> 00:28:10,479
Speaker 1: down near Japan and a normal trajectory. Can it go

451
00:28:10,720 --> 00:28:14,400
Speaker 1: a lot further distance in the vicinity of your San Diego?

452
00:28:14,880 --> 00:28:17,320
Speaker 1: Oh my gosh, Tom it can? It can fly right

453
00:28:17,320 --> 00:28:20,600
Speaker 1: over San Diego. Wave at it in land in Washington,

454
00:28:20,720 --> 00:28:24,240
Speaker 1: d C. If you do the map which you through

455
00:28:24,280 --> 00:28:27,480
Speaker 1: out there, that thing will go about eight thousand miles

456
00:28:27,680 --> 00:28:31,000
Speaker 1: And that's because of time of flight and angle of flight.

457
00:28:31,280 --> 00:28:34,640
Speaker 1: So yeah, we're in a different ballpark on distance right

458
00:28:34,680 --> 00:28:37,080
Speaker 1: now in terms of what he can do. Okay, orbital

459
00:28:37,160 --> 00:28:40,640
Speaker 1: velocity seventeen thousand, five miles per hour. Folks, you memorize

460
00:28:40,640 --> 00:28:43,880
Speaker 1: that freshman year of engineering. I mean we all get that.

461
00:28:43,920 --> 00:28:47,800
Speaker 1: We're not talking orbital velocity. But James, your good friend

462
00:28:47,880 --> 00:28:52,360
Speaker 1: Mr maddis holding court in Washington, our last savior would suggest,

463
00:28:52,560 --> 00:28:55,840
Speaker 1: as you say, it would give us time to shoot

464
00:28:55,920 --> 00:28:59,640
Speaker 1: the thing down. Can that would say that with confidence?

465
00:29:00,400 --> 00:29:03,120
Speaker 1: I don't think you can, because all of our missile

466
00:29:03,200 --> 00:29:06,240
Speaker 1: tests that shoot in that cruise dase where it would

467
00:29:06,280 --> 00:29:09,360
Speaker 1: be going over say Seattle on the way to San Antonio.

468
00:29:09,840 --> 00:29:13,280
Speaker 1: We're only knocking it down about fifty of the time. Tom,

469
00:29:13,280 --> 00:29:16,480
Speaker 1: That is not a highly effective system. And frankly, I

470
00:29:16,480 --> 00:29:19,480
Speaker 1: don't want to bet San Antonio in that system. Okay,

471
00:29:19,640 --> 00:29:22,480
Speaker 1: But within this then, and thank you for your frankness here,

472
00:29:22,560 --> 00:29:27,080
Speaker 1: with your past public responsibilities, within what you've just said,

473
00:29:27,080 --> 00:29:29,240
Speaker 1: and forget about Seattle. They're supposed to get the thing

474
00:29:29,520 --> 00:29:32,320
Speaker 1: twenty five miles south of Okinawa, pick it up and

475
00:29:32,320 --> 00:29:34,880
Speaker 1: shoot it down. You know, I get the good news story,

476
00:29:34,880 --> 00:29:39,520
Speaker 1: which isn't gonna happen. How does your navy respond to

477
00:29:39,800 --> 00:29:43,520
Speaker 1: these realities within a new war plan made in the

478
00:29:43,560 --> 00:29:46,560
Speaker 1: last twenty four hours. Yeah, we've got to in the

479
00:29:46,640 --> 00:29:49,360
Speaker 1: navy side of things, Tom, We've got to up our

480
00:29:49,440 --> 00:29:53,280
Speaker 1: game in missile defense, and that means using our agis

481
00:29:53,680 --> 00:29:57,840
Speaker 1: UH destroyers and cruisers more effectively, and we have the

482
00:29:57,880 --> 00:30:01,680
Speaker 1: ability to do that. It costs money, but I would

483
00:30:01,760 --> 00:30:05,880
Speaker 1: argue that's money well spent on the maritime missile defense

484
00:30:05,880 --> 00:30:07,680
Speaker 1: side of this thing. Early in this guy, if you're

485
00:30:07,720 --> 00:30:11,600
Speaker 1: just joining us folks from Fletcher School, Toughs University near Boston,

486
00:30:11,720 --> 00:30:15,360
Speaker 1: James Travitis with this former Supreme Commander for NATO and

487
00:30:15,400 --> 00:30:18,880
Speaker 1: of course an admiral of our US Navy over therese.

488
00:30:18,920 --> 00:30:21,160
Speaker 1: You can't say enough again about a sequence of books

489
00:30:21,520 --> 00:30:25,920
Speaker 1: led by the leader's bookshelf. I just it's seventy books,

490
00:30:25,960 --> 00:30:28,800
Speaker 1: beautifully laid up by people with way too much time

491
00:30:28,800 --> 00:30:32,200
Speaker 1: in their hand to read no more than than we do.

492
00:30:32,240 --> 00:30:35,120
Speaker 1: You mentioned in the beginning of this conversation addimal that

493
00:30:35,320 --> 00:30:39,920
Speaker 1: North Korea has a war plan. Our audience doesn't buy it.

494
00:30:40,200 --> 00:30:44,280
Speaker 1: This guy's a nut. He's acting unilaterally without war plans.

495
00:30:44,560 --> 00:30:47,320
Speaker 1: Does he have a real military behind him? He does,

496
00:30:47,640 --> 00:30:51,040
Speaker 1: and uh, it's a structured military and a disciplined one.

497
00:30:51,320 --> 00:30:56,080
Speaker 1: And um, it's not superbly equipped across the entire spectrum

498
00:30:56,080 --> 00:30:59,960
Speaker 1: of battle, but he has the capability to inflict massive

499
00:31:00,000 --> 00:31:03,520
Speaker 1: the initial casualties on South Korea, particularly on the city

500
00:31:03,520 --> 00:31:07,520
Speaker 1: of Seoul. We should not underestimate his ability to put

501
00:31:07,600 --> 00:31:10,880
Speaker 1: that machine of war at playing. What does General Mattis

502
00:31:10,960 --> 00:31:16,000
Speaker 1: need to do to breathe all in Washington, our legislative

503
00:31:16,040 --> 00:31:18,520
Speaker 1: branch and of course his boss. What does he need

504
00:31:18,600 --> 00:31:24,280
Speaker 1: to brief them on the news travitous urgency. Um, I'm

505
00:31:24,360 --> 00:31:29,200
Speaker 1: sure he's doing it, which is to um request more

506
00:31:29,440 --> 00:31:34,280
Speaker 1: assets for intelligence to increase the missile defense posture as

507
00:31:34,320 --> 00:31:38,040
Speaker 1: we just talked about, to put more offensive cyber weapons

508
00:31:38,080 --> 00:31:41,320
Speaker 1: at play. Tom, that's a real capability we can deploy

509
00:31:41,360 --> 00:31:45,600
Speaker 1: and to begin to consider this is controversial. A maritime

510
00:31:45,600 --> 00:31:48,520
Speaker 1: blockade of North Korea, much as we put a blockade

511
00:31:48,560 --> 00:31:51,440
Speaker 1: on Cuba in the k Well. I know you were

512
00:31:51,440 --> 00:31:55,400
Speaker 1: on the blockade of the Confederacy. Link it to blockade's work.

513
00:31:55,440 --> 00:31:58,960
Speaker 1: Come on, it's two thousand seventeen. It would not work

514
00:31:59,160 --> 00:32:03,360
Speaker 1: without Chinese ease cooperation. So, as usual, all roads to

515
00:32:03,440 --> 00:32:06,280
Speaker 1: pun Yang lead us through Beijing. We've got to get

516
00:32:06,320 --> 00:32:09,400
Speaker 1: China on board even to implement that idea, let alone

517
00:32:09,520 --> 00:32:11,959
Speaker 1: get Kim Jong onto the negotiating table. Do you one

518
00:32:12,040 --> 00:32:14,720
Speaker 1: final question? Do you suggest that we have a constructive

519
00:32:14,720 --> 00:32:18,280
Speaker 1: of late relationship with a leadership of China? Are they

520
00:32:18,320 --> 00:32:21,080
Speaker 1: playing us for a fool? I think it's somewhere in

521
00:32:21,120 --> 00:32:25,000
Speaker 1: the middle, Tom, China is playing a long game and

522
00:32:25,040 --> 00:32:28,520
Speaker 1: they're playing at a more sophisticated level. We're playing checkers

523
00:32:28,520 --> 00:32:32,040
Speaker 1: and they're playing go. Oh. I like see, that's why

524
00:32:32,080 --> 00:32:36,160
Speaker 1: he's the professor, Richard. He goes right, You know, rich Truman,

525
00:32:36,160 --> 00:32:40,400
Speaker 1: I'm the worst go player out of nineteen thousand Bloomberg employees.

526
00:32:40,680 --> 00:32:43,520
Speaker 1: I lost a house playing Go in our Hong Kome

527
00:32:43,680 --> 00:32:46,880
Speaker 1: office about twenty five years ago. I mean just terrible.

528
00:32:47,400 --> 00:32:50,240
Speaker 1: Thank you so much. James Tevitas on short notice, the

529
00:32:50,240 --> 00:32:53,000
Speaker 1: Animal from Fletcher School. And I can't say enough again

530
00:32:53,320 --> 00:32:57,360
Speaker 1: about leaders Workshop, A great book in there on the

531
00:32:58,000 --> 00:33:01,480
Speaker 1: Greek wars of a century and centuries ago. And I

532
00:33:01,560 --> 00:33:04,520
Speaker 1: can't say enough again about John Keenan's Kegan's One volume.

533
00:33:04,760 --> 00:33:07,160
Speaker 1: I'm reading it here in the ninety ninth anniversary of

534
00:33:07,960 --> 00:33:10,760
Speaker 1: World War One is easy read. John Keegan is just

535
00:33:11,160 --> 00:33:17,000
Speaker 1: can't say enough about it. James tra Vigas, thank you.

536
00:33:20,840 --> 00:33:25,080
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

537
00:33:25,120 --> 00:33:30,440
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

538
00:33:30,480 --> 00:33:34,720
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

539
00:33:34,760 --> 00:33:38,560
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

540
00:33:38,680 --> 00:33:38,960
Speaker 1: Radio