Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.
Speaker 1: Daily we bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. He
Speaker 1: is Lurid from Columbia. Uh. He is a gentleman of
Speaker 1: liberal thought who, unfortunately conservatives have to read to try
Speaker 1: to keep up to speed on the outrages on income,
Speaker 1: on wealth, the pushback from conservatives as well. The classic
Speaker 1: two thousand two is globalization and as discontents. There's a
Speaker 1: long new afterward. It's not just like a six page afterward.
Speaker 1: You really put some thought into it when you wrote
Speaker 1: the afterward. I'm sure you had an idea in your
Speaker 1: mind and then you had to rewrite the afterward. What
Speaker 1: was the rewrite like of the new afterward? Well, the
Speaker 1: big idea it was that when I wrote Globization Discontent,
Speaker 1: I just left uh. Being Chief Economists of the World Bank,
Speaker 1: I saw the discontent in the developing world, and I
Speaker 1: saw that there was a real rationale behind that discontent.
Speaker 1: Globalization had been unfair, particularly for say Africa, up and afterwards, yeah, exactly.
Speaker 1: And then uh Trump becomes president the United States and
Speaker 1: he says globalization is unfair to the United States. And
Speaker 1: you have to ask the question, how can globalization be
Speaker 1: unfair to the United States, unfair to the developing world.
Speaker 1: How can it be that something that was supposed to
Speaker 1: be so good for everybody while winds up being hated
Speaker 1: by everybody. And one of the reasons for writing the
Speaker 1: book was to try to to unravel that that dilemma.
Speaker 1: Another one was that Trump says, uh, NAFTA and every
Speaker 1: one of our other trade deals or the worst deal ever.
Speaker 1: And what he seems to suggest is that actually almost
Speaker 1: said is that our trade negotiations got snookered by the
Speaker 1: smart trade negotiators from Mexico. And come on, he said
Speaker 1: in China, Joe Joe stickless with us from Columbia, Folks,
Speaker 1: Professor Stiglets, he said in Shina, he blamed past presidents exactly,
Speaker 1: that that that we that we have been taken advantage
Speaker 1: of by by those in other countries, and that you know,
Speaker 1: I've watched these trade negotiations for thirty five years, and
Speaker 1: the idea that we were snookered by by those in
Speaker 1: other countries that they took advantage of us is absolutely wrong.
Speaker 1: We got what we asked for. The real question was
Speaker 1: were we asking for the right thing? Okay, but whether
Speaker 1: this Joe is you grew up in blue collar Gary, Indiana,
Speaker 1: Mr Trump fact represents a huge swath of disaffected blue
Speaker 1: collar America. Now why is this blue collar now different
Speaker 1: from the blue collar you knew in Gary, Indiana long
Speaker 1: ago and far away? Well, first, he doesn't represent those
Speaker 1: they voted for him. Voted for him, but they voted
Speaker 1: for him because he says that he's going to put
Speaker 1: forward a set of economic policies that are going to
Speaker 1: let's make their play better. And that was the third
Speaker 1: reason I wrote the book. I wanted to answer the question,
Speaker 1: would the policies that he put forward actually do what
Speaker 1: he promises? Or is there in third way another way? Uh,
Speaker 1: it's clear that the policies that we did in the past,
Speaker 1: it's clear that. And my argument was that his protectionism
Speaker 1: was not gonna work either. It was actually going to
Speaker 1: make them worse off. Okay, I learned people go, how
Speaker 1: did you learn to wear a bow tie? Tom? And
Speaker 1: it wasn't that I got it from Senator Simon of Illinois.
Speaker 1: But that was a good in the esteemed economists from
Speaker 1: Illinois long ago and far away. Where are the Democrats
Speaker 1: in your party who can move centrist to assuage the
Speaker 1: fears of more traditional, non Trumpian Republicans. Do you have
Speaker 1: any optimism the Democratic Party can get out of its
Speaker 1: own way in its own recent historical baggage. I think
Speaker 1: so I do have some money. Why do you say that, Well,
Speaker 1: I think one of the elements, Uh, they're beginning to grasp. Uh.
Speaker 1: One of the elements of correcting where the problem is
Speaker 1: where things have gone wrong is market power. Uh that Uh.
Speaker 1: One of the reasons that globalization is being so bad
Speaker 1: is that it has weakened UH workers marketing power and
Speaker 1: UH play provided a framework in which large corporations have
Speaker 1: gotten larger and larger. So there's an increasing concentration of
Speaker 1: market power, uh, just like there was in the goaded
Speaker 1: age at the end of the nineteenth century. Uh. And
Speaker 1: they've grasped that and says we uh, And I said,
Speaker 1: we have to do something about that. A second element
Speaker 1: is that we have to have systems of social protection
Speaker 1: without protectionism. UM. And part of social protection is having
Speaker 1: a tax system that's fair. Uh. So underlying one of
Speaker 1: the elements of of making our economic system work is
Speaker 1: that those who gain have to share some of the
Speaker 1: benefits with those who have lost. Show the primal screen
Speaker 1: from conservative the four conservative Democrats that are out there,
Speaker 1: but a huge body of people who I would suggest
Speaker 1: didn't want to vote for President Trump is there's the
Speaker 1: Democratic Party, his law its way from the wards of Gary,
Speaker 1: Indiana from years ago, and from other geographers, well, Pat
Speaker 1: Toomey of Senator from Pennsylvania's to deal with us every day?
Speaker 1: Why is your world you grew up in so embarrassing
Speaker 1: to East coast and left coast Democrats. Well, that's a
Speaker 1: political issue. Uh, let's get back to Mike McKie political classes.
Speaker 1: They're the only ones that don'ts no. But uh, there
Speaker 1: are many complexities to these political dynamics. We all know
Speaker 1: that in the United States, Uh, money matters in politics.
Speaker 1: And I'm afraid that that the search for money has distroyed.
Speaker 1: It has led to a focus on where the money is,
Speaker 1: you know, exact simple and and I'm for you only.
Speaker 1: I think we have to get back to the roots
Speaker 1: of where where the voters are, and the voters are
Speaker 1: ordinary citizens who have not done very well, and you know,
Speaker 1: just the real the reality is that most Americans have
Speaker 1: lost uh as a result what has going on in
Speaker 1: the last thirty third of a century. And globalization, as
Speaker 1: I point out in my book, is a part, not
Speaker 1: the only part of the story, but an important part
Speaker 1: of the story. And we have to restructure globalization. It's
Speaker 1: not with globalization itself, it's with the way we manage globalization.
Speaker 1: So let me ask one quick set up, please, you
Speaker 1: only get thirty seconds, and then we can delve into
Speaker 1: this later. The tax bill argument that the administration makes
Speaker 1: is especially the repatriation that their their concept is sevent
Speaker 1: of corporate earnings go to labor, go to labor, and
Speaker 1: only to capital, which is kind of the opposite of
Speaker 1: what most people have said. So do you disagree with them? Uh?
Speaker 1: Their analysis of what will happen as a result of
Speaker 1: the corporate income tax cut is uh. But if we'll
Speaker 1: get into I want to ask that because that's one
Speaker 1: of their major arguments that they make, that workers will
Speaker 1: get a big raise out of this. And you were
Speaker 1: talking how even the CEOs, even the CEOs have said
Speaker 1: that's wrong. I mean, it's really striking that We've gotten
Speaker 1: a big dose of honesty from a lot of the CEOs,
Speaker 1: you know. Uh. Cone asked a group of CEOs what
Speaker 1: were they going to do with the tax cut, and
Speaker 1: only three of them their hands and said, maybe we'll
Speaker 1: show a little investment traditional economics. Uh. Research shows that
Speaker 1: workers get maybe of profit corporate profits, whereas capital the
Speaker 1: owners get, which, as you were just saying, makes logical sense. Uh.
Speaker 1: And yet the the argument for the tax bill reverses
Speaker 1: that do you know of any economic research supporting that idea? No? Uh, no,
Speaker 1: no credible research actually. Uh. After the Console of Economic
Speaker 1: Advisors came out with the report, uh uh, there were
Speaker 1: two very good articles that were very quickly published on
Speaker 1: the internet, uh, analyzing where what the weight of evidence was.
Speaker 1: And and it was quite frankly an embarrassment because for
Speaker 1: uh fifty years, the SIN sixth creation the Console of
Speaker 1: Economic Advisors has always tried to be reflect the best
Speaker 1: of economic science, you know it when the evidence was
Speaker 1: against it, they would be totally silent, you know. And
Speaker 1: and sometimes politicians do put forward something, but it was
Speaker 1: never actually going on the record, uh, and and uh
Speaker 1: saying things that we're against what economic science. Ha said
Speaker 1: and this was an embarrassment for UH what has has
Speaker 1: been a very strong institution in our government, UM, one
Speaker 1: that tries to give the American people, and I'm bipartisan
Speaker 1: basis the what economics says about various policies being advocated
Speaker 1: by administrations. You see what I've done here, Tom, I've
Speaker 1: set up a shameless plug for Bloomberg News is to
Speaker 1: lou On Eurompeia and his story this morning on this Uh,
Speaker 1: if you look at Bloomberg dot com, he's looked at
Speaker 1: what CEOs are saying they will do with the cash.
Speaker 1: So there's a third good story out there for you, Joe. UM.
Speaker 1: The other thing we're talking about during the break is
Speaker 1: the tax trigger that they're putting into this and UH,
Speaker 1: let's leave aside the the idea of you know, the
Speaker 1: value of this tax plan and the politics of this
Speaker 1: tax plan, but just uh, from a from an economic
Speaker 1: point of view, tax trigger bad idea. What the basic
Speaker 1: problem is that, UH, when the nature of the tax
Speaker 1: trigger is that when if the tax revenues are less
Speaker 1: than they say, and almost surely they will be, uh,
Speaker 1: it raises taxes. That's what economists call is pro cyclical
Speaker 1: tax policy. In other words, tax policy is supposed to
Speaker 1: run against the tax so that when the economy is weak,
Speaker 1: taxes are cut to stimulate the economy. When the economy
Speaker 1: is strong, uh, you raise taxes. We're doing just the opposite.
Speaker 1: The economy is relatively strong and we're lowering taxes. That's
Speaker 1: going to be pro you know, exaggerate the movements of
Speaker 1: the economy, and the tax trigger will do just the opposite.
Speaker 1: If the economy gets weak, tax revenues go down, and
Speaker 1: the tax trigger says, now we're gonna raise taxes um
Speaker 1: and that will weaken economy further. It's the worst kind
Speaker 1: of economic say that you could imagine. And I tried
Speaker 1: to read it yesterday. Man, he's glazed over by paragraph
Speaker 1: three and forty two numbers of it's formulaic beyond believe Joe.
Speaker 1: There's a lot of people out there who have grown
Speaker 1: up Republican who want to find an alternative. Can your
Speaker 1: Democratic Party generate an alternative for two thousand twenty Yes,
Speaker 1: I think they can. Uh, Well, who is going to
Speaker 1: be a long process. I mean, I think one of
Speaker 1: the reasons that you don't see people uh putting their
Speaker 1: names for it is we know the political what the
Speaker 1: political process works. It looks like whoever there there there, Joe,
Speaker 1: everybody who's running is older than you. Uh, not everybody.
Speaker 1: There are some some people who are who are younger,
Speaker 1: who have a lot of ability. The real question is
Speaker 1: what will the central messages of and the central platform
Speaker 1: of the Democratic Party look like. And I think uh
Speaker 1: to come back say in my book, Uh, one of
Speaker 1: my messages of my book Globalization, it's discontents to revisit
Speaker 1: it is we have to manage globalization better. It's not
Speaker 1: with the problem with globalization, it's the way we managed it.
Speaker 1: When it's working well, it can lead the economy you
Speaker 1: do well. But the problem when it's not well managed.
Speaker 1: Even if the economy does well, more than of the
Speaker 1: benefits go to the people at the top. And so
Speaker 1: you have to have systems of social protection without protectionism,
Speaker 1: which is the route that the Republicans are going. So
Speaker 1: it has to be a different message. Part of that
Speaker 1: message is market power, ugglomeration of market and within you're afterwards,
Speaker 1: we've got the phrase market power just took us. Congratulations
Speaker 1: from two thousand two on a strong new edition of
Speaker 1: his classic Globalization, Globalization and its disc Well, we've got
Speaker 1: to go. I know you do. I mean we've got
Speaker 1: to um get you into our London studios as well.
Speaker 1: When you're over there. We migrate now to a careful
Speaker 1: discussion in uh too short a time here this morning
Speaker 1: with vage matel of I n G on the foreign
Speaker 1: exchange space verage. I'm sure you saw the news on
Speaker 1: Britain with an attendant strength in cable. What euro Sterling?
Speaker 1: I haven't talked about it in a while. Is a
Speaker 1: euro Sterling a profitable place to play the back and
Speaker 1: forth of Brexit. Well, for most of your Sterling has
Speaker 1: kind of been a political gauge for rest risks, political
Speaker 1: risk in both Europe and and the UK. Earlier this
Speaker 1: year was the French elections. He saw the Euro sort
Speaker 1: of pricing a bit of political streaming over summer, the
Speaker 1: Euro turned into a safe haven and it's kind of
Speaker 1: demonstrating these characteristics at the moment as well. Our outlook
Speaker 1: going into next year for US we see two cyclical
Speaker 1: forces offsetting each other for Eurosterling. So whilst you're going
Speaker 1: to get a positive repricing in on the Sterling side
Speaker 1: as Brexit talks make some good progress in the UK economy,
Speaker 1: maybe instill some animal confidence. Equally, the Eurozone economy looks
Speaker 1: pretty upbeating that's right where I wanted to go. They're
Speaker 1: both strengthening as the I n G car right exactly.
Speaker 1: So for us, we actually see we've we've got a
Speaker 1: nuanced profile. We actually think the first quarter might be
Speaker 1: relatively better for Sterling against the Euro, just purely because
Speaker 1: you have the specter of the Italian election risks for
Speaker 1: the Eurozone and also a positive repricing on the Brexit front.
Speaker 1: We're seeing part of that today, a transition deal with
Speaker 1: the next catalyst that we think could drive Sterling even higher.
Speaker 1: We're looking sort of for the low eight five eight
Speaker 1: five level that that's our sort of mid early sort
Speaker 1: of next year. A target after that. We're kind of
Speaker 1: then in sort of this period where it will net
Speaker 1: around that sort of a five level and sort of
Speaker 1: cycle thats fluctuate around there unless we get another layer
Speaker 1: of positive steering in the UK economy towards a soft Brexit. Uh.
Speaker 1: We're not making any big calls here. That's the that's
Speaker 1: the twenty nineteen story. But for now, eighty five is
Speaker 1: what we're looking at. What is your single best idea
Speaker 1: in the next year, just grab it up here. What
Speaker 1: does a cross rate where you think alpha can be made? Well,
Speaker 1: so we we were sort of running with this sort
Speaker 1: of monetary convergence theme going into next year. So it's
Speaker 1: it's it's where the low yielders can play sort of
Speaker 1: catch up against the sort of against the sort of
Speaker 1: higher yielders. The yend actually looks like a pretty good
Speaker 1: place that I want it finds the peak dollar yen
Speaker 1: sort of finding a peak up in one fifteen. But
Speaker 1: yen crosses as well, especially against sort of some of
Speaker 1: the some of the higher yielders which are suffering like
Speaker 1: as the year, et cetera. So we were quite like
Speaker 1: these sort of convergence trades for US. We're also quite
Speaker 1: like euros, so euro against the Aussi dollar again another
Speaker 1: convergence trade there, the ECB tightening, the Australian, your curves
Speaker 1: thaying relatively flat, going into neetka, all of these convergent,
Speaker 1: your convergent trades. Well, right, we're gonna have fun and
Speaker 1: this in the Bloomberg folks, you'll see this chart first
Speaker 1: out on Twitter. Thank you for listening to Bloomberg Radio.
Speaker 1: You're looking for stronger yen which and dollar yen is
Speaker 1: from one eleven down to one oh nine one oh eight.
Speaker 1: Do I have that right exactly exactly? And so for us,
Speaker 1: what we're looking at, it's this idea of a V
Speaker 1: shaped invertive V shaped profile for Dollienne. You may get
Speaker 1: arrived just purely. Is this that the tax still goes
Speaker 1: through maybe at the turn of the year, but I
Speaker 1: think it'll be quickly faded. I think markets have learned
Speaker 1: their lesson from translation earlier this year. They want to
Speaker 1: see the evidence in the growth. They want to see
Speaker 1: the evidence in the data. I don't think we don't
Speaker 1: think we're going to get that sort of evidence coming
Speaker 1: through at all the US economy going into next year.
Speaker 1: Where's your target? And Aussie And I'm going to put
Speaker 1: this chart out folks, based on what Varage says, where's
Speaker 1: your target on Ozzie again, Well, so I think when
Speaker 1: we look at it, it's sort of it's it's it's
Speaker 1: kind of around the sort of potentially could go back
Speaker 1: to sort of those low low seventy five, sort of
Speaker 1: low seventies level, so to ciclically, that's where direction of
Speaker 1: travel seems to be going. I'm making the Varage Patel
Speaker 1: circle on my Bloomberg chart right now down at the
Speaker 1: seventies six level, folks, we're gonna put this is what
Speaker 1: I love about surveillance. We can have a pro like
Speaker 1: Verage Patel on we can make the chart is he
Speaker 1: speaks and in this case with radio, you can see
Speaker 1: it out on Twitter just like that. That's very good
Speaker 1: from my m G. Varage Patel, Thank you so much. Rage.
Speaker 1: We gotta get you back on longer next time. Sorry
Speaker 1: for this the abruptness this time. Jeff Kerry, are you
Speaker 1: see with us with Golden sax? He looks at come
Speaker 1: on days and particularly oil Will you go to Vienna two?
Speaker 1: S's like watching I mean, let's be honest here, is
Speaker 1: it like watching paint dry? I mean you look at
Speaker 1: the list of planary speakers and closing comments. Is it
Speaker 1: like the definition of watching paint dry? There's a reason
Speaker 1: why I haven't been back for a little Yes, exactly,
Speaker 1: That's what I thought. You say. The story with this
Speaker 1: opaque is the mystery over inventories. Is that like where's
Speaker 1: the oil? Well? I mean there's different metrics to measure
Speaker 1: the inventories, and if you go with the opaque data,
Speaker 1: it would suggest that rebalancing is roughly complete. Now, if
Speaker 1: you use the I A data, it would say it's yes,
Speaker 1: it's roughly complete. Now that's not the end of the uncertainty.
Speaker 1: Then if you add in what metrics do you use?
Speaker 1: Do you use days of forward consumption or do you
Speaker 1: use the inventory levels? Um? That will if you use
Speaker 1: days of forward consumption of the rebalancing. So how far
Speaker 1: we are along the rebalancing path. There's a high level
Speaker 1: of uncertainties, which is enough for you to make a call.
Speaker 1: I mean, if we're an arrange bond quality of a
Speaker 1: vector up vector, well are our base case is that
Speaker 1: we're still having the cut ending in April of next year,
Speaker 1: and then we have a you know, a a gradual
Speaker 1: increase in both OPEC and Russian production after that. Now,
Speaker 1: obviously the meeting is going to lead to most likely
Speaker 1: some extension beyond that um. You know, of the three
Speaker 1: outcomes that you would have, you know, than the nine
Speaker 1: month extension UM, which would be I think the market
Speaker 1: really has not priced that in yet, a six month extension,
Speaker 1: which is roughly what the market has priced in, and
Speaker 1: then a three month month extension with a reassessment or
Speaker 1: a taper discussing how you would actually create an exit strategy.
Speaker 1: Have you ever seen this this almost negotiated or discourse
Speaker 1: driven dynamics and oils supply. No, And and I think
Speaker 1: one of the key the key issues is that there's
Speaker 1: so much debate eight right now on what you're going
Speaker 1: to use as a metric. So if you go back
Speaker 1: to November two thousand and fourteen, that one was viewed
Speaker 1: as having a high level uncertain it really didn't because
Speaker 1: it was either cut or don't cut. This one is
Speaker 1: where are we in the rebalancing process and how much
Speaker 1: do we need to actually still do to get a
Speaker 1: rebalanced market. And that's where the core the debate is
Speaker 1: that is less of a black and white and much
Speaker 1: more of a gray area to be in. We should
Speaker 1: mention the West Texas four right now brent significantly higher
Speaker 1: than they were earlier this year, and everybody says, you know,
Speaker 1: the deal is why, But there were a lot of
Speaker 1: predictions at the time that they were making a deal
Speaker 1: among these countries that what that's going to do is
Speaker 1: bring American fract oil back into the marketplace and scent
Speaker 1: producers and that would put a cap on prices doesn't
Speaker 1: seem to have happened yet. Well, first I want to
Speaker 1: correct there. You know, are we at fifty seven fifty
Speaker 1: due to the OPEC cut strictly no demand, Let's do
Speaker 1: not underestimate demand in on globally is on fire right
Speaker 1: because the economies are getting exactly I mean that that's
Speaker 1: because you got to look at the fact that copper
Speaker 1: is sitting near right now, which has nothing to do
Speaker 1: with an opeca. But anyway, let's go back to your
Speaker 1: question about the supply response from the shale producers. We
Speaker 1: saw earlier this year when we got up around fifty
Speaker 1: six dollars of barrel, we saw a substantial response from
Speaker 1: US shale producers in terms of the rig count. We
Speaker 1: aren't seeing it this time. One of the key issues
Speaker 1: is the fact that the investors um after May and
Speaker 1: June this year, UM, we're less willing to accept um
Speaker 1: large CAPEX programs. And I would say that if the
Speaker 1: dicipline being imposed on the producers by the investors, it's
Speaker 1: leading to a very different outcome, much more constrained in
Speaker 1: terms of why did they not want to accept it.
Speaker 1: They want returns and they want they want cash, they
Speaker 1: want dividends they are no that they're no longer going
Speaker 1: to allow them to deficit spend. So, um, what's the
Speaker 1: break even return price now for for oil? Particularly you
Speaker 1: know coming out of the the United States? You know,
Speaker 1: just looking at the behavior of the producers of the
Speaker 1: last last year, looking at the financial data coming out
Speaker 1: of out of the companies, that put us somewhere in
Speaker 1: that fifty seven range. So thirty dollars is not gonna
Speaker 1: happen again? Well, I mean you're gonna say it's not
Speaker 1: gonna happen again. You have a train wreck and demand.
Speaker 1: You could easily see that again. But you know, barring
Speaker 1: a train wreck and demand, the answer is unlikely. What
Speaker 1: about much higher than we are right now? I mean,
Speaker 1: is there is there? Does the supply that we provide
Speaker 1: now uh put a cap? Well? Actually, I think given
Speaker 1: the the strength we've seen in the fundamental day data recently,
Speaker 1: the level of you know, geopolitical uncertainty out there, combined
Speaker 1: that with the rhetoric around the OPEC cut of a
Speaker 1: potential nine month extension, it's actually kind of surprising that
Speaker 1: this market hasn't moved higher. I mean, I like to
Speaker 1: point out, you know, during that hurricane season back in
Speaker 1: late August of this year. These markets just really did
Speaker 1: not move, which is an indication that you know that
Speaker 1: volatility both to the upside and downside really has been
Speaker 1: capped recently. Jeff Curry, thank you so much. Don't be
Speaker 1: a stranger. He's with Goldman Saxons, look at comodies and
Speaker 1: particularly the OPEC meeting to come all sources and perfectly
Speaker 1: Mr Curry emphasizing that there's a huge uncertainty out of
Speaker 1: this meeting as well, arguably in terms of international relations.
Speaker 1: My interview of the week, if not the month, he
Speaker 1: has James Travitas is at the Fletcher School, Toughs University,
Speaker 1: formal Admiral of the Navy with a modest knowledge of
Speaker 1: our history of jaw boning and such. Admiral, My book
Speaker 1: of the summer was your fantastic leader's bookshelf, but easily
Speaker 1: could be my book of the year, but I wanted
Speaker 1: to get it out right away. Is my book of
Speaker 1: the summer, and in it is the heartbreak of a
Speaker 1: four fifty page book where you want to just die
Speaker 1: through the first forty seven pages. It is John Keegan's
Speaker 1: The First World War. He begins with the European tragedy
Speaker 1: and then the heartbreak and arrogance and lack of humility
Speaker 1: of a set of world leaders. In chapter two, war Plans.
Speaker 1: Are we planning ourselves into a defense or war position
Speaker 1: with the policy of the United States on this Wednesday,
Speaker 1: I worry a lot in that regard Tom about North Korea. Um.
Speaker 1: The common phrase about World War One is that the
Speaker 1: great Powers sleepwalked into that war and didn't take the
Speaker 1: kind of diplomatic economics steps that were necessary to definitively
Speaker 1: avoid it. And I kind of feel where edge in
Speaker 1: that way with North Korea and the uh intransigence on
Speaker 1: our side and on Kim Jong inside is creating a
Speaker 1: real collision course. And frankly, Um, I think the chances
Speaker 1: of war and that peninsula have gone up and up
Speaker 1: and up, and pretty much the only thing left in
Speaker 1: the locker between us and an absolute necessity to go
Speaker 1: in and take him on is whether he detonates a
Speaker 1: hydrogen bomb over the ocean. And I think that's next.
Speaker 1: John Keegan is so good at the minutia and pulling
Speaker 1: it into the present. For example, I didn't know about
Speaker 1: the League of the Three Emperors, and this is ancient
Speaker 1: eighteen seventy history. But what you learn in n is
Speaker 1: if we do this, they'll do that. But they do that,
Speaker 1: and they do that and that and that. Are we
Speaker 1: in that same sequential framework in an X y Z
Speaker 1: space that they were in. We are. And it's called
Speaker 1: war plans and we have them, and Kim Jong un
Speaker 1: has them in North Korea and in the First World
Speaker 1: War time, as you know, they mobilized into this uh
Speaker 1: step by step by step process. Here it's an escalation
Speaker 1: of events from North Korea and then we're going to respond.
Speaker 1: And those war plans can drive you inexorably forward in
Speaker 1: less leaders step up and walk back from the abyss.
Speaker 1: But I see no indication of that at the moment. Okay,
Speaker 1: let's go technical on this right now, folks. Youre aerospace
Speaker 1: engineering with James te Vida's only I'm Bloomberg surveillance. All
Speaker 1: you need to know, folks is the equation is V
Speaker 1: equals the square root of gr squared over our plus H.
Speaker 1: That's galileo. You put a rocket in the air and
Speaker 1: you want to point at forty five degrees. I got
Speaker 1: a little upset this morning, Appal, because we're not reporting
Speaker 1: in the media that basically they took this ginormous rocket
Speaker 1: and put it st eight up in the air, not
Speaker 1: at forty five degrees, but weighs deeper and it comes
Speaker 1: down near Japan and a normal trajectory. Can it go
Speaker 1: a lot further distance in the vicinity of your San Diego?
Speaker 1: Oh my gosh, Tom it can? It can fly right
Speaker 1: over San Diego. Wave at it in land in Washington,
Speaker 1: d C. If you do the map which you through
Speaker 1: out there, that thing will go about eight thousand miles
Speaker 1: And that's because of time of flight and angle of flight.
Speaker 1: So yeah, we're in a different ballpark on distance right
Speaker 1: now in terms of what he can do. Okay, orbital
Speaker 1: velocity seventeen thousand, five miles per hour. Folks, you memorize
Speaker 1: that freshman year of engineering. I mean we all get that.
Speaker 1: We're not talking orbital velocity. But James, your good friend
Speaker 1: Mr maddis holding court in Washington, our last savior would suggest,
Speaker 1: as you say, it would give us time to shoot
Speaker 1: the thing down. Can that would say that with confidence?
Speaker 1: I don't think you can, because all of our missile
Speaker 1: tests that shoot in that cruise dase where it would
Speaker 1: be going over say Seattle on the way to San Antonio.
Speaker 1: We're only knocking it down about fifty of the time. Tom,
Speaker 1: That is not a highly effective system. And frankly, I
Speaker 1: don't want to bet San Antonio in that system. Okay,
Speaker 1: But within this then, and thank you for your frankness here,
Speaker 1: with your past public responsibilities, within what you've just said,
Speaker 1: and forget about Seattle. They're supposed to get the thing
Speaker 1: twenty five miles south of Okinawa, pick it up and
Speaker 1: shoot it down. You know, I get the good news story,
Speaker 1: which isn't gonna happen. How does your navy respond to
Speaker 1: these realities within a new war plan made in the
Speaker 1: last twenty four hours. Yeah, we've got to in the
Speaker 1: navy side of things, Tom, We've got to up our
Speaker 1: game in missile defense, and that means using our agis
Speaker 1: UH destroyers and cruisers more effectively, and we have the
Speaker 1: ability to do that. It costs money, but I would
Speaker 1: argue that's money well spent on the maritime missile defense
Speaker 1: side of this thing. Early in this guy, if you're
Speaker 1: just joining us folks from Fletcher School, Toughs University near Boston,
Speaker 1: James Travitis with this former Supreme Commander for NATO and
Speaker 1: of course an admiral of our US Navy over therese.
Speaker 1: You can't say enough again about a sequence of books
Speaker 1: led by the leader's bookshelf. I just it's seventy books,
Speaker 1: beautifully laid up by people with way too much time
Speaker 1: in their hand to read no more than than we do.
Speaker 1: You mentioned in the beginning of this conversation addimal that
Speaker 1: North Korea has a war plan. Our audience doesn't buy it.
Speaker 1: This guy's a nut. He's acting unilaterally without war plans.
Speaker 1: Does he have a real military behind him? He does,
Speaker 1: and uh, it's a structured military and a disciplined one.
Speaker 1: And um, it's not superbly equipped across the entire spectrum
Speaker 1: of battle, but he has the capability to inflict massive
Speaker 1: the initial casualties on South Korea, particularly on the city
Speaker 1: of Seoul. We should not underestimate his ability to put
Speaker 1: that machine of war at playing. What does General Mattis
Speaker 1: need to do to breathe all in Washington, our legislative
Speaker 1: branch and of course his boss. What does he need
Speaker 1: to brief them on the news travitous urgency. Um, I'm
Speaker 1: sure he's doing it, which is to um request more
Speaker 1: assets for intelligence to increase the missile defense posture as
Speaker 1: we just talked about, to put more offensive cyber weapons
Speaker 1: at play. Tom, that's a real capability we can deploy
Speaker 1: and to begin to consider this is controversial. A maritime
Speaker 1: blockade of North Korea, much as we put a blockade
Speaker 1: on Cuba in the k Well. I know you were
Speaker 1: on the blockade of the Confederacy. Link it to blockade's work.
Speaker 1: Come on, it's two thousand seventeen. It would not work
Speaker 1: without Chinese ease cooperation. So, as usual, all roads to
Speaker 1: pun Yang lead us through Beijing. We've got to get
Speaker 1: China on board even to implement that idea, let alone
Speaker 1: get Kim Jong onto the negotiating table. Do you one
Speaker 1: final question? Do you suggest that we have a constructive
Speaker 1: of late relationship with a leadership of China? Are they
Speaker 1: playing us for a fool? I think it's somewhere in
Speaker 1: the middle, Tom, China is playing a long game and
Speaker 1: they're playing at a more sophisticated level. We're playing checkers
Speaker 1: and they're playing go. Oh. I like see, that's why
Speaker 1: he's the professor, Richard. He goes right, You know, rich Truman,
Speaker 1: I'm the worst go player out of nineteen thousand Bloomberg employees.
Speaker 1: I lost a house playing Go in our Hong Kome
Speaker 1: office about twenty five years ago. I mean just terrible.
Speaker 1: Thank you so much. James Tevitas on short notice, the
Speaker 1: Animal from Fletcher School. And I can't say enough again
Speaker 1: about leaders Workshop, A great book in there on the
Speaker 1: Greek wars of a century and centuries ago. And I
Speaker 1: can't say enough again about John Keenan's Kegan's One volume.
Speaker 1: I'm reading it here in the ninety ninth anniversary of
Speaker 1: World War One is easy read. John Keegan is just
Speaker 1: can't say enough about it. James tra Vigas, thank you.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
Speaker 1: Radio