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U.S. Better Be Prepared For Another Strike On Syria: Stavridis · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. North
• 0:32
  Speaker 1: Korea and potential negotiations with the US, we do to
• 0:36
  Speaker 1: find out that top representatives of nately CIA Director UH
• 0:41
  Speaker 1: Mike Pompeio, did meet with Kim Jong un, the leader
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  Speaker 1: of North Korea, in recent weeks. Joining us now to
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  Speaker 1: discuss I'm very pleased to say is Admiral James Servriti
• 0:52
  Speaker 1: is retired US General U S. Navy Admiral and former
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  Speaker 1: military commander of NATO. He is a current Dean of
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  Speaker 1: the Flesh Your School at Tufts University and a Bloomberg
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  Speaker 1: View contributor. Admiral stefridis thank you so much for being
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  Speaker 1: with us. Are we being played with these negotiations? I
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  Speaker 1: would say it's too soon to tell. Um. There is
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  Speaker 1: a possibility that there is a sincerity here, uh driven
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  Speaker 1: Let's face it. By financial exigencies in North Korea, UH
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  Speaker 1: and the fact that he really has nuclear weapons now,
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  Speaker 1: so he may feel, in all honesty that this is
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  Speaker 1: a good point for him to negotiate. I think we
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  Speaker 1: are being played if we think that he's going to
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  Speaker 1: give up those nuclear weapons. I do not think he will.
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  Speaker 1: Admiral Stefrida's Japanese Prime Minister Shinzo Abe meeting with President
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  Speaker 1: Donald Trump in Florida and Mara Lago. What do you
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  Speaker 1: think the position of the Japanese is visa VI what
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  Speaker 1: is seemingly a bilateral negotiation between the United States and
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  Speaker 1: North Korea. I think they will push very hard to
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  Speaker 1: expand these talks rapidly. The next step should be to
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  Speaker 1: go from bilateral, as you correctly point out US North Korea,
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  Speaker 1: to four party talks to bring in South Korea and China.
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  Speaker 1: We will never solve this problem without fully integrating China
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  Speaker 1: into the discussion. Once we make some serious progress, hopefully
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  Speaker 1: through four party talks, then I think you have to
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  Speaker 1: go to six party talks. That's when Japan and Russia
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  Speaker 1: come into the equation. This is the work of a
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  Speaker 1: year or two, and if President Trump thinks he's going
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  Speaker 1: to sit down across the table from Kim Jong on
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  Speaker 1: and walk out with the Nobel Peace Prize. That is
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  Speaker 1: not going to happen. This is going to be the
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  Speaker 1: work of at least a year of solid negotiation building
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  Speaker 1: toward inclusion of our Japanese allies. Given the work that
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  Speaker 1: lies ahead, is this meeting premature? I don't think so.
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  Speaker 1: I think that this is a reason all time to
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  Speaker 1: try a kind of uh, dramatic gesture that might crack
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  Speaker 1: this thing open and move it in a positive direction.
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  Speaker 1: Another way to put it is compared to where we
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  Speaker 1: were four months ago before the Olympics, when we had
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  Speaker 1: nuclear detonations and ballistic missiles flying over Japan and headed
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  Speaker 1: towards Guam, this is a better place to be in.
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  Speaker 1: But we should not be overly euphoric about what's ahead
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  Speaker 1: and where to understand that this is hard work negotiations
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  Speaker 1: and diplomacy or time consuming and difficult, especially with someone
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  Speaker 1: like Kim Jong un. Admiral Strafridi's I want to get
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  Speaker 1: your view on CIA Director Mike Pompeio, since he was
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  Speaker 1: the one who traveled to North Korea last week to
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  Speaker 1: meet with the North Korean leader. Uh, what do you
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  Speaker 1: think of him as sort of the initial UH spokesperson
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  Speaker 1: for the US. I think it would have been a
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  Speaker 1: very odd choice, except for the fact that he is
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  Speaker 1: nominated and I think has a better then even chance
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  Speaker 1: of being confirmed as the next Secretary of State. Given that,
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  Speaker 1: it makes sense if if he had been planned to
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  Speaker 1: stay at the CIA for the next three or four years,
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  Speaker 1: I think it would have been a very strange choice.
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  Speaker 1: Leaving that kind of structural answer. Aside as a person,
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  Speaker 1: I think he's a very good choice. He Iss high
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  Speaker 1: emotional intelligence, UM, He's academically very well prepared West Point
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  Speaker 1: grad first in his class there UM coming out of
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  Speaker 1: the CIA. He has a depth now in intelligence. Former congressman,
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  Speaker 1: so he gets the political piece of this. I think
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  Speaker 1: he's a very reasonable choice, given that he is on
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  Speaker 1: tap to become Secretary of State. Admiral Stevids just quickly.
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  Speaker 1: John Balton, national Security Advisor reaching out to Egypt and
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  Speaker 1: other Arab nations in order to replace the U S
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  Speaker 1: and Syria. Is that kind of work. I think it's
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  Speaker 1: unlikely that we are going to wholesale replace the u US.
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  Speaker 1: The idea that we're going to just step away in
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  Speaker 1: our son of friends are going to step in is unrealistic.
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  Speaker 1: But I think the idea of building a coalition that
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  Speaker 1: includes significant Sunni Arab states to include Jordan's Saudi Arabia,
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  Speaker 1: Gulf states as well as Egypt, I think makes sense.
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  Speaker 1: It will require U S boots on the ground. We're
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  Speaker 1: not going to be able to just leave the region.
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  Speaker 1: I'm trying to get a sense of what the U. S.
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  Speaker 1: Relationship is at this point with its allies, with grappling
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  Speaker 1: with Syria in particular, do you get a sense of
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  Speaker 1: how much more the US is working with its allies
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  Speaker 1: in light of what happened there. We will continue to
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  Speaker 1: try and build the coalition in preparation for the possibility
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  Speaker 1: of another round of strikes. Let's face it, um we
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  Speaker 1: have now struck twice, but in the interim between those
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  Speaker 1: two strikes, we've seen Assad continue to use chemical weapons
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  Speaker 1: with impunity. I am unconvinced that he's going to have
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  Speaker 1: a sudden epiphany like St. Paul on the road to
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  Speaker 1: Damascus and stop using those weapons. So we better be
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  Speaker 1: prepared for another strike, and that means getting our allies,
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  Speaker 1: partners and friends on board. The reason why I asked
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  Speaker 1: that Admiral Strafrides is because there's been so much tension
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  Speaker 1: with respect to trade and a lot of harsh words
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  Speaker 1: back and forth between the US and allies, and I'm
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  Speaker 1: wondering how much that plays into some of these military
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  Speaker 1: relationships that are required for conflicts like this. It absolutely does,
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  Speaker 1: and one of the very strong arguments for UH maintaining
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  Speaker 1: balanced global relationships is that in times of trouble, you
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  Speaker 1: need friends and you can't surge trust. Um. You've got
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  Speaker 1: to build it a brick at a time, and when
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  Speaker 1: you knock it down with a series of bad choices, economically,
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  Speaker 1: it does bleed over into your day to day military
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  Speaker 1: intelligence and operational relationships. Admiralst of Vitas, what is the
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  Speaker 1: U s strategic reason for being in Syria. I'll give
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  Speaker 1: you four reasons, and I think these will call that
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  Speaker 1: we need to remain in Syria. The first is quite straightforward,
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  Speaker 1: and that is continuing to destroy the Islamic State. The
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  Speaker 1: second is we have a shared interest with the global
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  Speaker 1: community and stopping the use of chemical weapons, which appears
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  Speaker 1: to be continuing forthwith. Thirdly, um, we have a strategic
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  Speaker 1: challenge with Iran in that region. Who threatens Israel, Saudi Arabia,
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  Speaker 1: Jordan's and other Sunni states. And fourth and finally, um,
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  Speaker 1: there's an enormous humanitarian crisis sin Syrian. I think we
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  Speaker 1: have a moral obligation to be part of resolving that.
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  Speaker 1: To do that, you have to create security in the region.
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  Speaker 1: So I'll give you those four reasons, and most reads,
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  Speaker 1: they're all legitimate reasons. One thing that is also at play, though,
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  Speaker 1: is President Trump's support from his base. There was a
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  Speaker 1: lot of pushback after these strikes in Syria, with people saying,
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  Speaker 1: President Trump, you said that you wanted to pull troops
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  Speaker 1: out of the US, out of Syria. Rather, why should
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  Speaker 1: those conflicts be our cost? We should just turn our
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  Speaker 1: focus on ourselves. How much does that factor into the
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  Speaker 1: debate and the strategy of the US. I think it
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  Speaker 1: will play a significant role, and it should. Um. We
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  Speaker 1: these are national decisions and that's what leaders do. They
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  Speaker 1: ought to step up and explain why they need to
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  Speaker 1: continue to take the hard right choice, not the easy
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  Speaker 1: wrong choice. And I think that the fact that President
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  Speaker 1: Trump essentially reversed his position UH several days later is
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  Speaker 1: a good indicator that people like Secretary of Defense Gimattis
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  Speaker 1: and CIA Director Pompeio and others convinced him to do so.
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  Speaker 1: So I don't think we're gonna leave Syria anytime soon.
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  Speaker 1: Point one and point two. Uh, the level of engagement
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  Speaker 1: is very different here than the hundred and fifty thousand
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  Speaker 1: troops that we had in Iraq or the hundred and
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  Speaker 1: sixty thousand troops that I commanded in Afghanistan when I
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  Speaker 1: was NATO commander. We're talking to three five thousand troops. Um,
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  Speaker 1: this is a very sustainable commitment for the United States,
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  Speaker 1: and I think good leaders will recognize that and seek
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  Speaker 1: to explain it to the American public. Just to wrap
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  Speaker 1: up here, Admiral Staffridi's given the fact that you are
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  Speaker 1: the author of Seapower, the History and geopolitics of the
• 9:29
  Speaker 1: world's Oceans, the fact that you were formerly U. S.
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  Speaker 1: Navy admiral, former military commander of NATO, given your vast
• 9:36
  Speaker 1: experience with the international relations on the military front, are
• 9:41
  Speaker 1: you more optimistic about the sort of global outlook right
• 9:45
  Speaker 1: now than you worked two months ago. I am cautiously,
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  Speaker 1: very cautiously optimistic. On North Korea. I think there's a
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  Speaker 1: real possibility of negotiating our way out of what two
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  Speaker 1: or three months ago pre Olympics looked very, very dangerous
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  Speaker 1: in terms of the Middle East. I am more pessimistic
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  Speaker 1: because I uh don't see a strategic plan being laid
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  Speaker 1: out by the administration. In simply lobbying Tomahawk missiles is
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  Speaker 1: not going to get us where we need to go there.
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  Speaker 1: So it's a mixed picture. But overall, um, I am
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  Speaker 1: very concerned, uh finally about great power politics and the
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  Speaker 1: dynamics of our relationship with both Russia and China had
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  Speaker 1: degraded over the last three or four months. So running
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  Speaker 1: it all together, i'd say we're on a down trend
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  Speaker 1: right now and we've got some work to do. I
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  Speaker 1: want to thank you very much for spending time with us.
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  Speaker 1: Admiral James Stefridis is the Dean of the Fletcher School
• 10:47
  Speaker 1: of Law and Diplomacy at Tufts University. Also a Bloomberg
• 10:51
  Speaker 1: of you Calmnists joining us from Boston Home to Bloomberg
• 10:54
  Speaker 1: one six on Boston, New Report in thirty in Metro West,
• 10:57
  Speaker 1: in the South Sure and Admiral's to read This is
• 11:00
  Speaker 1: the author of Seapower, The History and Geopolitics of the
• 11:04
  Speaker 1: World's Oceans, The use of cryptocurrencies not only is gaining
• 11:23
  Speaker 1: popularity when it comes to international transactions for businesses, but
• 11:29
  Speaker 1: also being used by people for retail transactions on which
• 11:33
  Speaker 1: they would like to maintain their privacy. And the premier
• 11:37
  Speaker 1: online destination for adult entertainment it's called porn Hub, has
• 11:41
  Speaker 1: announced that it is now accepting anonymity focused cryptocurrency Verge,
• 11:47
  Speaker 1: in order to keep current with what it describes as
• 11:49
  Speaker 1: its communities, payment preferences. And here to tell us more
• 11:53
  Speaker 1: about Verge and cryptocurrencies is Justin Velo. He is the
• 11:57
  Speaker 1: founder and the CEO of Verge Austin. Thanks very much
• 12:00
  Speaker 1: for coming in. Can you first tell us what is Verge.
• 12:05
  Speaker 1: Verge is a cryptocurrency. It's very similar to the Bitcoin
• 12:08
  Speaker 1: blockchain UM, but it's also modified. It has much faster
• 12:12
  Speaker 1: transaction time. Bitcoin has about a ten minute transaction time
• 12:15
  Speaker 1: for for a confirmation of a transaction hours is about
• 12:18
  Speaker 1: thirty seconds UM. And we have a much higher supply
• 12:23
  Speaker 1: because we believe that it's better for distribution. The more
• 12:25
  Speaker 1: the more coins we have, the better. So Bitcoin has
• 12:28
  Speaker 1: minted or will mint in its lifetime, twenty one million coins,
• 12:31
  Speaker 1: whereas we will be minting sixteen point five billion, So
• 12:36
  Speaker 1: you know, we're we're uh, you know, we're what we
• 12:39
  Speaker 1: see as a more fair currency. Okay, So just to
• 12:42
  Speaker 1: give some perspective, the cryptocurrency has about oh one billion
• 12:45
  Speaker 1: dollar market cap, and it has increased quite a bit
• 12:49
  Speaker 1: over the past few months. You know. Uh, we're talking
• 12:52
  Speaker 1: about pornography, which is sort of interesting because we stay
• 12:55
  Speaker 1: away from it. But it's a huge business and porn
• 12:58
  Speaker 1: hub has nearly a hundred million daily users. And people
• 13:01
  Speaker 1: don't want other people to see that they're buying pornography,
• 13:04
  Speaker 1: which is why there must be some interest in a
• 13:07
  Speaker 1: secret way of delivering payment. Who approached to with this transaction? Um,
• 13:12
  Speaker 1: it was sort of a mutual approach. Um. I believe
• 13:14
  Speaker 1: that people from we have a very very big community
• 13:16
  Speaker 1: of you know, people that are very interested in the
• 13:18
  Speaker 1: coin and very excited about the project itself. Uh. So
• 13:21
  Speaker 1: I believe that, you know, people from our community. We're
• 13:23
  Speaker 1: talking about hundreds of thousands of people. Uh. And I
• 13:26
  Speaker 1: believe that they started initiating contact with them, probably through
• 13:29
  Speaker 1: their website, you know, saying hey, we would really like
• 13:32
  Speaker 1: you guys to start supporting cryptocurrencies. Okay. I'm wondering though,
• 13:36
  Speaker 1: what this does for the reputation of cryptocurrencies that people
• 13:39
  Speaker 1: kind of want to cloak their actions and are looking
• 13:42
  Speaker 1: for ways of doing so. And you know, pornography is
• 13:45
  Speaker 1: uh some people might you know, shake their head at it,
• 13:47
  Speaker 1: but it's not you know, a terrorist activity, but somebody
• 13:50
  Speaker 1: could potentially use it for that. Absolutely, Um, people deserve privacy,
• 13:53
  Speaker 1: especially in that aspect of their life. Um. And you
• 13:56
  Speaker 1: mentioned the hundred million visitors a day uh statistic, which
• 14:00
  Speaker 1: is interesting, But what I find more interesting is that
• 14:01
  Speaker 1: it's actually over a billion unique visitors a year, which
• 14:04
  Speaker 1: is actually a double digit percentage of our population on Earth.
• 14:08
  Speaker 1: So I think that that's uh, you know a little
• 14:10
  Speaker 1: bit more important to look at. It's it's a very
• 14:13
  Speaker 1: common thing. And uh, you know there's still some stigma
• 14:16
  Speaker 1: around sexual preferences, uh, you know, fetishes, things like that.
• 14:21
  Speaker 1: But you know these things, you know, if we all
• 14:23
  Speaker 1: love and respect to one another, this is none of
• 14:25
  Speaker 1: our business and we shouldn't judge each other by it.
• 14:27
  Speaker 1: But we live in in a time and age still
• 14:29
  Speaker 1: where people do so it's you know, it's very important
• 14:32
  Speaker 1: that people have privacy, and especially online. And wonder if
• 14:35
  Speaker 1: you could just describe for our listeners, how do you
• 14:39
  Speaker 1: raise the money in order to have all of these coins,
• 14:44
  Speaker 1: these these artificial tokens. Okay, Well, see a lot of
• 14:47
  Speaker 1: projects that launch do what's called an i c O,
• 14:49
  Speaker 1: which is obviously very similar to an ipal coin offering. Yes, um,
• 14:53
  Speaker 1: and then there's all you do one of those No,
• 14:54
  Speaker 1: we did not. How did you raise the money? Uh?
• 14:57
  Speaker 1: Through the community? So you used online source like a
• 15:01
  Speaker 1: crowdfunding site and what to do? So? Yes, and it's
• 15:03
  Speaker 1: and it's voluntary. Okay. So what has been your response
• 15:07
  Speaker 1: to people that say that the coins that were created
• 15:11
  Speaker 1: as a result of that fundraising effort, that many of
• 15:15
  Speaker 1: those coins either disappeared or that the money that they
• 15:19
  Speaker 1: then used to purchase these digital coins has been locked
• 15:24
  Speaker 1: and they cannot get it out of their wallets. That
• 15:28
  Speaker 1: that's not how it goes. It's basically like throwing your
• 15:30
  Speaker 1: money into a pot. Um. What what we've done is
• 15:33
  Speaker 1: we've given some a lot of these funds for integration
• 15:36
  Speaker 1: of Verge into the actual platform, the software platform behind
• 15:40
  Speaker 1: porn hub UM. But then we've also had other goals
• 15:42
  Speaker 1: like we're building an iOS wallet, um. You know, we're
• 15:45
  Speaker 1: looking to get integrated into a hardware device for even
• 15:49
  Speaker 1: stronger storage of but I understand. But but my question
• 15:52
  Speaker 1: is that if if there is this fundraising that went on,
• 15:57
  Speaker 1: there's publicly available information that says it over eighteen million
• 16:01
  Speaker 1: of these well no, they were simply moved, were right.
• 16:04
  Speaker 1: But were they moved with the knowledge of the people
• 16:07
  Speaker 1: who had invested? Oh? Yeah, absolutely. I think everybody knew
• 16:10
  Speaker 1: going in that these funds were allocated for specific things
• 16:13
  Speaker 1: and that's what they're being used for. Oh, I'm just wondering, Uh,
• 16:17
  Speaker 1: what else have you thought of partnering with, I mean,
• 16:20
  Speaker 1: any cannabis companies or other types of things like that.
• 16:22
  Speaker 1: That that's absolutely another one, Like you know, a medical
• 16:24
  Speaker 1: marijuana industry is another one where um, you know, there's
• 16:27
  Speaker 1: a stigma to it where you don't you may not
• 16:29
  Speaker 1: want your employer or some of your even friends, you know,
• 16:32
  Speaker 1: to know that that's part of your lifestyle, you know.
• 16:33
  Speaker 1: And this is something that I was trying to get
• 16:35
  Speaker 1: out earlier. I mean, it's one thing for there to
• 16:37
  Speaker 1: be a stigma around sexual preferences. There's another thing to
• 16:41
  Speaker 1: sort of have money laundering or financing terrorist activities. How
• 16:45
  Speaker 1: do you prevent that type of use from this coin? Well,
• 16:49
  Speaker 1: I mean, at the moment, I would say that most
• 16:51
  Speaker 1: of those nefarious things that happened with currencies probably stemmed
• 16:54
  Speaker 1: from the US dollar. Um. I mean, when's the last time,
• 16:57
  Speaker 1: you know, you heard a story about US going into
• 16:59
  Speaker 1: its horrist location and uncovering palettes of cryptocurrency or finding
• 17:03
  Speaker 1: hard drives with bitcoins. We don't we find palettes of
• 17:05
  Speaker 1: you know, shrink craft hundred dollar bills. So well, one
• 17:08
  Speaker 1: of the biggest owners of bitcoin is the US government
• 17:11
  Speaker 1: from actually seizing Yeah, so so there is there is
• 17:15
  Speaker 1: that activity, and basically this is a designed cryptocurrency to
• 17:19
  Speaker 1: cloak activities. You have to wonder that's going to be
• 17:22
  Speaker 1: a motivation for people to use it. Sure, but I
• 17:24
  Speaker 1: think that we can see. Um, I'm similar to the
• 17:27
  Speaker 1: tour project, which is a open source piece of software
• 17:30
  Speaker 1: that helps hide your IP address that was actually originally
• 17:33
  Speaker 1: developed by the US government. So I mean I think
• 17:35
  Speaker 1: that's to some degree. Uh, you know, privacy is important
• 17:38
  Speaker 1: in the US government recognizes that too. So interesting having
• 17:41
  Speaker 1: you on. Thank you so much for being with us.
• 17:43
  Speaker 1: Justin Vellow, founder and chief executive officer of Verge Cryptocurrency,
• 17:48
  Speaker 1: just announcing that it is partnering with porn Hub to
• 17:52
  Speaker 1: allow people to pay for their pornography consumption with a
• 17:56
  Speaker 1: cloaked identity through the crypto asset. That's discussion. He is
• 18:15
  Speaker 1: the Finance Minister of a Luxembourg. Pierre Gramina joins us now.
• 18:20
  Speaker 1: And just to give some context, many people may not
• 18:23
  Speaker 1: know that Luxembourg City is one of the three official
• 18:27
  Speaker 1: capitals of the European Union. Indeed, it is the seat
• 18:30
  Speaker 1: of the European Court of Justice. And from that perspective,
• 18:35
  Speaker 1: he has an interesting look into the role of trade
• 18:39
  Speaker 1: and taxes and a variety of other issues in the
• 18:42
  Speaker 1: European Union. And he joins us here in our eleven
• 18:44
  Speaker 1: three oh studios. Minister, thank you very much for beating
• 18:46
  Speaker 1: with us. Appreciate it. Maybe just set for our listeners
• 18:51
  Speaker 1: a little bit about Luxembourg, your role and the role
• 18:55
  Speaker 1: of Luxembourg which belies its size in the European Union
• 19:00
  Speaker 1: because it has served as a nation that has tried
• 19:04
  Speaker 1: to mediate and to help integrate Europe since the creation
• 19:09
  Speaker 1: of the EU. Eure absolutely right, Luxembourg is a founding
• 19:13
  Speaker 1: member of the European Union. It was the smallest one
• 19:16
  Speaker 1: of the six founding members that is today the second
• 19:20
  Speaker 1: smallest one, but being at the heart of the European
• 19:25
  Speaker 1: continent between Germany and France, and having been also the
• 19:30
  Speaker 1: victim of two world wars, we're probably the most staunch
• 19:34
  Speaker 1: advocate for European reconciliation, and the European Union has achieved
• 19:40
  Speaker 1: that goal. We haven't had any war in Europe since
• 19:42
  Speaker 1: the setting up of the European Combinate Steel in fifty
• 19:46
  Speaker 1: two and the European Community in nineteen fifty eight, and
• 19:50
  Speaker 1: that's often forgotten, and we continue to keep that on
• 19:53
  Speaker 1: our mind and act as a mediator as a neutual
• 19:57
  Speaker 1: partner to find solutions. U. You are a neutral partner
• 20:01
  Speaker 1: also to asset managers and other investment companies that have
• 20:06
  Speaker 1: put their headquarters in Luxembourg. A lot of corporations have
• 20:10
  Speaker 1: as well, in part because of beneficial tax treatment that
• 20:13
  Speaker 1: they get for going to Luxembourg. How much pressure are
• 20:16
  Speaker 1: you getting right now from other European countries, given the
• 20:21
  Speaker 1: need to raise money and given the need to sort
• 20:24
  Speaker 1: of prevent a race to the bottom with respect weakening
• 20:26
  Speaker 1: tax rules. While we've had a rough ride in the
• 20:32
  Speaker 1: past on these issues of taxation, but since two thousand
• 20:36
  Speaker 1: fourteen the present government has changed its root in this matter.
• 20:40
  Speaker 1: We have given up the bank secrecy laws. That was
• 20:44
  Speaker 1: one of the criticisms that we were receiving. It was
• 20:48
  Speaker 1: something that was not any more accepted. It was an
• 20:51
  Speaker 1: old tradition in many countries, not only in hours. We've
• 20:54
  Speaker 1: decided to part with that and to embrace tax transparency
• 20:59
  Speaker 1: and since then, obviously the pressure is far less. We
• 21:02
  Speaker 1: have obviously attractive tax rates, but if you look at
• 21:06
  Speaker 1: the average of taxes of Luxembourg in the O City,
• 21:11
  Speaker 1: we're just in the middle field. Now. I get pressure
• 21:14
  Speaker 1: in my country very often that we should have lower
• 21:16
  Speaker 1: taxes than what we have now. Yes, I mean we
• 21:18
  Speaker 1: have a corporate tax rate of eighteen percent. If you
• 21:22
  Speaker 1: add municipal taxes you get at twenty six percent, So
• 21:26
  Speaker 1: I think this is a decent amount. Have any companies
• 21:29
  Speaker 1: or are fund managers removed their premises for remove their
• 21:33
  Speaker 1: headquarters from Luxembourg as a result. No, because the reason
• 21:37
  Speaker 1: why we were successful was not based solely on taxation.
• 21:41
  Speaker 1: I think if you look at what happened in the
• 21:43
  Speaker 1: Brexit context, we are one of the winners short term
• 21:48
  Speaker 1: in the sense that quite a few players in London
• 21:51
  Speaker 1: had to find a place on continental Europe because they
• 21:55
  Speaker 1: are losing the passport for financial services into the EU
• 21:59
  Speaker 1: Single Market, and many chose Luxembourg. I mean, I think
• 22:02
  Speaker 1: of American banks who have decided to beef up their
• 22:07
  Speaker 1: private bankings hub in Luxembourg. They could have chosen other places.
• 22:12
  Speaker 1: I think of asset management firms that have taken the
• 22:15
  Speaker 1: same decision. I think of insurance company. It shows that
• 22:19
  Speaker 1: the general framework of Luxembour's attractive. We are one of
• 22:23
  Speaker 1: the ten countries left in the world that have a
• 22:25
  Speaker 1: triple A rating Financially. This is important when you're an
• 22:29
  Speaker 1: international financial center. We've been able to attract Chinese banks
• 22:33
  Speaker 1: to Luxembourg. Seven largest Chinese banks are in Luxembourg. Some
• 22:36
  Speaker 1: have come more recently. So it shows that fortunately what
• 22:41
  Speaker 1: we were pretending that it is a full international ecosystem
• 22:44
  Speaker 1: that we have that explains why we've been successful. It's
• 22:47
  Speaker 1: not only about taxes, Minister. Before you were the finance minister,
• 22:53
  Speaker 1: you also served as the country's ambassador to Japan and
• 22:57
  Speaker 1: South Korea, also the consul general and director of the
• 23:02
  Speaker 1: Board of Economic Development in San Francisco, so you have
• 23:05
  Speaker 1: a global perspective about how companies and countries uh integrate
• 23:10
  Speaker 1: in order to do business. Recently, the United States has
• 23:15
  Speaker 1: taken the position that certain types of optical component technology
• 23:20
  Speaker 1: cannot be sold to certain Chinese companies. Is a company
• 23:26
  Speaker 1: in Boston, Acacia and also in uh San Francisco, O
• 23:31
  Speaker 1: Clara optical component technology not to be sold to companies
• 23:35
  Speaker 1: like z t E. What is the position of Luxembourg?
• 23:39
  Speaker 1: Does it feel as if it's between a rock and
• 23:41
  Speaker 1: a hard place, because a lot of times these rules
• 23:45
  Speaker 1: and regulations will make it more difficult for country companies
• 23:49
  Speaker 1: all over the world to do business with other companies. Yes,
• 23:52
  Speaker 1: I think there's a few issues that need to be
• 23:56
  Speaker 1: covered here about your question, which is a very legitimate
• 24:00
  Speaker 1: and obviously a country like mine is for open trade
• 24:03
  Speaker 1: as far as possible, bringing down trade barriers and other obstacles,
• 24:09
  Speaker 1: and and also making sure that the EU s such
• 24:11
  Speaker 1: doesn't build fences and and go to protection is to
• 24:15
  Speaker 1: So that's the general principle. Having been a diplomat I
• 24:18
  Speaker 1: for twenty years, I very well know that some strategic
• 24:21
  Speaker 1: material cannot be sold to other countries, So I think
• 24:25
  Speaker 1: you have to put this in parallel. Open trade is
• 24:28
  Speaker 1: one thing, strategic issues is another. We're a member of NATO,
• 24:32
  Speaker 1: We're going to complay comply with NATO rules obviously, and
• 24:36
  Speaker 1: we need to abide by those sorts. You know, as
• 24:39
  Speaker 1: we talk about trade concerns, and know the ECB members
• 24:41
  Speaker 1: have been raising the issue that any trade skirmish could
• 24:44
  Speaker 1: potentially slow growth. We are getting some disappointing numbers out
• 24:47
  Speaker 1: of the European region today. We saw slowing inflation throughout.
• 24:53
  Speaker 1: What do you make of this? Are we seeing sort
• 24:54
  Speaker 1: of the peak of of the growth cycle in Europe? Oh?
• 24:59
  Speaker 1: I think it's a really a little bit earlier or
• 25:01
  Speaker 1: hasty to draw that conclusion based on a few weekly
• 25:06
  Speaker 1: or monthly figures. I mean, the i m F came
• 25:09
  Speaker 1: out with new figures of growth for Europe yesterday. I'm
• 25:13
  Speaker 1: going to tend the spring meeting of the IMF tomorrow
• 25:16
  Speaker 1: in Washington, and for Europe the growth is forecast to
• 25:20
  Speaker 1: be three point sorry two point four percent this year,
• 25:25
  Speaker 1: slightly higher than anticipate it. And it's going to be
• 25:28
  Speaker 1: three point eight percent worldwide, do mostly to a pick
• 25:31
  Speaker 1: up in international trade and a pickup of investment. And
• 25:35
  Speaker 1: if I look at Europe, growth has only been back
• 25:38
  Speaker 1: since one year one year and a half, so our
• 25:41
  Speaker 1: economic cycle is younger than the one in the United
• 25:45
  Speaker 1: States and then I must say, with the very accommodative
• 25:48
  Speaker 1: monetary policies that we have in the United States and Europe,
• 25:52
  Speaker 1: this is obviously underpinning growth and international trade in the future.
• 25:56
  Speaker 1: So I'm more optimistic, fabulous Pierre Gravenia, thank you so
• 26:00
  Speaker 1: much for being here. Pierre Grams, Minister of Finance for Luxembourg,
• 26:05
  Speaker 1: joining us on his way to the I m F meeting,
• 26:08
  Speaker 1: where no doubt they will be speaking about all of
• 26:10
  Speaker 1: these issues growth, trade, headwinds the like will be hearing more,
• 26:14
  Speaker 1: I'm sure as they meet. It has become something of
• 26:32
  Speaker 1: a playground brawl that has entered the upper echelons of
• 26:36
  Speaker 1: major Wall Street firms. I'm talking about Blackstone and Goldman Sachs,
• 26:40
  Speaker 1: and I'm talking about a deal having to do with
• 26:43
  Speaker 1: credit fault swaps related to have Nanni in New Jersey's
• 26:47
  Speaker 1: biggest home builder here to talk about. The latest in
• 26:50
  Speaker 1: this saga is Shradaratarajan, who has been covering this amazingly
• 26:54
  Speaker 1: uh and joins us now he covers all things having
• 26:56
  Speaker 1: to do with credit for Bloomberg. So shri this out
• 27:00
  Speaker 1: for us with respect to a particular lunch that recently
• 27:04
  Speaker 1: took place right and I think we've discussed this a
• 27:07
  Speaker 1: little bit a little bit before, but really what this
• 27:09
  Speaker 1: goes back to is this sneaky, knotty trade that Blackstone
• 27:13
  Speaker 1: struck up at the end of last deal with a
• 27:15
  Speaker 1: almost bankrupt company where they get paid out on some
• 27:18
  Speaker 1: insurance like derivatives. The only problem Goldman is on the
• 27:22
  Speaker 1: other side of the trade and they're not quite fans
• 27:25
  Speaker 1: of this trade. We've already seen lawsuits lapped on this case.
• 27:27
  Speaker 1: Blackstone has been accused of fraud in manipulation. But at
• 27:30
  Speaker 1: the same time, those guys on the other end who
• 27:32
  Speaker 1: might have to make big payouts to Blackstone want to
• 27:35
  Speaker 1: make sure they can avert that outcome. So when Lloyd
• 27:38
  Speaker 1: blankfind met John Gray, the next head of Blackstone, and
• 27:42
  Speaker 1: I'm assuming it was a regular relationship builder meeting just
• 27:46
  Speaker 1: to talk about all things under the sun, how they
• 27:48
  Speaker 1: could do a little more business together, this little deal
• 27:52
  Speaker 1: came up and as you can imagine, it probably got
• 27:54
  Speaker 1: a little awkward. What kind of money are we talking
• 27:57
  Speaker 1: about here? And that's the amazing thing here. That company
• 28:00
  Speaker 1: that we're talking about as a market gap of on
• 28:02
  Speaker 1: the three million what's at stake for Blackstone and Goldman
• 28:06
  Speaker 1: is a decent amount of money. For Blackstone, this could
• 28:08
  Speaker 1: be hundreds of million dollars and pay out for Goldman
• 28:12
  Speaker 1: the losses could be would likely be south of a
• 28:14
  Speaker 1: hundred millions, if at all. But but what's weird is
• 28:17
  Speaker 1: no one wants to back down. And I guess, uh,
• 28:20
  Speaker 1: when you think you're right, when you think the other
• 28:22
  Speaker 1: party is wrong, why back down? And the takeaway from
• 28:25
  Speaker 1: me is when elephants go to fight, it's the eagles
• 28:28
  Speaker 1: that get trampled. Well, yeah, that's what That's what I
• 28:30
  Speaker 1: was going to ask you. I mean, how much is
• 28:31
  Speaker 1: this just a chess game among people who are brilliant
• 28:35
  Speaker 1: as children at chess and are still brilliant at chess,
• 28:39
  Speaker 1: and they want to outsmart one another and the stakes
• 28:41
  Speaker 1: are just going up and up? How much is that
• 28:43
  Speaker 1: really what we're watching here? That's what it truly feels
• 28:47
  Speaker 1: to me, Like, clearly Blackstone did something which is not
• 28:50
  Speaker 1: a ordinary trade. But they did they do something that
• 28:54
  Speaker 1: falls outside of the playbox. These guys get to play,
• 28:58
  Speaker 1: probably not at least the judges. So far, the legal
• 29:01
  Speaker 1: argument doesn't seem to indicate that. And we will see
• 29:03
  Speaker 1: how this spanard over the next couple of months. But
• 29:06
  Speaker 1: it does feel like a bit of I've been outsmarted.
• 29:09
  Speaker 1: I need to head back, but just sort of to
• 29:11
  Speaker 1: to follow onto what you're saying. The stakes seem to
• 29:13
  Speaker 1: be raised increasingly. They're already has been some withdrawal from
• 29:19
  Speaker 1: from government sacks on the part of Blackstone, correct. I
• 29:21
  Speaker 1: mean they've already reduced some of their business as a
• 29:23
  Speaker 1: result of this trade, right we we've certainly seen that GSO,
• 29:27
  Speaker 1: which is the credit on of Blackstone and is the
• 29:29
  Speaker 1: principle on the opposite side of government on the trade,
• 29:31
  Speaker 1: has already cut back on some of its trading with
• 29:33
  Speaker 1: Goldman sax And. And remember Blackstone is a large, massive,
• 29:38
  Speaker 1: important client for all of the banks, and there are
• 29:41
  Speaker 1: some people within government who are nervous that if this
• 29:43
  Speaker 1: situation escalates further, you could see a further pullback in
• 29:47
  Speaker 1: the business from them. What was the actual business that
• 29:50
  Speaker 1: went wrong with her Nanian? Yeah, it's a home builder
• 29:55
  Speaker 1: in two thousand and like most other companies, too much
• 29:57
  Speaker 1: dead recession that got them into a lot of trouble
• 30:00
  Speaker 1: back then. Through that period, Blackstone had previously done financing
• 30:03
  Speaker 1: for them, But ten years on, this is more not
• 30:06
  Speaker 1: so much more about what's wrong with the business. It's
• 30:08
  Speaker 1: about how we can help you. But first we want
• 30:11
  Speaker 1: to make sure we can make a good amount of
• 30:14
  Speaker 1: money on side bets that we have on the company.
• 30:17
  Speaker 1: When is this whole affair going to get wrapped up?
• 30:20
  Speaker 1: I would like to think fairly soon. But that's what
• 30:22
  Speaker 1: I thought my life. We we have some interesting day
• 30:27
  Speaker 1: key dates coming up. May first is when the company,
• 30:30
  Speaker 1: you know, defaults on a bond payment, which is critical
• 30:34
  Speaker 1: to the deal that black Stone struck up with this company.
• 30:37
  Speaker 1: After that you have a thirty day period. This then
• 30:39
  Speaker 1: goes through a trade group and the body determines who
• 30:43
  Speaker 1: who owes whom how much. And that's when this will
• 30:46
  Speaker 1: pan out. And I think it's going to get It's
• 30:48
  Speaker 1: going to get a little bit uglier. What about some
• 30:50
  Speaker 1: of the other companies that are involved here, the hedge
• 30:53
  Speaker 1: funds and such? Have they pulled back from Goldman? Are
• 30:57
  Speaker 1: there on the same side as gold Man? Well, some
• 30:59
  Speaker 1: of them are on the same side as Goldman. There
• 31:01
  Speaker 1: are some folks who have even jump sides in the
• 31:03
  Speaker 1: last four or five months. Again, like you saidly so
• 31:05
  Speaker 1: this is this is as much as people want to
• 31:08
  Speaker 1: get indignant about how right is it? Is it fair
• 31:12
  Speaker 1: people also want to make money, and if they were
• 31:15
  Speaker 1: on one side of the trade, they have jumped to
• 31:16
  Speaker 1: the other side as long as they've spotted an opportunity
• 31:18
  Speaker 1: to make money. Fair Okay, I think we'll just fair.
• 31:24
  Speaker 1: I guess it's really about what you can prove and
• 31:26
  Speaker 1: what you can do when you when you go to
• 31:28
  Speaker 1: court with the lawyers, and they'll all make some money.
• 31:30
  Speaker 1: Thanks very much. A Street not Rag, and he is
• 31:32
  Speaker 1: our high yield debt and syndicated loan reporter. It's sort
• 31:36
  Speaker 1: of like writing a soap op right in a way.
• 31:38
  Speaker 1: I much appreciated the great story on the Bloomberg. Thanks
• 31:44
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 31:46
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 31:50
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 31:54
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
• 31:58
  Speaker 1: It's one before the podcast. You can always catch us
• 32:00
  Speaker 1: worldwide on Bloomberg Radio.