Latest / Bloomberg Intelligence / Xi Will Welcome Distraction of U.S. in Middle East, Cook Says

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Xi Will Welcome Distraction of U.S. in Middle East, Cook Says · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether at the grocery store or
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  Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
• 0:20
  Speaker 1: SoundCloud and at Bloomberg dot com. Of course, of the
• 0:28
  Speaker 1: United States overnight attacking in the Assyrian air field, Stephen
• 0:32
  Speaker 1: Cook as a senior fellow for Middle Eastern Studies at
• 0:35
  Speaker 1: the Council on Foreign Relations, and he joins us now. Stephen,
• 0:39
  Speaker 1: thank you for being with me. Um. You know, this
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  Speaker 1: decision comes about three and a half years after President
• 0:44
  Speaker 1: Obama's effort to threaten assad with Basher Alissa, the president
• 0:50
  Speaker 1: of Syria, with military action after an earlier chemical weapons
• 0:53
  Speaker 1: attack that killed hundreds of people. He even used the
• 0:57
  Speaker 1: term a red line. What does this say about what's
• 1:01
  Speaker 1: happened in the last three and a half years and
• 1:03
  Speaker 1: whether there needs to be a policy change. Well, I
• 1:07
  Speaker 1: think the last evening strike is a reflective effect that
• 1:11
  Speaker 1: you have a different administration, uh, and that President Trump,
• 1:14
  Speaker 1: who ran hard obviously against President Obama's record and ran
• 1:19
  Speaker 1: on restoring American strength and credibility around the world. Couldn't
• 1:24
  Speaker 1: ignore uhhar lassa chemical attack. Uh it is um. I
• 1:31
  Speaker 1: think a strike that is intended to send a message
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  Speaker 1: to the Syrian leader as well as his Russian and
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  Speaker 1: Iranian backers, But I don't think it augurs a major
• 1:39
  Speaker 1: shift in American policy towards Syria. Does it send a
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  Speaker 1: message to other nations such as China. We know that
• 1:47
  Speaker 1: the President is a meeting with the President Jijing Ping
• 1:50
  Speaker 1: of China and Mara Lago. Well, it's a that's a
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  Speaker 1: very interesting question. Certainly, the timing with a major world
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  Speaker 1: leader having bilateral meetings with the president is uh. It
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  Speaker 1: makes for an important demonstration of American resolve, especially since
• 2:06
  Speaker 1: the President is going to be talking to the Chinese
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  Speaker 1: leader about North Korea. What my contacts in China are
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  Speaker 1: telling me is that she is probably going to shrug
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  Speaker 1: this off, take note of it, and actually welcome further
• 2:18
  Speaker 1: American entanglement in the Middle East. Why is that because
• 2:22
  Speaker 1: they feel that the United States will protect their oil
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  Speaker 1: lifeline in importing oil from the Middle East to China. Well,
• 2:29
  Speaker 1: it tends the United States down in the Middle East. Um.
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  Speaker 1: While and takes its attention away from developments in for example,
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  Speaker 1: of the South China Sea or in relations to North Korea. UM.
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  Speaker 1: This is from the Chinese perspective. Those parts of the
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  Speaker 1: world are within China's um sphere of influence, and as
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  Speaker 1: long as the United States is engaged in the Middle East,
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  Speaker 1: there's less attention that can be paid to Asia. Well,
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  Speaker 1: you know, Steven, earlier in the program, I was speaking
• 2:56
  Speaker 1: with Leonard Burschitsky, Bloomberview columnist joining us from Bear Lynn,
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  Speaker 1: and he made it clear that Russian President Vladimir Putin
• 3:04
  Speaker 1: is not interested in a direct military confrontation with the
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  Speaker 1: United States. Having said that, then why place Russian troops
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  Speaker 1: and or aircraft in a particularly well in a harm's
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  Speaker 1: way perhaps, but also to play this kind of game
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  Speaker 1: of chicken flying over the Baltic and Eastern Europe. What
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  Speaker 1: is the intent? Well, I think it's clear that the
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  Speaker 1: Russian president is interested in re establishing Russia as a
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  Speaker 1: global power. UH. Syria in particular has been a bridgehead
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  Speaker 1: for the Russians to re establish their influence throughout the
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  Speaker 1: Middle East. During the Soviet era of the Russians were
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  Speaker 1: quite active in the Middle East. UH and Putin clearly
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  Speaker 1: has strategy UH in order to UM make Russia great
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  Speaker 1: again in the Middle East at the very least. Okay,
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  Speaker 1: but having us But I want I want to then
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  Speaker 1: turn that on to what you just said having to
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  Speaker 1: do with China. That if the Chinese are are in
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  Speaker 1: a sense happy that the United States is going to
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  Speaker 1: be pulled or is moving more into the Middle East
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  Speaker 1: in terms of its attention, that wouldn't the same be
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  Speaker 1: true for Russia. And if it is, then you know
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  Speaker 1: what does Vladimir Putin want? I mean, you give them
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  Speaker 1: a medal that says, all right, you are a world power.
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  Speaker 1: Great now stop trying to turn things into a fight.
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  Speaker 1: I think the Russians and the Chinese have very different calculations.
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  Speaker 1: The Chinese pursue a foreign policy that's essentially a mercantile
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  Speaker 1: ist one, and you alluded to it before, h that
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  Speaker 1: is to ensure UM that energy supplies flow out of
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  Speaker 1: the region, and thus for the United States has been
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  Speaker 1: willing to ensure that provide the kind of security for
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  Speaker 1: that UM that allows the Chinese to enjoy um, enjoy
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  Speaker 1: the energy resources of the Middle East unfettered. The Russians
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  Speaker 1: have a very different calculation UM, from the perspective of
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  Speaker 1: Vladimir Putin, the end of the Soviet Union was the
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  Speaker 1: worst day in the world, and that Russia is a
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  Speaker 1: great power that should be directly involved in the Middle
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  Speaker 1: East because the Middle East is relatively close to the
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  Speaker 1: Russian homeland. Russia has problems of its own with Islamic extremism,
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  Speaker 1: and well, you had the bomb blast in St. Petersburg,
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  Speaker 1: but Russia in the subway that began the week on Monday,
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  Speaker 1: that's exactly right. And the Russians believe that UM support
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  Speaker 1: for leaders like Bashar al assad Uh in contrast to
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  Speaker 1: UH the United States. And this is from the Russian perspective,
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  Speaker 1: which welcomed uprisings against these leaders UM. The Russians perceived
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  Speaker 1: that if these leaders follow these authoritarian dictators in the
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  Speaker 1: region fall, it'll bring to power Islamist Islamis Islamist extremists.
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  Speaker 1: De pardon me. It's kind of ironic, isn't it, though.
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  Speaker 1: I Mean, on the one hand, they're talking about combating terrorism,
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  Speaker 1: and yet the terrorism continues UH and then still keep
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  Speaker 1: the same people in place. That is an irony. Of course,
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  Speaker 1: the United States attack Syrian air base with a barrage
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  Speaker 1: of cruise missiles last night retaliation for this week's chemical
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  Speaker 1: weapons attack against civilians. President Donald Trump casting the US
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  Speaker 1: assault that's vital to deter future use of poison gas.
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  Speaker 1: He also called on other nations to join in seeking
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  Speaker 1: to quote end the slaughter and bloodshed in Syria. Here
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  Speaker 1: to tell us more is Tony Capacio. He is our
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  Speaker 1: Pentagon and National Security porter for Bloomberg and he joins
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  Speaker 1: us from Washington, d C. Tony, what can detail can
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  Speaker 1: you add to what we already know about these attacks? Okay? Well,
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  Speaker 1: I picked up this morning at the operation and the
• 6:55
  Speaker 1: operation came together in about twenty four hours. So the
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  Speaker 1: Navy actually did two rehearsals of it. The two vessels
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  Speaker 1: involved the two rehearsals of it. And this is the
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  Speaker 1: US s ROSS in the US S Porter, correct, right,
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  Speaker 1: they I'll give you some detail. The Ross fired Dity
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  Speaker 1: six of the latest model rate theon Block four E
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  Speaker 1: Tomahawk cruise missiles. The porter fired thirty four of them.
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  Speaker 1: Each missile took up minutes to sixty minutes to hit
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  Speaker 1: its target. And there were backups in the with the
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  Speaker 1: Bush Strike Group in the Persian Gulf in case any
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  Speaker 1: of these missiles and malfunctions and those those both those
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  Speaker 1: ships took the two rehearsals from what I was told
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  Speaker 1: where they went to the dry runs of lunch sequence
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  Speaker 1: and actually launching. So it came together pretty fast. Now,
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  Speaker 1: the governor the Syrian government, uh, the governor of the
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  Speaker 1: homes of province Talala Bazari. He said that some Syrians
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  Speaker 1: had been killed and others wounded, but there were no
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  Speaker 1: precise details. Do we know anything about the results, not yet,
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  Speaker 1: but I mean, it's plausible they picked that time for
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  Speaker 1: forty am. Whenever is minimal would there the minimal activity
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  Speaker 1: of the air base. So that's pretty standard for these
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  Speaker 1: type of operations. You know, it's conceivable that some some
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  Speaker 1: people were killed. I'm not going to discount it, but
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  Speaker 1: I don't have any incident into that. Now, all right,
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  Speaker 1: and let's talk about the implications for this. With the
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  Speaker 1: meeting that President Donald Trump is currently having with Chinese
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  Speaker 1: President j Ping. What kind of signal do you think
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  Speaker 1: that sends to him about one of their big topics,
• 8:34
  Speaker 1: which is North Korea's nuclear program. Well, I think the
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  Speaker 1: Chinese and North Koreans, now we'll have to reckon with
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  Speaker 1: the fact that They're dealing with a US president who
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  Speaker 1: moved pretty quickly, albeit with a precision limited strike. But
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  Speaker 1: he moved pretty quickly to retaliate with the minimal consultation
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  Speaker 1: with Congress he recalled during the Vietnam War, the Nixon
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  Speaker 1: wanted to invoke the kind of a madman theory with
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  Speaker 1: North North Vietnam in terms of whether he you know,
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  Speaker 1: just how much he would do what he would do. Well,
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  Speaker 1: maybe there's a madman theory at play here. Trump showing
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  Speaker 1: that he's quick, impulsive, fast on the draw, and that
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  Speaker 1: might ship send a chill of North Korea or China
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  Speaker 1: spins Well. Rex Tillis, and Secretary of States, says, it
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  Speaker 1: clearly indicates the president is willing to take decisive action
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  Speaker 1: when called for. What does this mean for the U. S.
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  Speaker 1: Relationship with Russia, because, of course the President has called
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  Speaker 1: for greater counter terrorism cooperation with Russia. I think the
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  Speaker 1: impact will be minimal because the U. S took pains.
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  Speaker 1: They contacted the Russians through they called this deconfliction link
• 9:48
  Speaker 1: that was set up there because over air strikes. You know,
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  Speaker 1: we did we tipped the Russians off, and locally we
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  Speaker 1: didn't tip them off through at the Moscow level, but
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  Speaker 1: we tipped the Russians off locally that this was gonna
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  Speaker 1: happen the US, that those cruise misses were precise enough,
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  Speaker 1: they did not hit the airfield areas where the Russians
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  Speaker 1: were sleeping or are stationed. You know, we give him
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  Speaker 1: advanced warning, and you know, Pim, I think it's going
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  Speaker 1: to show that the Russians did not tip the Syrians off.
• 10:16
  Speaker 1: That we don't know that definitively, will know that later today.
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  Speaker 1: But I don't think the Russians tipped the Syrians off.
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  Speaker 1: But there's no indications of planes taking off ahead of time.
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  Speaker 1: So I'm met sure what the long term implications on
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  Speaker 1: the US Russian relations are. I leaned towards it might
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  Speaker 1: reinforce the fact that we can be trusted allies. Does
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  Speaker 1: it also change the dynamic when it comes to Vladimir
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  Speaker 1: Putin's support of President bush are Alissa that indeed, perhaps
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  Speaker 1: they are not as strong allies as previously thought if
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  Speaker 1: the Russian reaction is muted. I tend to agree with
• 10:51
  Speaker 1: you there that the rush the relationship with Syrias not
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  Speaker 1: as a close as we thought. I mean, it depends
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  Speaker 1: on the reaction from Russian and so far it's been
• 11:00
  Speaker 1: freely muted. Well, the UN ambassador the Russians, a deputy
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  Speaker 1: UN Ambassador of Vladimir sorokof Is he warned that any
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  Speaker 1: negative consequences from the strike would be quote on the
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  Speaker 1: shoulders of those who initiated such a doubtful and tragic enterprise.
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  Speaker 1: Is he just using diplomatic language because he's got nothing
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  Speaker 1: else to say? Well, that's that's the first cut outrage.
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  Speaker 1: I mean the follow up will be more important in
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  Speaker 1: terms of what impact that's going to have in Syria.
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  Speaker 1: If the Russians start painting or illuminating US planes with
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  Speaker 1: their radars and act in an active peak or retaliation subtle,
• 11:36
  Speaker 1: not subtle, but a retaliation short of firing missiles, that'll
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  Speaker 1: be more of a leading indicator than whatever words come
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  Speaker 1: out of the U. N Ambassador Tony, What about Steve
• 11:45
  Speaker 1: Bannon and his departure for the National Security Council. He
• 11:50
  Speaker 1: has previously spoken about the US being overextended outside America.
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  Speaker 1: Do you think that the National Security Council's changed anything
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  Speaker 1: to do with this? Yeah? I think one of one
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  Speaker 1: changes that the Pentagon was allowed to plan this on
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  Speaker 1: their own, really quickly, without a lot of back and
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  Speaker 1: forth was to National Security Council. I think that accounts
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  Speaker 1: in some respect for the fast, for the rapid nature
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  Speaker 1: of the the operation that the Pentagon was able to
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  Speaker 1: pose together on its own without without a lot of
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  Speaker 1: mother may I from the National Security Council. Indeed, just
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  Speaker 1: the last point to you, Tony, what's next? Do we
• 12:28
  Speaker 1: just wait and see or is there going to be
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  Speaker 1: some detail about some change in policy? I think it
• 12:35
  Speaker 1: will be a what what we're gonna learn more from
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  Speaker 1: the Pentagon? Today's the battle damage assessment, you know, the
• 12:41
  Speaker 1: nuts and bolts of military attack aftermath. I think you're
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  Speaker 1: going to see maybe a letter to Congress from the
• 12:49
  Speaker 1: White House asking for an authorization for the use of
• 12:53
  Speaker 1: military force on Syria. I think that that's one possible
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  Speaker 1: the plausible follow up. All right, what we leave it there,
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  Speaker 1: but we look forward to you covering this topic for US.
• 13:02
  Speaker 1: Tony Capacio as our Pentagon and National Security reporter for
• 13:07
  Speaker 1: Bloomberg joining us from Washington, d C. This is Bloomberg.
• 13:24
  Speaker 1: The unemployment rate falling to four and a half percent,
• 13:27
  Speaker 1: that's down from four point seven percent. Why no, cheers? Well,
• 13:31
  Speaker 1: payrolls only adding ninety eight thousand jobs last month. Economists,
• 13:36
  Speaker 1: we're looking for about a hundred and eighty thousand to
• 13:39
  Speaker 1: be added. Here to tell us more about the report
• 13:41
  Speaker 1: and it's the factor of wages is al A Grissani.
• 13:45
  Speaker 1: He is a former assistant Labor Secretary under President Ronald Reagan.
• 13:48
  Speaker 1: Al thanks for being in the studio and also joining
• 13:51
  Speaker 1: us is Carlick Godnna. He's the chief US economist for
• 13:53
  Speaker 1: Bloomberg Intelligence out. Let's come to you first and just
• 13:57
  Speaker 1: make your case about wage growth. Two point seven percent
• 14:00
  Speaker 1: increase year over year. You say that's not enough, No,
• 14:03
  Speaker 1: it's not. In good morning, pim um. If you look
• 14:06
  Speaker 1: at wage growth over the last twenty years, it's been
• 14:08
  Speaker 1: steadily going down. And there was hope that with this recovery,
• 14:13
  Speaker 1: which really started eight years ago when the Fed ease
• 14:16
  Speaker 1: monetary rates in the Obama administration, that now with the
• 14:19
  Speaker 1: pickup in the with the Trump administration and the change
• 14:22
  Speaker 1: and all the things people are talking about, that we
• 14:24
  Speaker 1: would finally see wages get back to growth, which would
• 14:27
  Speaker 1: be really an indication of a real, sustained, long term recovery.
• 14:31
  Speaker 1: What kind of number are you looking for if you
• 14:32
  Speaker 1: don't like two point seven percent? What what what do
• 14:35
  Speaker 1: you think would work well? If you go back to
• 14:36
  Speaker 1: the historical standards when really we were in real, real
• 14:39
  Speaker 1: three to four percent GDP growth UH rates in the
• 14:44
  Speaker 1: in the growing economy, you're looking at four to five
• 14:46
  Speaker 1: percent wage growth that's needed to sustain a long term recovery.
• 14:50
  Speaker 1: All right, let's go to car Record Dona, chief US
• 14:52
  Speaker 1: economists for Bloomberg Intelligence. What do you think about this
• 14:54
  Speaker 1: four to five percent wage increase? Do you think that
• 14:56
  Speaker 1: would do it? I think that would certainly help four
• 14:59
  Speaker 1: to economic momentum and maybe push us back towards UH
• 15:04
  Speaker 1: let's say eighties or nineties style growth rates from the
• 15:07
  Speaker 1: two percent which has plagued the economy over the last
• 15:11
  Speaker 1: eight years. What's the what's the relationship though between wage
• 15:14
  Speaker 1: growth and productivity? Well, as workers become more expensive than
• 15:19
  Speaker 1: employers will look for ways to minimize that input cost,
• 15:23
  Speaker 1: and so they invest in capital. And you're seeing it
• 15:25
  Speaker 1: from automated UH register clerks at fast food joints or
• 15:32
  Speaker 1: no clerks at all when you do the check out
• 15:34
  Speaker 1: yourself that's increasingly exactly or self check out in a
• 15:38
  Speaker 1: grocery or retail outlet. And so as wage pressures pick up,
• 15:42
  Speaker 1: you'll get more productivity gains. But we've had relatively cheap
• 15:46
  Speaker 1: labor over the last ten years or so, so there's
• 15:49
  Speaker 1: not been a lot of incentive for employers to make
• 15:51
  Speaker 1: those types of investments. That's changing now because we are
• 15:54
  Speaker 1: seeing a bit more wage pressure. Alright, what, having having
• 15:58
  Speaker 1: said that out to you, if indeed we are entering
• 16:01
  Speaker 1: a period of more rapid automation, where will the wage
• 16:07
  Speaker 1: growth come from. If indeed the wages that employers will
• 16:11
  Speaker 1: have to pay can alternatively be put into artificial intelligence
• 16:17
  Speaker 1: robots and even dare I say it offshore, Yes, well,
• 16:22
  Speaker 1: we have a let's add this to the equation. We
• 16:25
  Speaker 1: have a secular change going on in the economy that
• 16:28
  Speaker 1: speaks to this. The secular change is what you're talking about,
• 16:31
  Speaker 1: the move from labor to tomorrow automation, etcetera. And you
• 16:34
  Speaker 1: can see it in the retail job numbers today thirty
• 16:36
  Speaker 1: thou down. That may be the beginning of what we're
• 16:39
  Speaker 1: starting to see as all these malls are closing and
• 16:42
  Speaker 1: the retailers are pulling back. So that's a sign of
• 16:44
  Speaker 1: what I'm talking about and the secular change. And do
• 16:47
  Speaker 1: you think that that comes what from the competition from
• 16:49
  Speaker 1: Amazon and other online retailers that that sort of stands
• 16:53
  Speaker 1: in the way of this increases. And that's code for automation,
• 16:56
  Speaker 1: isn't it. And I see it my business too. We're
• 16:59
  Speaker 1: all data and from nation businesses and the turnaround business
• 17:02
  Speaker 1: are now becoming commoditized. So where's the value add going
• 17:05
  Speaker 1: to come from the drive's wages in the future. It's
• 17:08
  Speaker 1: got to be from intellectual capital businesses. It's got to
• 17:11
  Speaker 1: be from value add from people that are providing insights.
• 17:15
  Speaker 1: And that's the only place that I see where you're
• 17:17
  Speaker 1: going to have the ability to demand more wages. That
• 17:19
  Speaker 1: sounds like high skilled workforce absolutely, Carca Donna. I mean,
• 17:23
  Speaker 1: is there a chance that you're gonna see this wage
• 17:25
  Speaker 1: increase of indeed what you just described increasing automation, so
• 17:28
  Speaker 1: that really the only wage increase you're gonna see is
• 17:31
  Speaker 1: people who have some kind of intellectual property that puts
• 17:35
  Speaker 1: them in absolute that's where it will be concentrated. But
• 17:40
  Speaker 1: I mean, there's less job security, whether it's lower union
• 17:44
  Speaker 1: membership or robots taking jobs, or just the internationalization of
• 17:49
  Speaker 1: the or the globalization of the workforce, and so that
• 17:52
  Speaker 1: means that the Phillips curve still works. Uh, this is
• 17:56
  Speaker 1: a trade off between unemployment and inflation, but it's flatter
• 17:59
  Speaker 1: than it has bend in past economic cycles. And I
• 18:01
  Speaker 1: don't want to make too much of us, because clearly
• 18:03
  Speaker 1: this is not the focus of the wage the two
• 18:05
  Speaker 1: point seven percent year over year wage increase. But we
• 18:09
  Speaker 1: learned earlier in the week that black Rock, for example,
• 18:13
  Speaker 1: moving away from some managed funds to replace them with
• 18:16
  Speaker 1: more automated exchange traded fund or indexed products. That also
• 18:21
  Speaker 1: is part of this trend. Absolutely. So the point here
• 18:24
  Speaker 1: is that you're not getting as much inflation or wage
• 18:27
  Speaker 1: bang for your buck as the unemployment rate moves lower
• 18:31
  Speaker 1: compared to pass cycles, which means that maybe full employment
• 18:35
  Speaker 1: going into the cycle were fed forecasters and whatnot. We're
• 18:38
  Speaker 1: thinking it could be five and a quarter percent, was
• 18:40
  Speaker 1: five percent, then it was just below five percent or
• 18:44
  Speaker 1: four and a half, and so last of all, if
• 18:45
  Speaker 1: you recall Janet Yellen throughout the idea in an academic
• 18:49
  Speaker 1: forum that maybe full employment is materially lower than forecasters
• 18:54
  Speaker 1: currently anticipate, and as we see unemployment rate grinding grinding
• 18:57
  Speaker 1: down and we're not getting the wage pressures yet, that
• 19:00
  Speaker 1: reinforces that notion. Al Agressoni, what's your prescription for an
• 19:04
  Speaker 1: increase in wages? Well, I think that back to the
• 19:07
  Speaker 1: secular trends. I mean, while there's a change moving on
• 19:10
  Speaker 1: to automation and lower skilled jobs are going to be replaced,
• 19:14
  Speaker 1: you have to look at the positive side of the
• 19:16
  Speaker 1: secular trend. And we talked about this on one of
• 19:18
  Speaker 1: your shows a couple of years ago, where we discussed
• 19:20
  Speaker 1: that we could potentially become again a nation of entrepreneurs,
• 19:24
  Speaker 1: people who are either and either have skills that are
• 19:27
  Speaker 1: can command a higher wage like in the ellectual capital businesses,
• 19:31
  Speaker 1: or people who have the ability to start and start
• 19:33
  Speaker 1: and sustain and run their own business. But aren't those
• 19:35
  Speaker 1: people already doing that? I mean by definition, I mean,
• 19:38
  Speaker 1: what is going to move the two point seven percent
• 19:40
  Speaker 1: number higher? Well, what's gonna what's gonna move it higher
• 19:43
  Speaker 1: is if you're uh, if you're making a choice to
• 19:46
  Speaker 1: become an entrepreneur, right and you're in a startup business,
• 19:48
  Speaker 1: that you're going to have a more greater demand and
• 19:53
  Speaker 1: to hire somebody than somebody who's in a big corporation
• 19:56
  Speaker 1: like Walmart, who can replace that body at any point
• 19:59
  Speaker 1: in time. So if you're looking for wage growth, I
• 20:01
  Speaker 1: think it's going to come from the very high end
• 20:03
  Speaker 1: of the intellectual scale, and it's going to come from
• 20:05
  Speaker 1: the more entrepreneurial end of our economies. Thanks very much,
• 20:08
  Speaker 1: Al Agrisani, he is the former assistant Labor Secretary under
• 20:12
  Speaker 1: President Ronald Reagan. And our thanks of course to Carricka Donna,
• 20:15
  Speaker 1: chief US economist for Bloomberg Intelligence. Always a pleasure. All right,
• 20:30
  Speaker 1: let's turn our attention now to headline economic news. The
• 20:34
  Speaker 1: unemployment rate down to four and a half percent from
• 20:37
  Speaker 1: four point seven, the economy adding just ninety eight thousand
• 20:41
  Speaker 1: jobs last month. Economists were looking to add about a
• 20:44
  Speaker 1: hundred and eighty thousand jobs. One of those economists was
• 20:47
  Speaker 1: Vincent Reinhardt. He is chief economist Standish Melon Asset Management.
• 20:51
  Speaker 1: He joins us from Boston, home to Bloomberg twelve hundred. Vincent,
• 20:55
  Speaker 1: thank you for being with us. How did you get
• 20:57
  Speaker 1: it wrong? Great introduction, PIM, I like starting on the
• 21:02
  Speaker 1: positive note, and the answer is most of us just
• 21:06
  Speaker 1: forgot it was cold in March. Uh. Part of this weather.
• 21:11
  Speaker 1: Part of it is let's calm down a little bit.
• 21:13
  Speaker 1: The payroll employment is a erratic number. The Bureau of
• 21:18
  Speaker 1: Labor Statistics tells us that a nine confidence interval around
• 21:24
  Speaker 1: monthly changes and met payrolls is a hundred and a
• 21:28
  Speaker 1: hundred thousand plus or minus. What does that mean? That
• 21:32
  Speaker 1: means that if you thought it was a hundred and
• 21:34
  Speaker 1: eighty thousand expected this month. Uh, you wouldn't be statistically
• 21:41
  Speaker 1: proved to be wrong if the number came in between
• 21:44
  Speaker 1: eighty and two undred and eighty thousand. Oh well, I
• 21:47
  Speaker 1: guess that that makes it very easy, doesn't it. It
• 21:50
  Speaker 1: makes it perfectly. The good news is, in a statistical sense,
• 21:54
  Speaker 1: I wasn't wrong. Okay, all right, that's like bumpers, you know,
• 21:57
  Speaker 1: in a bowling alley. All right, so your contains So
• 22:00
  Speaker 1: if let's take the you know, let's take this in perspective. First,
• 22:04
  Speaker 1: there were weather dislocations. Uh, that's and we see very
• 22:09
  Speaker 1: strong employment growth from the household survey and week on
• 22:14
  Speaker 1: the establishment survey. That's probably because when the BLS comes
• 22:18
  Speaker 1: around to a household at at home because they're not
• 22:21
  Speaker 1: working because of bad weather, they they believe they're employed.
• 22:24
  Speaker 1: Whereas you go to the establishment and ask them, are
• 22:27
  Speaker 1: you how many people are working for you today? Uh,
• 22:31
  Speaker 1: they give them a lower number, so average the two
• 22:34
  Speaker 1: UM a low number nine number. Okay, so we're not
• 22:37
  Speaker 1: gonna go We're not gonna go crazy about this, UH
• 22:41
  Speaker 1: seemingly what the bond market is doing with that big
• 22:43
  Speaker 1: move higher in the long pond. If that's the case,
• 22:47
  Speaker 1: then what are the particulars of the report that you
• 22:50
  Speaker 1: think are specifically interesting? Is that the labor participation rate?
• 22:56
  Speaker 1: Is that the two point seven wage growth year over
• 22:59
  Speaker 1: year number, or what part of the report do you
• 23:02
  Speaker 1: find most useful? That's a great thing about the peril Fridays.
• 23:06
  Speaker 1: If the DLS puts out of twenty plus page report,
• 23:09
  Speaker 1: there's always gonna be something that's interesting. I think there's
• 23:12
  Speaker 1: a couple of things of note. One is Chenney Ellen's
• 23:16
  Speaker 1: basically been right. You run accommodative monetary policy and you
• 23:21
  Speaker 1: marry very well draw workers into the labor force. UH.
• 23:25
  Speaker 1: In fact, there were very large games in household households,
• 23:32
  Speaker 1: on the order of four hundred and seventy two thousand
• 23:34
  Speaker 1: people coming into the labor force. UM. That's why the
• 23:38
  Speaker 1: unemployment rate UH goes down. We have peril rather unemployment. UH.
• 23:44
  Speaker 1: Persons in the household reports fell by thousand, So that's
• 23:49
  Speaker 1: good news. That's so, that's good news. So why would
• 23:51
  Speaker 1: people be bidding up the price of the thirty year
• 23:54
  Speaker 1: by fifteen thirty seconds? Why are we at two point
• 23:56
  Speaker 1: nine six? Well, the world's are as key plays, uh
• 24:00
  Speaker 1: and uh. But it was risky last week too, Yeah,
• 24:03
  Speaker 1: but maybe it feels a little risky, okay. Uh. The
• 24:06
  Speaker 1: other I think part of it is actually averagary earnings
• 24:10
  Speaker 1: that came in as an increase of two tents of
• 24:13
  Speaker 1: a percent on the month, and the twelve month change
• 24:16
  Speaker 1: picked lower to two point seven. So if you think
• 24:19
  Speaker 1: the Fed is going to be acting because they're worried
• 24:21
  Speaker 1: about inflation, then the Fed should explain to you where's
• 24:26
  Speaker 1: the cost pressure got it? So don't worry about that
• 24:29
  Speaker 1: at least right now, worry about something else. Right the Fed.
• 24:32
  Speaker 1: Fed's got a plan that it's going to be renormalizing
• 24:35
  Speaker 1: monetary policy gradually. Nothing in this report says they can
• 24:39
  Speaker 1: fulfill that plan. Well, Vincent, you know, just to pick
• 24:42
  Speaker 1: up on that. On that point, I want to go
• 24:44
  Speaker 1: back to the f O M meeting minutes that were
• 24:48
  Speaker 1: released earlier this week about unwinding or dealing with the
• 24:52
  Speaker 1: four and a half trillion dollar balance sheet at the
• 24:55
  Speaker 1: Federal Reserve. What are your thoughts there? So what first
• 24:59
  Speaker 1: thing to observe, They're trying to telegraph it as as
• 25:02
  Speaker 1: clearly as possible, because most of the people making those
• 25:06
  Speaker 1: decisions are still shell shocked from the paper tantrum when
• 25:10
  Speaker 1: slowing asset purchases a threat to produce such a big
• 25:14
  Speaker 1: reaction in markets. Uh. Second thing to note is um
• 25:20
  Speaker 1: that they view it as in part of substitute for
• 25:23
  Speaker 1: rate action. So they're basically telling you there's three more
• 25:26
  Speaker 1: press conference meetings this year. The next to they'll raise
• 25:31
  Speaker 1: the funds right at a quarter point. The third one
• 25:33
  Speaker 1: they'll tell you they're slowing asset purchases UH reinvestments so
• 25:38
  Speaker 1: that it's a balance sheet will vary gradually shrink. That's
• 25:43
  Speaker 1: a good way to put it. Thank you very seccinctly
• 25:46
  Speaker 1: appreciate it. Vincent Reinhardt, as always he's he's the chief economist,
• 25:49
  Speaker 1: standish melon asset management. He wasn't wrong. He was within
• 25:53
  Speaker 1: the margin of arab This is Bloomberg. Thanks for listening
• 26:04
  Speaker 1: to the Bloomberg pian L podcast. You can subscribe and
• 26:07
  Speaker 1: listen to interviews at iTunes, SoundCloud, or whatever podcast platform
• 26:12
  Speaker 1: you prefer. I'm pim Fox. I'm out there on Twitter
• 26:15
  Speaker 1: at pim Fox. I'm out there on Twitter at Lisa Abramo.
• 26:19
  Speaker 1: It's one before the podcast. You can always catch us
• 26:22
  Speaker 1: worldwide on Bloomberg Radio