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

Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. North Korea and potential negotiations with the US, we do to find out that top representatives of nately CIA Director UH Mike Pompeio, did meet with Kim Jong un, the leader of North Korea, in recent weeks. Joining us now to discuss I'm very pleased to say is Admiral James Servriti is retired US General U S. Navy Admiral and former

military commander of NATO. He is a current Dean of the Flesh Your School at Tufts University and a Bloomberg View contributor. Admiral stefridis thank you so much for being with us. Are we being played with these negotiations? I would say it's too soon to tell. Um. There is a possibility that there is a sincerity here, uh driven Let's face it. By financial exigencies in North Korea, UH and the fact that he really has nuclear weapons now, so he may feel, in all honesty that this is

a good point for him to negotiate. I think we are being played if we think that he's going to give up those nuclear weapons. I do not think he will. Admiral Stefrida's Japanese Prime Minister Shinzo Abe meeting with President Donald Trump in Florida and Mara Lago. What do you think the position of the Japanese is visa VI what is seemingly a bilateral negotiation between the United States and North Korea. I think they will push very hard to

expand these talks rapidly. The next step should be to go from bilateral, as you correctly point out US North Korea, to four party talks to bring in South Korea and China. We will never solve this problem without fully integrating China into the discussion. Once we make some serious progress, hopefully through four party talks, then I think you have to go to six party talks. That's when Japan and Russia

come into the equation. This is the work of a year or two, and if President Trump thinks he's going to sit down across the table from Kim Jong on and walk out with the Nobel Peace Prize. That is not going to happen. This is going to be the work of at least a year of solid negotiation building toward inclusion of our Japanese allies. Given the work that lies ahead, is this meeting premature? I don't think so.

I think that this is a reason all time to try a kind of uh, dramatic gesture that might crack this thing open and move it in a positive direction. Another way to put it is compared to where we were four months ago before the Olympics, when we had nuclear detonations and ballistic missiles flying over Japan and headed towards Guam, this is a better place to be in.

But we should not be overly euphoric about what's ahead and where to understand that this is hard work negotiations and diplomacy or time consuming and difficult, especially with someone like Kim Jong un. Admiral Strafridi's I want to get your view on CIA Director Mike Pompeio, since he was the one who traveled to North Korea last week to meet with the North Korean leader. Uh, what do you think of him as sort of the initial UH spokesperson

for the US. I think it would have been a very odd choice, except for the fact that he is nominated and I think has a better then even chance of being confirmed as the next Secretary of State. Given that, it makes sense if if he had been planned to stay at the CIA for the next three or four years, I think it would have been a very strange choice. Leaving that kind of structural answer. Aside as a person,

I think he's a very good choice. He Iss high emotional intelligence, UM, He's academically very well prepared West Point grad first in his class there UM coming out of the CIA. He has a depth now in intelligence. Former congressman, so he gets the political piece of this. I think he's a very reasonable choice, given that he is on tap to become Secretary of State. Admiral Stevids just quickly.

John Balton, national Security Advisor reaching out to Egypt and other Arab nations in order to replace the U S and Syria. Is that kind of work. I think it's unlikely that we are going to wholesale replace the u US. The idea that we're going to just step away in our son of friends are going to step in is unrealistic. But I think the idea of building a coalition that includes significant Sunni Arab states to include Jordan's Saudi Arabia, Gulf states as well as Egypt, I think makes sense.

It will require U S boots on the ground. We're not going to be able to just leave the region. I'm trying to get a sense of what the U. S. Relationship is at this point with its allies, with grappling with Syria in particular, do you get a sense of how much more the US is working with its allies in light of what happened there. We will continue to try and build the coalition in preparation for the possibility

of another round of strikes. Let's face it, um we have now struck twice, but in the interim between those two strikes, we've seen Assad continue to use chemical weapons with impunity. I am unconvinced that he's going to have a sudden epiphany like St. Paul on the road to Damascus and stop using those weapons. So we better be prepared for another strike, and that means getting our allies,

partners and friends on board. The reason why I asked that Admiral Strafrides is because there's been so much tension with respect to trade and a lot of harsh words back and forth between the US and allies, and I'm wondering how much that plays into some of these military relationships that are required for conflicts like this. It absolutely does, and one of the very strong arguments for UH maintaining balanced global relationships is that in times of trouble, you

need friends and you can't surge trust. Um. You've got to build it a brick at a time, and when you knock it down with a series of bad choices, economically, it does bleed over into your day to day military intelligence and operational relationships. Admiralst of Vitas, what is the U s strategic reason for being in Syria. I'll give you four reasons, and I think these will call that we need to remain in Syria. The first is quite straightforward,

and that is continuing to destroy the Islamic State. The second is we have a shared interest with the global community and stopping the use of chemical weapons, which appears to be continuing forthwith. Thirdly, um, we have a strategic challenge with Iran in that region. Who threatens Israel, Saudi Arabia, Jordan's and other Sunni states. And fourth and finally, um, there's an enormous humanitarian crisis sin Syrian. I think we have a moral obligation to be part of resolving that.

To do that, you have to create security in the region. So I'll give you those four reasons, and most reads, they're all legitimate reasons. One thing that is also at play, though, is President Trump's support from his base. There was a lot of pushback after these strikes in Syria, with people saying, President Trump, you said that you wanted to pull troops out of the US, out of Syria. Rather, why should those conflicts be our cost? We should just turn our

focus on ourselves. How much does that factor into the debate and the strategy of the US. I think it will play a significant role, and it should. Um. We these are national decisions and that's what leaders do. They ought to step up and explain why they need to continue to take the hard right choice, not the easy

wrong choice. And I think that the fact that President Trump essentially reversed his position UH several days later is a good indicator that people like Secretary of Defense Gimattis and CIA Director Pompeio and others convinced him to do so. So I don't think we're gonna leave Syria anytime soon.

Point one and point two. Uh, the level of engagement is very different here than the hundred and fifty thousand troops that we had in Iraq or the hundred and sixty thousand troops that I commanded in Afghanistan when I was NATO commander. We're talking to three five thousand troops. Um, this is a very sustainable commitment for the United States, and I think good leaders will recognize that and seek

to explain it to the American public. Just to wrap up here, Admiral Staffridi's given the fact that you are the author of Seapower, the History and geopolitics of the world's Oceans, the fact that you were formerly U. S. Navy admiral, former military commander of NATO, given your vast experience with the international relations on the military front, are you more optimistic about the sort of global outlook right now than you worked two months ago. I am cautiously,

very cautiously optimistic. On North Korea. I think there's a real possibility of negotiating our way out of what two or three months ago pre Olympics looked very, very dangerous in terms of the Middle East. I am more pessimistic because I uh don't see a strategic plan being laid out by the administration. In simply lobbying Tomahawk missiles is not going to get us where we need to go there.

So it's a mixed picture. But overall, um, I am very concerned, uh finally about great power politics and the dynamics of our relationship with both Russia and China had degraded over the last three or four months. So running it all together, i'd say we're on a down trend right now and we've got some work to do. I want to thank you very much for spending time with us. Admiral James Stefridis is the Dean of the Fletcher School

of Law and Diplomacy at Tufts University. Also a Bloomberg of you Calmnists joining us from Boston Home to Bloomberg one six on Boston, New Report in thirty in Metro West, in the South Sure and Admiral's to read This is the author of Seapower, The History and Geopolitics of the World's Oceans, The use of cryptocurrencies not only is gaining popularity when it comes to international transactions for businesses, but also being used by people for retail transactions on which

they would like to maintain their privacy. And the premier online destination for adult entertainment it's called porn Hub, has announced that it is now accepting anonymity focused cryptocurrency Verge, in order to keep current with what it describes as its communities, payment preferences. And here to tell us more about Verge and cryptocurrencies is Justin Velo. He is the founder and the CEO of Verge Austin. Thanks very much for coming in. Can you first tell us what is Verge.

Verge is a cryptocurrency. It's very similar to the Bitcoin blockchain UM, but it's also modified. It has much faster transaction time. Bitcoin has about a ten minute transaction time for for a confirmation of a transaction hours is about thirty seconds UM. And we have a much higher supply because we believe that it's better for distribution. The more

the more coins we have, the better. So Bitcoin has minted or will mint in its lifetime, twenty one million coins, whereas we will be minting sixteen point five billion, So you know, we're we're uh, you know, we're what we see as a more fair currency. Okay, So just to give some perspective, the cryptocurrency has about oh one billion dollar market cap, and it has increased quite a bit

over the past few months. You know. Uh, we're talking about pornography, which is sort of interesting because we stay away from it. But it's a huge business and porn hub has nearly a hundred million daily users. And people don't want other people to see that they're buying pornography, which is why there must be some interest in a secret way of delivering payment. Who approached to with this transaction? Um,

it was sort of a mutual approach. Um. I believe that people from we have a very very big community of you know, people that are very interested in the coin and very excited about the project itself. Uh. So I believe that, you know, people from our community. We're talking about hundreds of thousands of people. Uh. And I believe that they started initiating contact with them, probably through their website, you know, saying hey, we would really like

you guys to start supporting cryptocurrencies. Okay. I'm wondering though, what this does for the reputation of cryptocurrencies that people kind of want to cloak their actions and are looking for ways of doing so. And you know, pornography is uh some people might you know, shake their head at it, but it's not you know, a terrorist activity, but somebody could potentially use it for that. Absolutely, Um, people deserve privacy,

especially in that aspect of their life. Um. And you mentioned the hundred million visitors a day uh statistic, which is interesting, But what I find more interesting is that it's actually over a billion unique visitors a year, which is actually a double digit percentage of our population on Earth. So I think that that's uh, you know a little bit more important to look at. It's it's a very

common thing. And uh, you know there's still some stigma around sexual preferences, uh, you know, fetishes, things like that. But you know these things, you know, if we all love and respect to one another, this is none of our business and we shouldn't judge each other by it. But we live in in a time and age still where people do so it's you know, it's very important

that people have privacy, and especially online. And wonder if you could just describe for our listeners, how do you raise the money in order to have all of these coins, these these artificial tokens. Okay, Well, see a lot of projects that launch do what's called an i c O, which is obviously very similar to an ipal coin offering. Yes, um, and then there's all you do one of those No, we did not. How did you raise the money? Uh? Through the community? So you used online source like a

crowdfunding site and what to do? So? Yes, and it's and it's voluntary. Okay. So what has been your response to people that say that the coins that were created as a result of that fundraising effort, that many of those coins either disappeared or that the money that they then used to purchase these digital coins has been locked and they cannot get it out of their wallets. That that's not how it goes. It's basically like throwing your

money into a pot. Um. What what we've done is we've given some a lot of these funds for integration of Verge into the actual platform, the software platform behind porn hub UM. But then we've also had other goals like we're building an iOS wallet, um. You know, we're looking to get integrated into a hardware device for even

stronger storage of but I understand. But but my question is that if if there is this fundraising that went on, there's publicly available information that says it over eighteen million of these well no, they were simply moved, were right. But were they moved with the knowledge of the people who had invested? Oh? Yeah, absolutely. I think everybody knew going in that these funds were allocated for specific things

and that's what they're being used for. Oh, I'm just wondering, Uh, what else have you thought of partnering with, I mean, any cannabis companies or other types of things like that. That that's absolutely another one, Like you know, a medical marijuana industry is another one where um, you know, there's a stigma to it where you don't you may not want your employer or some of your even friends, you know, to know that that's part of your lifestyle, you know.

And this is something that I was trying to get out earlier. I mean, it's one thing for there to be a stigma around sexual preferences. There's another thing to sort of have money laundering or financing terrorist activities. How do you prevent that type of use from this coin? Well, I mean, at the moment, I would say that most of those nefarious things that happened with currencies probably stemmed

from the US dollar. Um. I mean, when's the last time, you know, you heard a story about US going into its horrist location and uncovering palettes of cryptocurrency or finding hard drives with bitcoins. We don't we find palettes of you know, shrink craft hundred dollar bills. So well, one of the biggest owners of bitcoin is the US government from actually seizing Yeah, so so there is there is that activity, and basically this is a designed cryptocurrency to

cloak activities. You have to wonder that's going to be a motivation for people to use it. Sure, but I think that we can see. Um, I'm similar to the tour project, which is a open source piece of software that helps hide your IP address that was actually originally developed by the US government. So I mean I think that's to some degree. Uh, you know, privacy is important in the US government recognizes that too. So interesting having you on. Thank you so much for being with us.

Justin Vellow, founder and chief executive officer of Verge Cryptocurrency, just announcing that it is partnering with porn Hub to allow people to pay for their pornography consumption with a cloaked identity through the crypto asset. That's discussion. He is the Finance Minister of a Luxembourg. Pierre Gramina joins us now. And just to give some context, many people may not know that Luxembourg City is one of the three official capitals of the European Union. Indeed, it is the seat

of the European Court of Justice. And from that perspective, he has an interesting look into the role of trade and taxes and a variety of other issues in the European Union. And he joins us here in our eleven three oh studios. Minister, thank you very much for beating

with us. Appreciate it. Maybe just set for our listeners a little bit about Luxembourg, your role and the role of Luxembourg which belies its size in the European Union because it has served as a nation that has tried to mediate and to help integrate Europe since the creation of the EU. Eure absolutely right, Luxembourg is a founding

member of the European Union. It was the smallest one of the six founding members that is today the second smallest one, but being at the heart of the European continent between Germany and France, and having been also the victim of two world wars, we're probably the most staunch advocate for European reconciliation, and the European Union has achieved

that goal. We haven't had any war in Europe since the setting up of the European Combinate Steel in fifty two and the European Community in nineteen fifty eight, and that's often forgotten, and we continue to keep that on our mind and act as a mediator as a neutual partner to find solutions. U. You are a neutral partner also to asset managers and other investment companies that have

put their headquarters in Luxembourg. A lot of corporations have as well, in part because of beneficial tax treatment that they get for going to Luxembourg. How much pressure are you getting right now from other European countries, given the need to raise money and given the need to sort of prevent a race to the bottom with respect weakening

tax rules. While we've had a rough ride in the past on these issues of taxation, but since two thousand fourteen the present government has changed its root in this matter. We have given up the bank secrecy laws. That was one of the criticisms that we were receiving. It was something that was not any more accepted. It was an old tradition in many countries, not only in hours. We've decided to part with that and to embrace tax transparency

and since then, obviously the pressure is far less. We have obviously attractive tax rates, but if you look at the average of taxes of Luxembourg in the O City, we're just in the middle field. Now. I get pressure in my country very often that we should have lower taxes than what we have now. Yes, I mean we have a corporate tax rate of eighteen percent. If you add municipal taxes you get at twenty six percent, So

I think this is a decent amount. Have any companies or are fund managers removed their premises for remove their headquarters from Luxembourg as a result. No, because the reason why we were successful was not based solely on taxation. I think if you look at what happened in the Brexit context, we are one of the winners short term in the sense that quite a few players in London had to find a place on continental Europe because they are losing the passport for financial services into the EU

Single Market, and many chose Luxembourg. I mean, I think of American banks who have decided to beef up their private bankings hub in Luxembourg. They could have chosen other places. I think of asset management firms that have taken the same decision. I think of insurance company. It shows that the general framework of Luxembour's attractive. We are one of the ten countries left in the world that have a triple A rating Financially. This is important when you're an

international financial center. We've been able to attract Chinese banks to Luxembourg. Seven largest Chinese banks are in Luxembourg. Some have come more recently. So it shows that fortunately what we were pretending that it is a full international ecosystem that we have that explains why we've been successful. It's

not only about taxes, Minister. Before you were the finance minister, you also served as the country's ambassador to Japan and South Korea, also the consul general and director of the Board of Economic Development in San Francisco, so you have a global perspective about how companies and countries uh integrate in order to do business. Recently, the United States has taken the position that certain types of optical component technology

cannot be sold to certain Chinese companies. Is a company in Boston, Acacia and also in uh San Francisco, O Clara optical component technology not to be sold to companies like z t E. What is the position of Luxembourg? Does it feel as if it's between a rock and a hard place, because a lot of times these rules and regulations will make it more difficult for country companies

all over the world to do business with other companies. Yes, I think there's a few issues that need to be covered here about your question, which is a very legitimate and obviously a country like mine is for open trade as far as possible, bringing down trade barriers and other obstacles, and and also making sure that the EU s such doesn't build fences and and go to protection is to

So that's the general principle. Having been a diplomat I for twenty years, I very well know that some strategic material cannot be sold to other countries, So I think you have to put this in parallel. Open trade is one thing, strategic issues is another. We're a member of NATO, We're going to complay comply with NATO rules obviously, and we need to abide by those sorts. You know, as we talk about trade concerns, and know the ECB members have been raising the issue that any trade skirmish could

potentially slow growth. We are getting some disappointing numbers out of the European region today. We saw slowing inflation throughout. What do you make of this? Are we seeing sort of the peak of of the growth cycle in Europe? Oh? I think it's a really a little bit earlier or hasty to draw that conclusion based on a few weekly or monthly figures. I mean, the i m F came

out with new figures of growth for Europe yesterday. I'm going to tend the spring meeting of the IMF tomorrow in Washington, and for Europe the growth is forecast to be three point sorry two point four percent this year, slightly higher than anticipate it. And it's going to be three point eight percent worldwide, do mostly to a pick

up in international trade and a pickup of investment. And if I look at Europe, growth has only been back since one year one year and a half, so our economic cycle is younger than the one in the United States and then I must say, with the very accommodative monetary policies that we have in the United States and Europe, this is obviously underpinning growth and international trade in the future. So I'm more optimistic, fabulous Pierre Gravenia, thank you so

much for being here. Pierre Grams, Minister of Finance for Luxembourg, joining us on his way to the I m F meeting, where no doubt they will be speaking about all of these issues growth, trade, headwinds the like will be hearing more, I'm sure as they meet. It has become something of a playground brawl that has entered the upper echelons of

major Wall Street firms. I'm talking about Blackstone and Goldman Sachs, and I'm talking about a deal having to do with credit fault swaps related to have Nanni in New Jersey's biggest home builder here to talk about. The latest in this saga is Shradaratarajan, who has been covering this amazingly uh and joins us now he covers all things having

to do with credit for Bloomberg. So shri this out for us with respect to a particular lunch that recently took place right and I think we've discussed this a little bit a little bit before, but really what this goes back to is this sneaky, knotty trade that Blackstone struck up at the end of last deal with a almost bankrupt company where they get paid out on some insurance like derivatives. The only problem Goldman is on the other side of the trade and they're not quite fans

of this trade. We've already seen lawsuits lapped on this case. Blackstone has been accused of fraud in manipulation. But at the same time, those guys on the other end who might have to make big payouts to Blackstone want to

make sure they can avert that outcome. So when Lloyd blankfind met John Gray, the next head of Blackstone, and I'm assuming it was a regular relationship builder meeting just to talk about all things under the sun, how they could do a little more business together, this little deal came up and as you can imagine, it probably got a little awkward. What kind of money are we talking

about here? And that's the amazing thing here. That company that we're talking about as a market gap of on the three million what's at stake for Blackstone and Goldman is a decent amount of money. For Blackstone, this could be hundreds of million dollars and pay out for Goldman the losses could be would likely be south of a hundred millions, if at all. But but what's weird is no one wants to back down. And I guess, uh, when you think you're right, when you think the other

party is wrong, why back down? And the takeaway from me is when elephants go to fight, it's the eagles that get trampled. Well, yeah, that's what That's what I was going to ask you. I mean, how much is this just a chess game among people who are brilliant as children at chess and are still brilliant at chess, and they want to outsmart one another and the stakes are just going up and up? How much is that

really what we're watching here? That's what it truly feels to me, Like, clearly Blackstone did something which is not a ordinary trade. But they did they do something that falls outside of the playbox. These guys get to play, probably not at least the judges. So far, the legal argument doesn't seem to indicate that. And we will see how this spanard over the next couple of months. But it does feel like a bit of I've been outsmarted. I need to head back, but just sort of to

to follow onto what you're saying. The stakes seem to be raised increasingly. They're already has been some withdrawal from from government sacks on the part of Blackstone, correct. I mean they've already reduced some of their business as a result of this trade, right we we've certainly seen that GSO, which is the credit on of Blackstone and is the principle on the opposite side of government on the trade, has already cut back on some of its trading with

Goldman sax And. And remember Blackstone is a large, massive, important client for all of the banks, and there are some people within government who are nervous that if this situation escalates further, you could see a further pullback in the business from them. What was the actual business that went wrong with her Nanian? Yeah, it's a home builder in two thousand and like most other companies, too much dead recession that got them into a lot of trouble

back then. Through that period, Blackstone had previously done financing for them, But ten years on, this is more not so much more about what's wrong with the business. It's about how we can help you. But first we want to make sure we can make a good amount of money on side bets that we have on the company. When is this whole affair going to get wrapped up? I would like to think fairly soon. But that's what I thought my life. We we have some interesting day

key dates coming up. May first is when the company, you know, defaults on a bond payment, which is critical to the deal that black Stone struck up with this company. After that you have a thirty day period. This then goes through a trade group and the body determines who who owes whom how much. And that's when this will pan out. And I think it's going to get It's going to get a little bit uglier. What about some of the other companies that are involved here, the hedge

funds and such? Have they pulled back from Goldman? Are there on the same side as gold Man? Well, some of them are on the same side as Goldman. There are some folks who have even jump sides in the last four or five months. Again, like you saidly so this is this is as much as people want to get indignant about how right is it? Is it fair people also want to make money, and if they were on one side of the trade, they have jumped to the other side as long as they've spotted an opportunity

to make money. Fair Okay, I think we'll just fair. I guess it's really about what you can prove and what you can do when you when you go to court with the lawyers, and they'll all make some money. Thanks very much. A Street not Rag, and he is our high yield debt and syndicated loan reporter. It's sort of like writing a soap op right in a way. I much appreciated the great story on the Bloomberg. Thanks

for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.