The Geopolitical Order Tipping Point with Bremmer

just a case of left and and right. It's globalism versus nationalism, the conflict between the citizen of the state. It often comes down to us versus Them. That's the title of in Bremer's new book, Us Versus Them, The Failure of Globalism. And I'm pleased to say that the Eurasia Group founder and President joins us now here in New York and good morning and congratulations to you. Thank you having it told me about the essence of this

book and why this is some important to you right now. Uh, it's important because I've never experienced our country so divided. And when you travel you go to Europe and increasing the other countries too, you feel it there and and that's happening when the global economy is doing better than at any point in over a decade, which means that we are getting something fundamentally wrong in liberal democracies with

our citizens. In fact, the only country among the advanced industrial democracies that you're not experiencing this is Japan, where they have no immigration and where the population is shrinking incredibly rapidly, so per capita. They feel like they're doing great. But it's not just economics, right, It's much deeper than that.

It's about security, um, It's about identity and culture and society, and and it basically is saying that the values that the United States has been promoting, both at home and abroad since after World War Two just don't apply to the average person anymore. And that's why we got Trump and Sanders, and that's why you got Brexit. And it's

just picking up momentum, it's not getting fixed. And your point in the book, really in the conclusion, is that the president the United States, President Trump, didn't create US versus them. Us versus them created President Donald Trump. It created the the outcome of the Ukit the Brexit decision as well, and these necessarily negative outcomes, as far as you're concerned, and I think they are because Trump's solutions

are more divisive. No, no one is better at painting us versus them than Donald Trump is America First is in a sense and encapulation of that um and everything he says about Mexicans. We need to build a wall, it's a fake news, and how everyone is a winner or a loser. He's doing that and facilitating a deepening of divisions that have already made us no longer understand what it is the United States fundamental he stands for.

And that's happening in a world where China has the strongest leader they've had since Mao, and the Chinese know exactly what they stand for and they're building it long term. This is a it's a profound tipping point in the geopolitical order, and it really is um forces I think us all to look at what kind of society we

want to build here in the United States. Perhaps importantly that in what has happened and why this message resonates with so many different people across the planet right now is because previous administrations have completely failed to insulate large sweats of society, whether it's in the United States, the UK, and across much of Europe as well insulate them from the negative impact of globalization. Previous administrations are quite clearly

failed to do that. I mean even Obama, who was voted for precisely not as a Democrat, but because he was. He beat Hillary right, because he was a first term senator, first black man. Everyone thought, here's a new guy that we can all have hoped for. And yet the swamp

could not be drained his ability. I mean a little things like saying I'm not going to pay for pix up, pay for play for American ambassadors around the world, to big things like building infrastructure, improving education, dealing with gun control in the poorest areas of the country. Couldn't get it done, and so a lot of people got disappointed. A lot of those Obama voters went to vote for Trump,

some went to vote for Sanders. They're gonna be disillusioned again because in four and eight years their situation isn't going to be better. So we have more and more people in America saying should I bother voting at all, More and more young people saying the system is rigged and I'd rather have a military dictatorship than have a

democracy because this system doesn't work for me. More and more people willing to vote outside of the elites and the establishment, thinking that the business community, the political community, the media, the public intellectuals are all in it for themselves and no one cares about them. And that's odd viously happening across Europe to this is not just an

American phenomena. So what's the solution. Well, in the near term, precisely because it's not a crisis and the elites aren't experiencing any trouble themselves, especially because the economy is doing so well. It's a combination of candy to keep people happy right now. So let's give everyone a tax break. Let's blow out the budgets, even if the bill is going to come do in a very serious way on the back of the working class in five or ten years. Let's just throw some cash at them now, and it's

build walls, it's divide people more effectively. The long term solution is you need to change the social contract. The long term solution, especially with technology facilitating divisions and fake news within our countries, are liberal democracies and a new industrial revolution or post industrial revolution going to take displace so many people in terms of automation, artificial intelligence. The long term is a would would require something very new.

Deal like would require the kind I mean, there's no magic in the fact that we need serious investments in infrastructure and education the rest. But Trump Trump did Infrastructure week. It was a failure, became the butt of jokes, while Trump does US versus them every day. One thing the president has done that most people would agree with is is take on China and try and break the status quo that has shaped the global economy. The Chinese do not abide by the global rules. They don't go by

the mantra of free trade. They have their own rules. They played by their own book. Correct. Do you think the president is going down the right path there trying to break up what has been a country that has really been elitch on the global trading system for for much of the last decade. I'm conflicted. I mean, first of all, it is true that if we have a trade war with the Chinese, we both lose, but we win against the Chinese. In other words, they'll get a

lot more hurt than we will. They know that, so our ability to push them and get them to actually be flexible with us is significant, and Trump has already had some success there. My problem, Blom is that if you want to beat up on the Chinese for deserved reasons in terms of intellectually property stealing, no reciprocity and market openness of the rest, you really want allies. You really want the Europeans with you, You want the Japanese

with you, and and Trump just doesn't trust multilateralism. He wants to do this himself. This is critical and it goes to work with your colleague Robert Caplan in his book The Return of Marco Polo. You've got a great section on, for example, Indonesia, or you could speak about the New Vietnam as well. Are those allies we have the ability to speak to as we look at the South China see the major conduit for oil and goods in the Pacific some call Caplin calls it China's Mediterranean.

Does a president even know where the South China see is on the map? They used to be allies that we could speak to more effectively withdrawing from the Trans Pacific Partnership than dangling it for a second and then saying nah doesn't help. Our military presence in the region, of course, is still dominant and beats the Chinese um except for you know, sort of really close to the

Chinese shores. That is changing. But you know the fact is that every day that we withdraw, every day that we say it's all about us, baby, we're not doing multilateral, is another day where the Chinese economy is more and more dominant over these countries due to Indonesia. What does our non engagement do. I'm just picking on the eye country to Indonesia. I mean it means that they recognize that one belt, one road is their marshal alone. It's

their marshal plan. They're not alone. The Chinese are prepared to throw an enormous amount of money and there's massive numbers of Chinese expats in Indonesia and the Philippines and Australia who are actually becoming the key business people in those countries. Five things you need to know to start your day. We do this with Brian Weezer Pivotal Squeezing. You know, five things, four things, six things. It's with

Brian Weezer. That's a good thing. Brought you by Interactive Brokers, rated number one best online broker two thousand eighteen and a top online broker for the eight consecutive year by Baron's visit ib k R dot com slash why I be to learn more? Brian Weiser, let's jump into it right now. Is a traditional ad business dead? Disney Access, traditional TV? This that Martin Sorel the gossip of your industry is mad been dead? The TV series? No, you know,

I think advertising is in a constant stative evolution. Um. I think sometimes we you know, how often have we heard the phrase the world's changed more in the last five years in the last fifty to which I sat? Anyone prove it quantified? John? This is Brian's first time on radio. Would you move as Mike's by him? Are you okay over there? I'm good, I'm gonna have radio. Guy has been on the Times of Times, c I, t R Vancouver. I used to be the president Society there.

Did you get that we got? Brian knows what he's doing. Is the business? No, it is not. I think that there are a number of challenges in a number of different parts of the industry, and unfortunately a lot of the numbers are often obscured. The agency space, for example, is obscured by the fact that we can't see what the media agency business is doing separate from the creative agency business. Um, we can't see the degree to which individual clients are experiencing like for like fee pressure or

putting like for like fee pressure on their agencies. Um. When it comes to traditional media, there is weakness, but is the melting ice cube when it comes to TV advertising for example, Uh, it's you know, a negative two percent number. It's not going away. It remains the least batt alternative for the largest advertisers. But UM, you know, all this stuff is moving just very gradually. Can we

get yourself on Facebook? One of only two cells on Facebook forty two buys two holds and it's you and Simon Baker over at Solk gen Um with two sounds on Facebook? What do you see that the bulk of the analyst community aren't getting as far as you are concern the single biggest issue for Facebook that most people do not appreciate. And let me clarify, I'm I'm no perma bear on Facebook. I had one of the highest price targets on Wall Street at the end of UM.

But certainly there's a mismanagement issues that have come to light over that period of time. The data privacy issue is merely a symptom. I think mismanagement of the company is a risk, not something we're seeing in the numbers. Clearly, the biggest single problem facing Facebook is the limits to growth that are available to them. In other words, the

advertising industry has not expanded faster than it otherwise would have. Doo, I don't know my face, I like you know, I got a big fine blah blahlah I never I never go to never. All due respect, though neither of you nor me, none of us matter. The consumer is the advertiser. It doesn't matter whether or not we're there. It matters whether or not it's the least bat alternative to a digital to an advertiser has a digital budget right the fact that we're not, When did they change their behavior?

That's the money question. When a lot of people reduce their time on the platform substantially, that would be a catalyst for change. But I think the bigger, more pressing issue is that there's only so much that they can increase their spending, and not a kind. It's only so much that you can increase your spending because the total pie for advertising is relatively fixed. That is the sync biggest thing that most Twitter take out, they finally get

taken out stocks, better, income statements better. Is this not the time they go? I mean it can always be. It's always a possibility. Um, certainly, I think risks are still to the downside for the stock. I think there's a lot of positive things to read through from yesterday's numbers, but not right away. I just got an email from a listener cave we love the Cavy is listening at this morning. She said, well, you could have taken me

to work. I go, but you're not my daughter. So the youngest one emails in and goes, you didn't let me come to work because ran fell you is styling? So major it is it? Bring your challenge to excuse me if you bring your issue, if your royal like a royal baby, isn't issue to work. We should have brought the dog to work. Can I just say, get that bill to come in later? Can we get vet better the next hour? Can I just say, Ryan, you fell you is styling today at work with her dad?

This is Bloomberg wonderful to have. I brought a gallo with us with wonderful wisdom on fixed income dynamics and the interdependencies of what we see not only in Europe but in general UM as well. Alberto Gallo, I guess we have caution, but we have an unchanged confidence. How could we have it both ways? A good morning from London. I think what Drug is essentially saying is that a bit like us, they have no idea why the data has been slowing in the first quarter. So it could

it could be the weather. It could be easter, could be that a lot of people got sick because the weather was too cold, or it could be lower demand. Now, if if this was just a soft patch, we would have had some signs of mean reversion, uh, and we're not getting that. And I suspect that given the trade conflict, the slower you know, the tougher negotiations with Asia and some other economies in the world that are also slowing, you know, this may be something a bit more structural

than just a soft patch. And the question is has the ECB missed the train on raising rates? Do they have enough time to realize rates in the next twenty four months before Mr Druggi leaves. I think they won't be able to do a lot. I think they will barely manage to normalize the deposit rate to zero. I mean, I look, Alberta at the dynamics here, the market speaks. You are so good at the interdependencies of the European markets. What is the market telling you when you take the

fixed income market, when you fold in CDs. Is the confidence there in the markets on European growth? Europe is growing, but um, the marketing fixed income it's looking for places to hide. We know that data in the US is strong. We saw the jobless claims are you know, one of the lowest numbers of the past few years. It's the lowest since nineteen I think just came up a bit earlier. Um,

so do you do? US economy is doing well, the FED is going to continue to hike, and fixed income investors are looking for um pavens or places too high, and Europe is one of them. So what happens is if growth in Europe is softening, you know, people are buying bones, but also BTPs, Portuguese bombs, Spanish bonds, and you know, I think until DCB remains quiet, and I think they're going to remain quiet for a bit longer. Okay,

they're gonna remain quiet. I get all this, and then whether you know, the banks are all the same, Alberto, there there betwixt by inflation or non inflation, and they're all struggling with their crystal ball and what they're gonna do with it. The money question is what will be the exaggerin in shock that changes this measured pace of a measured belief. Is that what we're waiting for is some exoggerin is shocked like oil. We could have a

positive shock to inflation. I agree, there could be you know, rising oil and and you know supply constraints or the U S economy accelerating. However, I'm starting to worry about negative arks too, I know. Such you know, you say, I'm more and more about the negative side. But you know, geo political risk. If you have a two high spike in oil, that can also constrain growth, fell a supply shock with oil spike into a D plus, so geo political tensions you run Turkey, Russia, UM, and also the

global imbalances. You know, we focus a lot on growth, on the on the changes in growth, on on unemployment changes. But if you look at the stock of debt in the US, the stock of consumer debt in the UK, of the stock of sovereign debt in Europe and Italy. So the stock variables are still very bad. What we have to think about if something goes wrong like in February, you don't have a lot of room, a lot of leeway. You know, recovers don't die of old age like um

miss Ellen used to say. But if you're ninety nine years old and someone pushes you over you you know you just have a little bit of of of room dollar weakness and some euro strength up to two or seven pim near the hotel. Yeah, well, I don't I just want to know a great question. I just don't understand. Why would you buy a tenure Spanish bond at one when you can buy a US tenure just under three percent and you have a euro? Come on, how did

that make any sense? If you if you convert euros to dollar, you know that you know the dollar yields roughly three percent, right, and you were yield zero. But if you buy European sovereign bond you converted two dollars, you get that three percent on the top of the yield that the European bond gives you. So for example, b dps ten year an hour at one point seventy four. If you buy it and then hedge the euro in two dollars, you're getting close to five. Okay, there's that's

that's attractive. There's a pro anthematics, a bird o piment a really good observation, which I believe Mr Drogs Italian. Does he have any kind of domestic constituency where he would run for prime minister in Italy? So there's been this discussion. I don't think he would like to go back um at the moment, given the um, you know, political confusion. I do think that he would be a great candidate for European you know, for for European role,

uh you know. And I hope as a European cities and that he continues um you know, European Institute, maybe on the fiscal side, like you know, finance men or or European Commission President. Alberta Golos thank you so much today as we see the euro surge here coming off of dragon comments Mr Glos with Algebras and we greatly appreciate his interest. Tom, do you know why you're able to buy products let's say they are made in China and have them ship to the United states and why

they's so cost effective for those companies. How has to do with postal rates? Has to do with the cost of actually making that shipment happen. Here to tell us about those kinds of details is Cheryl Bolm. He is Cheryl is Bloomberg's own government White House reporter focusing on trade. And Cheryl, thanks so much for being with us. Tell Tom exactly what this all has to do with the U S Postal Service and the cost of delivering shipments

both domestically and internationally. That's right, This is this is not a new issue, but it's certainly one that has come up very suddenly, and especially for US manufacturers. UM, there's been increased focus on the US Postal Service. The President has been tweeting about it in order to reform UM.

But really, what what manufacturers, the US manufacturers have discovered is that, especially with the rise of e commerce and the ability of consumers to just go on line order whatever toy, whatever products they want, UM that uh, these a lot of these products are being shipped from China for free. And why is that? Explaining the detail what happens? Tom King goes online, he wants another bow tie and it turns out that it's going to be shipped from Shanghai.

Why is it less expensive to get it from Shanghai than it is from let's say, Chapel Hill from across the street. That's right, um. And so this goes back to UM, a very very old organization called the Universal Um Postal Union, which is headquartered in Switzerland and it's part of the United Nations now it's a u N group and they get together every four years and they set postal rates for the delivery of of foreign mail.

And so uh what happens is is China or any other country their product um to US border and then the US Postal Service then takes that and delivers it to the to the final destination. They are paid that

US Postal Services paid a See, it's called a terminal do. Uh. The terminal do system is set by this Universal Postal Union and basically different countries are put into different categories really based on how developed they are, China being one of the countries that is considered developing and they get a very very low rate. So how much does it cost to ship to ship the bow tie from China versus shipping it from across the street. Well, there there

are a couple of factors in play here. There's concerned by manufacturers that China itself, China Post is subsidizing the the first leg getting it from China to the United States. Um. But really one of one of the Manu factors I talked to said that for him, he's based in New Jersey and for him to ship a package to California would cost about eighteen dollars, whereas his Chinese counterpart would pay about three dollars and seventy cents for that same

package o bucks versus under four bucks. That's right. That's that's has been his experience, and he pays to get the package across the Pacific Ocean that would be the foreign post. And so that in this case the China Post. Um, there's concern that the Chinese are subsidizing. I mean, I mean to explain this year on the time we've got left, and this is critical. It's just a classic linear sequence problem. The bottom line is possibly the Chinese postal system is

subsidized by the government. So the transfer from Shanghai to Long Beach is dirt cheap, right, That's that's correct. And then when we pick it up at Long Beach or Irvine or wherever. It's essentially an unsubsidized postal event in the United States of America. That's right, The U S Postal Services is losing a lot of money. What do we do about this, because we're not going to tell the Chinese what to do. No, we can't. We we

have no control of the Chinese UM. But there is legislation that has been introduced um in the House by Representative Kenny Marshawn and in the Senate by Senator Bill kat to have the State Department eliminate that subsidy and bring up the rates UH for for the internal delivery and within the United States at the same rates that the US Postal Service charges domestic UM US users mailers. So there might be some remedy to this. There might

be some remedy. It's going to take an international agreement though, and it involves the Secretary of State that negotiates on the happy United But you know, we don't have time for the bottom line is the foreign the foreign postal services are totally subsidence logistic subsidy. There's not this delusion of profitability that you have in the United States. Cheryl, that was fabulous. Thank you Cheryl Bowlin. Greatly appreciated with

Bloomberg government today. Really that's not James Albert Tyne. Thrilled to have him with us with consumer Edge and this is on the auto business. But we wanted to go further as we're always striving to do at Bloomberg Surveillance. Is you know, one of the great things in America is take your daughter, take your sons, and even worse, pim take your twins to work. Take your twin. We have some twins. Mom is like, yeah, free because e free day. Dad brought the twins and McDonald and Liam

comes with us right now. You're out of Rumson, New Jersey, and your parents have an suv, right, big fancy car with lots of coffee cup holders in them. What do you put in the coffee cup holders in an suv? What do you put in there? Liam? Chocolate? Hot chocolate would be very good. What have you got any others you put in? Water? Do you like the water? Is it like Mom pours a cup of water or like fits the bottle waters perfectly? Um? Probably? Okay? One question

before you go to Mr Alberti Penguins Capitals. Penguins look good right, yeah they do. But the Capitals, you know, they're pretty good my second team, So it's tough for you. This series is gonna be tough. Okay, to the UN's brothers, thank you so much for coming in and giving us auto perspective here, and James, that goes to the lead of your note, which is cars are dead. I don't buy it. Why are Why are cars dead? Is it

because of hot chocolate in the coffee cup holders? Well, first, thanks for having me, and thank you because the Capitals are my favorite team killing this is fantastic. Let me explain yourself for a global audience and for Abbie Joseph Coney goldban Sex. The Penguins always win, continue understood, and and I've got three children, and so what I find in the cup holders of their cars, it's always pretty interesting.

But I think that you take cars are dead. Well, you just asked our our friend there and he mentioned in SUV. So you know, I think the headpoints to exactly the UH the crux of the story here. Segments UM are shifting. You can get the same fuel economy and a crossover utility vehicle now that you can UH in a mid size Sadan and I think consumers are waking to that fact that for a similar price and similar fuel economy, the tradeoffs are not the same UM

as they had been prior cycles. So I I think that you know, forward pulling back into I believe they said to car segments looking into the future, specialty cars like the Mustang, and I think, very good selling market share for them in the focus. UM. You know, that's that's a smart thing to do. GM doing some of the same. So I like that domestic O e M s because their mix is generally more lever to c u vs, SUVs and trucks. That's where the margin is.

That's where consumers are going, and that's where they already are. James, is that where the consumer is now? How does anybody know where the consumer is going to be in two to three years? Uh, that's a very difficult question. I agree, But I think look at the end of the day, we're monthly payment driven, UH, at least in the United States.

And I think as long as credit availability remains um through widely available across the spectrum and leasing and residuals hold up, UM, I think you could you know, these these O E M s are going to push more utility vehicles and UH and consumers will justify them because the payments won't get out of reach. So I think those two things together kind of answer your question, where's

your research on safety? What I see time and time again is the guys going the shop, and even if they don't mention in the store, they'll say, I want more weight to the car to protect the family. Isn't that still number one for so many people? Oh? Absolutely, I think safety ratings are critical, and I think you if you want to juxtapose that with recalls, it's a very interesting debate. Right now. We've seen you know, record

numbers of vehicle recalls out there. On the one hand, you might say that that's o e ms that are much more focused on continuing to test the structure of their vehicles, the the safety of their vehicles even after they've sold it. They're they're kind of buying into the long term safety, you know. On the other hand, you could point it maybe there's you know, bigger quality concerns.

Maybe they're pushing volume too quickly, you know. I think, you know the reality is we're going to get a lot more sensors, a lot more air bags, a lot more equipment on vehicles in the next kind of five to ten year period as we're transitioning into more of, if you will, an autonomous world. Now, I don't necessarily think we're going to go fully a v UM, but you know, I do think, UM, that's where a lot of the strategy is focused. It's this sort of semi

autonomous functions. So safety is first and foremost on the minds of O E M S. And I think that's exactly right. That's the great way to have market share because consumers are obviously focused on that as well. James, are there any estimates for how much a fully automated vehicle is going to cost? Uh? Nothing. I would say that's credible at this point in terms of cost to

the consumer. I mean, we would say that some of these test vehicles are well into the hundreds of thousands of dollars you know cost to the O E M S. But it's all about scale, and I think to get you to answer your question, we'd have to figure out, Okay, you know, how is this technology going to ramp over time and how is it going to UM start to penetrate sort of the the the commercial market UM, And so that you know we're going to hear more of that in a few minutes here from GM in terms

of the rollout of the Cruise Automation A v S and Lower Manhattan later this year and into next year. And that's going to drive the answer to your question more than anything else. We gotta eat your back, hunt. I really want to talk about the Ford Motor Company, the Ford Motors short after Molalley and some of the chances there. Jamie Alberton, thank you so much, greatly appreciate it. Consumer Edge Research, UM, this one really really appreciate it.

M Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.