DAGEN: BREAKING NEWS RIGHT NOW,
TENSIONS RISING IN THE GULF
FOLLOWING THE TANKER ATTACK NEAR
IRAN.
THE U.S. RELEASING THIS NEW
VIDEO OF WHAT IT SAYS ARE
IRANIANS REMOVING AN UNEXPLODED
MINE FROM ONE OF THE VESSELS.
THIS COMING AFTER SECRETARY OF
STATE MIKE POMPEO PLACED BLAME
ON IRAN FOR THE ATTACKS.
>> IT IS THE ASSESSMENT OF THE
UNITED STATES GOVERNMENT THAT
THE ISLAMIC REPUBLIC OF IRAN IS
RESPONSIBLE FOR THE ATTACKS THAT
OCCURRED IN THE GULF OF OMAN
TODAY.
THIS ASSESSMENT IS BASED ON
INTELLIGENCE, THE WEAPONS USED,
THE LEVEL OF EXPERTISE NEEDED TO
EXECUTE THE OPERATION, RECENT
SIMILAR IRANIAN ATTACKS ON
SHIPPING AND THE FACT THAT NO
PROXY GROUP OPERATING IN THE
AREA HAS THE RESOURCES AND
PROFICIENCY TO ACT WITH SUCH A
HIGH DEGREE OF SOPHISTICATION.
DAGEN: IRAN DENYING
INVOLVEMENT, SAYING THIS MORNING
IT IS RESPONSIBLE FOR THE
SECURITY IN THE STRAIT OF HORMUZ
AND CALLING THE UNITED STATES'
MOVE TO BLAME IRAN ALARMING.
JOINING ME NOW, GLOBAL ECONOMICS
EDITOR FOR THE WALL STREET
JOURNAL, JOHN HILSENRATH.
THIS IS AN ECONOMIC STORY FOR
THE UNITED STATES AND FOR THE
GLOBE.
WE SAW A BIG MOVE-UP IN OIL
PRICES YESTERDAY.
HOW DO YOU ASSESS IT?
WHAT ARE PEOPLE TELLING YOU?
>> WELL, YOU KNOW, WHAT I FIND
REMARKABLE ABOUT THIS EVENT IS
WHAT DIDN'T HAPPEN.
IT'S TRUE THAT OIL PRICES MOVED
UP BUT THEY REALLY DIDN'T MOVE
UP VERY MUCH.
IF YOU THINK WHAT WOULD HAVE
HAPPENED 10 YEARS AGO IF WE HAD
TANKERS BEING SHELLED LIKE THIS
IN THE STRAIT OF HORMUZ, YOU
WOULD BE LOOKING AT MAJOR
INCREASES IN OIL PRICES AND I
THINK THE REASON THAT'S NOT
HAPPENING RIGHT NOW IS BECAUSE
THE UNITED STATES HAS A SHALE
BOOM GOING ON.
IF YOU ACTUALLY LOOK AT DOMESTIC
SHALE PRODUCER STOCKS YESTERDAY,
THEY ALL WENT UP.
THE U.S. SHALE BOOM IS
INSULATING THE U.S. ECONOMY AND
FINANCIAL MARKETS FROM EVENTS
LIKE THIS, WHICH IS REALLY GOOD
NEWS FOR THE U.S. ECONOMY, FOR
THE GLOBAL ECONOMY.
ONE OF THOSE TANKERS WAS A
JAPANESE TANKER.
THIS COULD BE PROBLEMS FOR OTHER
COUNTRIES THAT DEPEND ON GULF
OIL.
DAGEN: I'VE BEEN SAYING THIS
FOR YEARS AND YEARS AND YEARS,
AS LONG AS I'VE BEEN CERTAINLY
ON TELEVISION, ABOUT THE
IMPORTANCE OF OUR ENERGY
SECURITY.
ENERGY SECURITY IS NATIONAL
SECURITY.
AND TO BASICALLY THE MORE OIL WE
CAN PRODUCE, WE DON'T HAVE TO
WORRY ABOUT A SUPPLY DISRUPTION,
NUMBER ONE AND WE ALSO HAVE
GREATER CONTROL AND POWER OVER
THESE NATIONS, THESE OIL
PRODUCING NATIONS THAT HATE US,
LIKE IRAN.
>> RIGHT.
IF IRAN DID THIS, AND THAT'S
WHAT SECRETARY POMPEO SAID, I
DON'T THINK ALL THE EVIDENCE IS
IN, BUT IF IRAN DID THIS, ALL
THEY'RE REALLY DOING IS HURTING
THEMSELVES AND HURTING OTHER OIL
PRODUCERS IN THE GULF NATIONS.
BECAUSE ANYONE LOOKING FOR A
STABLE SOURCE OF OIL SUPPLY IN
THE WORLD RIGHT NOW HAS TO BE
LOOKING AT THE UNITED STATES.
AND WHEN YOU LOOK AT WHAT'S
GOING ON IN VENEZUELA, THE
POTENTIAL FOR TRANSPORTATION
DISRUPTIONS IN THE MIDDLE EAST,
THE U.S. IS A STABLE
DISTRIBUTOR.
AND I THINK WE'RE ALSO -- THE
UNITED STATES IS STILL BUILDING
OUT ITS INFRASTRUCTURE.
WE'VE GOT PIPELINE
INFRASTRUCTURE GOING UP.
THIS GOING TO MAKE IT EVEN
EASIER TO SHIP FROM THE PERMIAN
BASIN IN THE MONTHS AND YEARS
AHEAD.
SO AGAIN, IT'S REALLY REMARKABLE
TO ME.
I THINK 10 OR 20 YEARS AGO I
WOULD BE SITTING HERE TODAY
SAYING THIS COULD BE THE KIND OF
THING THAT COULD CAUSE A
RECESSION.
AND TODAY I'M SAYING IF YOU LOOK
AT WHAT HAPPENED AT 10 YEAR
TREASURY YIELD, STOCK PRICES,
OIL PRICES, IT DOESN'T REGISTER
ON A ONE MONTH OR THREE MONTH
BASIS, IF YOU LOOK AT CHARTS
OVER ONE OR THREE MONTHS.
YOU DON'T EVEN SEE THIS EVENT
YESTERDAY.
DAGEN: WE ARE THE WORLD'S
NUMBER ONE OIL PRODUCER.
WE PRODUCE MORE OIL THAN EVEN
SAUDI ARABIA AND RUSSIA, I THINK
BASED ON THE MOST RECENT
INFORMATION, AND OIL IS STILL --
EVEN THROUGH YESTERDAY'S CLOSE,
IT'S STILL DOWN IN A BEAR
MARKET, IT'S DOWN MORE THAN 21%
FROM THE RECENT HIGH HIT IN
APRIL OF THIS YEAR.
I WANT TO MOVE ON TO TARIFFS,
HUNDREDS OF AMERICAN COMPANIES
INCLUDING WALMART, COSTCO,
TARGET, SENDING A LETTER TO
PRESIDENT TRUMP, WRITING AGAINST
TARIFFS.
THE WHITE HOUSE ECONOMIC ADVISOR
LARRY KUDLOW SPEAKING YESTERDAY
ABOUT THE UPCOMING G-20 SUMMIT
AND POTENTIAL MEETING BETWEEN
PRESIDENT TRUMP AND CHINESE
PRESIDENT XI-JINPING.
LISTEN TO THIS.
>> PRESIDENT TRUMP HAS INDICATED
HIS STRONG DESIRE FOR A MEETING.
BUT THE MEETING IS NOT YET
ARRANGED FORMALLY.
HE'S ALSO INDICATED THAT IF THE
MEETING DOESN'T COME TO PASS,
THERE MAY BE CONSEQUENCES.
BUT HE WOULD PREFER THE MEETING.
DAGEN: ONE OF THE WORLD'S
LARGEST CHIP MAKERS, BROADCOM,
CUTTING ITS REVENUE FORECAST,
AMOUNTING TO $2 BILLION IN LOST
SALES AS A RESULT OF BANNING
CHINESE TELECOM GIANT, HUAWEI.
THESE ARE THE TWO FRONTS.
AGAIN, THE TARIFF FIGHT AND THEN
CRACKING DOWN ON THE ESPIONAGE
AND THEFT BY THE LIKES OF
HUAWEI.
YOUR REACTION TO BOTH OF THOSE
STORIES?
DOES IT DO -- DOES THIS DO
ANYTHING?
A WARNING FROM A MAJOR CHIP
MAKER AND THEN ALSO PUSHBACK
FROM THESE U.S. CORPORATIONS.
>> WELL, YOU KNOW, I THINK THE
PRESIDENT IS COMFORTABLE WITH
WHERE HE STANDS ON TARIFFS WITH
THE CHINESE.
HE TRIED TO USE TARIFFS WITH
MEXICO AS A LEVER IN THE
IMMIGRATION DEBATE AND HE KIND
OF GOT A LOT OF BLOWBACK ON
THAT.
WHEN IT COMES TO CHINA, THE
PRESIDENT'S VIEW IS IT'S RAISING
A BUNCH OF REVENUES.
THERE'S DEBATE GOING ON ABOUT
WHETHER THAT'S A TAX ON U.S.
CONSUMERS OR A TAX ON CHINESE
COMPANIES.
BUT I THINK HE'S COMFORTABLE
WITH WHAT'S HAPPENING.
THE FACT OF THE MATTER IS, WE'RE
NOT SEEING TARIFFS ON CHINA SHOW
UP IN CONSUMER PRICES AT THIS
POINT.
ALL THE INFLATION DATA ARE BELOW
THE FED'S 2% TARGET.
I THINK THE PRESIDENT FEELS LIKE
HE STILL HAS LEVERAGE IN THIS
DEBATE WITH THE CHINESE AND HE'S
GOING TO TAKE HIS TIME AND LET
THIS THING PLAY OUT.
DAGEN: MOVING ON TO THIS, YOU
BIG NERD.
I SAY THAT AS YOUR FRIEND.
THIS IS INCREDIBLE, IN THE WALL
STREET JOURNAL TODAY IT'S AN
ARTICLE THAT YOU CO-WROTE WITH
KATE DAVIDSON.
AND THE HEADLINE READS HOW
WASHINGTON LEARNED TO LOVE DEBT
AND DEFICITS.
HERE'S PART OF WHAT YOU WROTE.
MOODY'S PROJECTS WITHIN A DECADE
INTEREST PAYMENTS WILL CONSUME
MORE THAN 20% OF FEDERAL
REVENUE.
WELL ABOVE MOST OTHER DEVELOPED
NATIONS.
AND EXCEEDING U.S. LEVELS IN THE
1980s AND 1990s WHEN DEBT
WORRIES CONSUMED WALL STREET AND
WASHINGTON.
ALAN SIMPSON, RETIRED IN WYOMING
ANTICIPATES A RECKONING.
IF YOU SPEND MORE THAN YOU EARN,
YOU LOSE YOUR BUTT.
AGAIN, THIS IS ALSO -- YOU WRITE
ABOUT THIS.
YOU CALL IT A MINI REVOLUTION IN
ACADEMIA WHERE LEADING SCHOLARS
ARE DEBATING WHETHER WE CAN RUN
THESE HIGH DEBT LEVELS AND HIGH
DEFICITS.
>> WE TALKED ABOUT THIS A LOT ON
MARIA'S SHOW.
THE KEY FACTOR HERE IS WHAT'S
GOING ON WITH U.S. BORROWING
COSTS.
10 YEAR TREASURY YIELDS ARE NOW
NEAR 2%.
THIS DEFIES EVERY PREDICTION
THAT EVERY ECONOMIC MODEL HAS.
WHEN BORROWING -- WHEN
GOVERNMENT DEBT SOARS LIKE THIS,
THE MODELS SAY THAT INTEREST
COSTS SHOULD INCREASE AND THAT
CORPORATE BORROWING SHOULD BE
CROWDED OUT BY GOVERNMENT
BORROWING.
AND IT HASN'T HAPPENED.
RIGHT NOW, THE GOVERNMENTS'
INTEREST PAYMENTS ARE BEING HELD
DOWN BY VERY LOW INTEREST RATES
AND CORPORATE BORROWING IS
BOOMING, EVEN AS GOVERNMENT
BORROWING IS BOOMING.
AND SO THERE'S A REAL SENSE OF
CHOOSE YOUR TERM.
YOU COULD SAY COMPLACENCY IN
WASHINGTON OR YOU COULD SAY
COMFORT THAT THE HIGH DEBT
LEVELS AREN'T A PROBLEM FOR THE
UNITED STATES GOVERNMENT.
WHEN I TALK TO PEOPLE LIKE ALAN
SIMPSON, VERY COLORFUL GUY YOU
SAW FROM THAT QUOTE, WHAT THEY
WORRY ABOUT IS THAT THIS COMFORT
LEVEL IS GOING TO GO AWAY SOME
DAY.
INTEREST RATES, THEY'RE 2%
TODAY.
THEY COULD BE GOING HIGHER IN
THE FUTURE.
AND THEN WE'RE TALKING ABOUT A
REAL PROBLEM.
DAGEN: IN ALL YOUR REPORTING,
AND YOU GO INTO DETAIL AND I
ENCOURAGE EVERYONE TO READ THE
STORY IN TERMS OF JUST OUR
INTEREST COSTS, THE INTEREST ON
OUR DEBT, THE AMOUNT OF MONEY WE
SPEND, IT'S GOING TO SWAMP
MEDICAID THIS YEAR AND IN FIVE
YEARS IT'S GOING TO TOP WHAT WE
SPEND ON NATIONAL DEFENSE.
DO PEOPLE THINK THAT THIS COULD
BASICALLY -- THAT LONGER TERM
INTEREST RATES, ALL OF A SUDDEN
COULD SNAP BACK WHERE THE
GOVERNMENT AND ALL THOSE IN
CHARGE OF THIS FEDERAL BORROWING
ARE SHOCKED AND THERE IS A
GLOBAL ECONOMIC SHOCK, IF YOU
WILL?
>> THIS IS WHERE THE DEBATE IS
GOING ON IN ACADEMIA.
WHAT THE ECONOMISTS HAVE WOKEEN
UP TO IS THE FACT THAT INTEREST
RATES HAVE TENDED TO BE LOWER
THAN THE ECONOMY'S GROWTH RATE
FOR MOST OF THE POST WORLD WAR
II PERIOD INTEREST RATES HAVE
CONSISTENTLY DEFIED EXPECTATIONS
FOR THAT SNAPBACK THAT YOU TALK
ABOUT.
AND SO THE IDEA IN ACADEMIA IS
MAYBE ALL THIS DEBT ISN'T A
PROBLEM BECAUSE THE ECONOMY
KEEPS GROWING FASTER THAN THE
INTEREST COST IS COSTING US TO
MANAGE THE RISING DEBT.
WELL, THE WORRY IS THAT ONCE YOU
RECOGNIZE SOME PATTERN, LIKE
INTEREST RATES TEND TO BE LOW,
THEY DEFY THAT EXPECTATION AND
SMACK YOU IN THE FACE.
THE WORRY IS THAT INTEREST RATES
ARE GOING TO SNACK
ARE GOING TO SNAPK
ARE GOING TO SNAP BACK AND SNAP
US IN THE FACE.
PEOPLE HAVE BEEN PREDICTING THAT
FOR YEARS BUT IT HASN'T
HAPPENED.
DAGEN: I SAID NERD BUT YOU KNOW
WHAT I THINK OF YOU, AND YOU
ARE, YOU'RE ONE OF THE BEST