190. Is Trump Already Surrendering to Iran?

16:46Katty Kay:What would you say, Cady?

16:48Anthony Scaramucci:What you mean in terms of how well positioned the American military is?

16:53Katty Kay:Yeah, so I'll start. I would say President Xi, I'm worried about their AI capabilities. I'm worried about our missile defense systems because they didn't work in the first couple of days of the war. I'm also worried about the way we're using AI relative to the US Pentagon's use of AI. But they are thin, are they not? From an arsenal perspective, are the Americans thin?

17:17Anthony Scaramucci:No, I think they are looking thin. And I think they've used an awful lot of weaponry and munitions and missiles up, but haven't defeated the opposition. I mean, that's the problem. That's why we're now in a position where the choice is between a long-term ground forces commitment, which the president doesn't want to make, more bombings, which has no guarantee of producing a better result than we've got right now, or a negotiated deal, which is what Barack Obama did over 20 months. And we'll end up with something that looks very similar to the JCPOA. Congressman Mike Turner, who used to run the Foreign Relations Committee, said to me very clearly, the one thing that Trump doesn't want is to be sending pallets of cash to the Iranians like Obama did.

18:07Anthony Scaramucci:It's the thing that he keeps mentioning. And it's no surprise to me that over the course of the weekend, Donald Trump is putting out cartoons denigrating all of Obama's negotiators because, projection or confession, this is what Trump does when he's in a difficult position. He attacks the people who've been in that position before. But they did release frozen assets and he's going to end up doing the same thing. He's going to end up releasing frozen assets because it's going to cost him. This defeat is going to cost Donald Trump in money and in uranium. I'm not sure that he's going to get the uranium deal that he thinks.

18:43Anthony Scaramucci:He's not even going to be able to come out of this and say, we got that enriched uranium out of the country, because I think it's going to end up with the Iranians quite possibly watering down the uranium inside country, and then they can spin it back up again quite quickly to get to weapons grade. And at the same time, not to mention all of the costs that you outlined.

19:03Katty Kay:Kenny, where do our Gulf allies stand? Where do you think they stood at the beginning of the war? What do you think the realism of the war, has that altered where they stand? And then where do you think they stand right now in terms of the peace process?

19:21Anthony Scaramucci:So at the beginning of the war, the UAE did not want this war. They realized that they were in a vulnerable position. Once the war had started, they wanted America to prosecute the war fully to make sure they eliminated the threat and didn't leave them sitting next to an even angrier tiger. So they are in a position now where they've actually been pushing Trump to go further and make sure the regime doesn't hold and get rid of the missile threat, which they are concerned about, and they want the Straits of Hormuz opened. They also want the nuclear threat off the table. So they've been pushing for that.

20:00Anthony Scaramucci:It doesn't look like they're getting that, so they're trying to make alternative arrangements of their own. You've now got a split in the Gulf between the Saudis and the UAE, which makes less of a coherent alliance for the United States. And meanwhile, you've got the Israelis telling everybody who will listen, we were closing up with the UAE and making Netanyahu visited there at the beginning of the war so that we could give them our defense capabilities, which puts the UAE government in a vulnerable position as well. There isn't a chance, Donald Trump was raising it over the course of the weekend, there isn't a broader Abraham's Accord with the Saudis signing up, the Pakistanis signing up, the Qataris signing up.

20:46Anthony Scaramucci:I don't see how that happens right now. There's too much crumbling of Gulf alliances and the Saudis have no interest in signing up to an Abraham's Accord at a time when the Iranians could be getting stronger. So I think that which was on the table. It was certainly very much on the table before October the 7th, because actually a lot of work that the Biden administration had done, the Biden team had really pushed the Abraham Accords and got it to a position before October the 7th where it looked like a realistic possibility. It now doesn't look like a realistic possibility, whatever Trump says over the course of the weekend.

21:21Anthony Scaramucci:Is that about where you think we are?

21:23Katty Kay:I think so, but I want to play devil's advocate. So we'll give Trump and Jared Kushner credit for the Abraham Accords. I think the idea of that was very positive. And the move was to eventually have Saudi, where Mecca and Medina, the holy shrines are, and they're the caretakers. The royal family is the caretakers of the most important religious sites. We're going to get them to eventually acknowledge the state of Israel. And so as a result of that, I think the militias backed by Iran, funded by Iran, Hezbollah, attacked on October 7th and went after the Israelis. And the idea was to create a reaction from Israel that would be overwhelming, that would obviously create tension among the Gulf states, right?

22:19Katty Kay:And to more or less end the Abraham Accords.

22:21Anthony Scaramucci:Well, I don't know if it ends the Abraham Accords because actually they haven't pulled out. I mean, one of the interesting things that the president, to his credit, did point out in all fairness this weekend is that none of the original signatories of the Abraham Accords have pulled out of the Accords despite pressure over the attacks of October the 7th. What has ended, I think, is the possibility of the Saudis joining the Abraham Accords.

22:43Katty Kay:Yes, but I think the point I'm trying to make, and I'm interested if you agree or disagree, is that there was a strategy by Iran to block the Saudis from getting too close to Israel by executing that terrorist attack. Was that or was that not successful?

23:03Anthony Scaramucci:Yes, it was successful. They go where they want to.

23:06Katty Kay:And so now Trump ramming down the throat of the Gulf nations over Truth Social that they need to join the Abraham Accords. Your point, you don't think that's going to be successful. And so we're sitting here at the end of May. We're about to start June. Is that strait going to get opened? Will there be some type of formalized peace? and I'm going to say something that President Xi is probably thinking, which we reported a few weeks ago, which is, hey, I know you need my help, but I don't really need to help you because I'd like to embarrass you further and I'd like you more weakened. I don't want to blow up the entire global economy, but my oil is coming through the strait.

23:50Katty Kay:You guys are letting that come through the strait for obvious reasons. I'm going to let this thing go for a little while longer. and caddy you know is that two hundred dollar a barrel of oil by the end of the summer if this thing continues on its current trajectory or or what do you think happens well i don't know

24:08Anthony Scaramucci:i mean this is your world anthony one of the perplexing things is why oil hasn't gone much higher we can talk a little bit more about this in the second half when we talk about the economy and the politics of the economy but the only answer that i've had from people who are in the oil markets or people who are on the national security side who watch the oil markets who have been surprised by this as well, is that this is short-term trading with traders making a bet that they are buying Donald Trump's argument that in two weeks' time, it's going to be over. Now, how many times have we heard that in two weeks' time, it's going to be over?

24:40Anthony Scaramucci:We heard that at the end of February. We heard it in the middle of March. We heard it at the beginning of April. We heard it at the end of April. It's always just about to be over. And yet, traders seem to be happy to make short-term trades that are propping up the markets. People who are in the oil industry, not people who are on the politics side, are saying, well, in June, they think that global supplies will be severely depleted that are out there. The tankers have now reached their destinations. That will then start to have more of an impact on prices. But let's see. Let's see how much traders just seem to want to make a quick buck.

25:17Anthony Scaramucci:What they like is the volatility, which is what gets back to you were saying to me over the weekend that Trump is enjoying the volatility that suits him very well.

25:25Katty Kay:I think he's obviously trading the market, but I guess the thing that I'm worried about as an investor, as a global citizen, is the quagmire. What I'm worried about is Rubio saying, well, if it's not a strong deal for us, we're not going to do the deal. I'm just worried. I mean, we can break and talk about the economy in the second half, but I don't see, as you and I are sitting here right now, the outcome. The markets are saying, you're right, it's going to be a perfectly fine outcome. That's why stocks are so buoyant, but I don't see the outcome. If because of his own sense of hubris,

26:09Anthony Scaramucci:an antagonism towards Barack Obama, and his own sense that he had to be better than Barack Obama, he would never have pulled out of the JCPOA, which was actually working and containing Iran's nuclear program. But he pulled out without consulting experts because he doesn't believe experts know anything and he thinks he's right. But if he hadn't pulled out of the JCPOA, we'd be in a much better position than we are today. And it would have cost an awful lot less to Americans both in blood and in treasure. Okay, now I've got that off my chest. Let's talk more about the economy after the break.

26:51Anthony Scaramucci:Welcome back to The Rest is Politics US. And before we dive back in, don't forget everybody to get your tickets to our October tour of the United States and Canada. The month before the midterms, we're going to be doing live shows across the US and also heading up to Toronto. You can get your tickets at therestispoliticsus.com or click Click the link in the episode description. We can't wait to see you there. We have fun doing these shows, right, Anthony? This is fun. It's a great chance for us to meet you. It's great for you to ask us your questions live. Anthony occasionally stays on script, but not very often.

27:28Anthony Scaramucci:It's good.

27:29Katty Kay:The only thing I don't like about the shows are the introductory takedowns, okay? Because you know what? We really get the honest take of what our producers really think about us, Gatti. I know. And it hurts.

27:41Anthony Scaramucci:They're mean. Yeah, maybe for these shows, we insist, we put it in our very extensive riders, because we're such divas, that they can only do little videos that are incredibly flattering and complimentary and only use photos of us taken from before 20 years ago.

27:58Katty Kay:Well, all I know is that there's this beautiful actress that plays the queen on The Crown, playing you on Saturday Night Live. Yeah. And then they have me taking a dump on the Special Forces show coming out of the dumping, it's not flattering. It's flattering to you. It's just not flattering to me.

28:17Anthony Scaramucci:It's fine. So guys, if you want to know what on earth Anthony's talking about, get a ticket and we'll show you the video when you come and join us. Okay, we're talking about the economy. I thought this was worth doing, Anthony. I want to touch on this because, of course, we had Kevin Walsh confirmed last week, now installed as the country's chief central banker. He handpicked by Donald Trump with one mission, which was to bring down interest rates and not be a too late Jerome Powell, who was a thorn in Donald Trump's side. All presidents want their Fed chairs to bring down interest rates. It's the way it goes.

28:55Anthony Scaramucci:And I think that actually Kevin Walsh over the last year, as he was auditioning for the job, and make no mistake, he was auditioning for the job. As he was auditioning for the job, he kept going around earnest think tanks and the International Monetary Fund and groups of high net worth individuals making the case for why it was time to reduce interest rates and the possibility that America, the American economy was ready for a reduction in interest rates. But bang, he gets into the job. And what's the first thing that he's going to do, Anthony?

29:25Katty Kay:I think he's in a tough spot, by the way. So, I mean, you know, do you think he's going to lower rates right now? Because that would really freak out the bond market.

29:32Anthony Scaramucci:I think he might even have to raise rates.

29:35Katty Kay:Possibly. But I think the first thing, you know, yeah, it's a political job. We like to say it's so independent and so forth. I mean, he's being accused by Elizabeth Warren of being a sock puppet for Donald Trump. I guess he's going to do very little in the beginning and probably write some speeches and probably leave rates where they are. Even if he needs to raise them, I don't think he's going to raise them because of the overwhelming political pressure not to. From the White House. Yeah. But, Cady, when he was brought into the White House last week, this is the first time a Fed chair was sworn in at the White House since Ronald Reagan swore in Alan Greenspan way back in April of 1987.

30:19Katty Kay:Of course, a few months later, six months later, we had the stock market crash, 22.8 % decline in October of 1987. do you believe Donald Trump? Donald Trump looked over at Kevin Warsh and said I want you to just go and do a good job Kevin and I want you to be independent and then you saw the guppies going Do what you need to do and then the guppies were clapping like oh we see he's you really believe that?

30:47Anthony Scaramucci:You believe that? I don't believe that for a second I mean Donald Trump he's no dummy he knows what's happened to the economy because of everything we were speaking about in the first half He can see what's happened to gas prices. I'm sure he doesn't go around and fill up the beast very often with gas, but if he did, he'd have heart failure because it would cost him so much money. But he has enough people around him telling him that gas prices are high. I filled up my car in Washington last week. I was stunned. Petrol was at$6.50 a gallon. I mean, that's super high for Americans. It's not very high for Europeans, but it is very high for Americans.

31:25Anthony Scaramucci:He knows that. He knows that people are not happy about the gas prices. He knows they're not happy about inflation. When he says the fact that he turns to Kevin Walsh and says to him, okay, you can be independent. You do, Kevin, what you need to do. Completely different, by the way, from what he said to Jay Powell, which was bring down interest rates. I think it is a reflection of the fact that even Trump realizes that Walsh is in a difficult position and may not be able to bring down interest rates. And if he's looking at the polls, there was an extraordinary CNN poll out just recently showing that he's 70 % disapproval of Donald Trump's handling of the economy.

32:02Anthony Scaramucci:In his first term, he never got below 50 % disapproval of his handling of the economy. So in that 70%, that's not all Democrats. There are some independent and swing and possibly even Republican voters in that 70%, right?

32:16Katty Kay:That's a pretty low modern number. I mean, we're down at Herbert Hoover levels, but let's just talk about a few things that Kevin Warsh will likely do. Number one, he's got to give a speech. And I think he gives a speech that tries to differentiate himself from Powell, doesn't want to be a Powell clone. So he's going to probably talk about restraint or a doctrine of restraint. I think number two, I think he's got to take an opinion on the oil shock. And my guess is knowing Kevin, he's going to look through the oil shock and not chase it. But I think in the speech, he's going to say that we've got to reset the dot plot in June.

32:56Katty Kay:And just for people listening, what is the dot plot? They have inflation, expected inflation, and then actual inflation. And these are dots on their economic or econometric model. And then based on the data, they make decisions on rates. And I think he's just got to simply say that the March plot that they've been looking at is quite stale now. It was written before crude peaked at$138 or at least Brent crude peaked there. So I think he's got to get into that with the people and explain to them that he's modernizing this. And I think he's got to signal to people that, listen, I'm looking past the oil shock, you're going to get at least one cut this year.

33:38Katty Kay:And the goal is to cut twice in the first quarter of 27. And I think if he says that, he's not going to get overly criticized for that because that's really what the market is seeing. Okay. And so that's where I think he's going. And I think if he says that, I think he gets Trump off of his back pretty early. So those are some of the things that I think he will do. And the last thing, Caddy, is that if you go back to the 1996-1999 productivity study that Alan Greenspan commissioned. So Greenspan was like, we're having massive productivity gains in the economy as a result of the internet. Let's call that Web1.

34:21Katty Kay:And so Greenspan took the position that that was deflationary, that technology typically brings prices down. And I think Warsh is probably going to pull that playbook out. and he's probably going to deploy that playbook.

34:36Anthony Scaramucci:I don't know that he will commit to cutting rates this year. I think that will depend slightly on what does happen, even if he doesn't want to talk about it with oil. And that depends on the Straits of Hormuz. If we are really now only entering another 30-day ceasefire and we're not going to get to even negotiating the opening of the Straits of Hormuz until the end of June, that is knocking up against the midterm election. So let's see what he does about that. I think he's going to commit to a quieter Fed. It's something that he has talked about a lot, where the Fed is not on the front pages all the time.

35:07Anthony Scaramucci:Maybe good luck with that. It depends on how Donald Trump takes to him and whether he manages to keep Donald Trump happy. I think you're right. He's going to talk about an AI productivity boom. He's been talking about this a lot and making the case for the strength of the American economy and bringing down rates based on that AI productivity boom. We're going to be talking about that in our bonus episode for our founding members because actually there is starting to be a big political story around AI. It is not just the Pope that is talking about AI and ringing some alarm bells. You're starting to get college campuses where AI is being booed every time it's mentioned by speakers, whether it's in terms of productivity or creativity.

35:45Anthony Scaramucci:You're getting in certain states where there are a lot of data centers, you're getting huge pushback from voters left and right against the data centers. People don't like living to them. They make this loud humming noise. They drive up electricity costs because they consume so much energy. I think data centers could be a sleeper issue in these midterm elections in the states where they're being built. So he may have to be a little careful in the way that he talks about AI. That may be something that American politicians are just going to have to start to moderate a little bit on. But whatever Kevin Walsh says, it doesn't get to the fact that Donald Trump is suffering and he's suffering because he failed to deliver on the promise he made the American people.

36:26Anthony Scaramucci:Voters get upset when they think that a president isn't doing the job that they elected them to do. Look at Barack Obama in 2010. He was massacred in the midterm elections because he had spent from 2008 to 2010 focusing on healthcare and Americans had elected him after the financial crash to come in and do something about the economy and to stimulate growth and to stimulate jobs and to rescue them for the financial crash. He focused on healthcare instead, and it really cost him in terms of the midterm elections and political capital. I think that's what you're getting. The worrying signs, and this is not just one poll, the problem for Donald Trump is that you're seeing it in repeated polls.

37:06Anthony Scaramucci:There's a CBS poll showing that he's even underwater with white non-college educated voters, only 46 % approve of the job that he's doing. That's his base. He cannot be underwater with that group of voters and hope to do well. Now, maybe he doesn't care. But when he is talking about Iran, and he's talking about the reflecting pool, and he's talking about the ballroom, and he's talking about the arc to Trump, it's no surprise that you've got the Wall Street Journal writing editorials saying that he's lost the governing plot. But I mean, maybe you're right, Anthony, he doesn't care. Maybe he doesn't care about any of that.

37:40Anthony Scaramucci:He cares about the fact that his family's making money, his cronies are making money, but it's not good for the country.

37:44Katty Kay:I don't think he cares. He wants to make money and he wants to leave monuments to himself in Washington. He's decided that he stuck a finger in everybody's eye in the establishment and he wants to continue to do that. But here's another irony that I think we should point out to viewers and listeners is that Kevin Warsh is an establishmentarian. establishmentarian. And when you go to the people that were in the swearing-in ceremony, they were all establishmentarians, okay? Condoleezza Rice, who wrote that big letter for him and put out all those big recommendations on social media, has been at the Hoover Institute with him.

38:23Katty Kay:He had Stan Druckenmiller there, who he's worked for. My mentor, Ken Langone, the founder of Home Depot, who was on the board of the New York Stock Exchange and the board of General Electric, He's now 90, so he's more or less in retirement. They were all there. And I like that. I'm going to tell you why I like that, because I know guys like Druckenmiller and Langone, and they would be telling somebody like Kevin Warsh, hey, man, you don't want to come across as an Erdogan sock puppet employee of Donald Trump. You don't want people to think that he's now captured the money the way Erdogan did in Turkey, where you're experiencing 73 % inflation.

39:09Anthony Scaramucci:And Walsh will outlast Trump, right? He knows that. No question. He knows that Trump is there for two years, and he's there for another three years after that.

39:17Katty Kay:It's one of those weird things about Washington, Caddy, where the establishment got Trump. And what do I mean by that? George Walker Bush, Jeb Bush, Mitt Romney, Glenn Youngkin, any one of those as, quote unquote, the Republican president would have picked Kevin Warsh. Bill Clinton, believe it or not, would have picked somebody like a Kevin Warsh. He reappointed Alan Greenspan. And so this is one of those things about Washington where the players played Trump and got themselves the person that they wanted as Federal Reserve. And so I wish him Godspeed. I like Kevin and I want to see him do well.

39:57Katty Kay:I know you have a personal relationship with him. And to me, I think he's a very competent, safe pair of hands. But that doesn't mean that he's not going to be tripped up by the current supply shocks that are in the marketplace because of the Trump-Iranian war.

40:13Anthony Scaramucci:He's going to have to have a political mantle of steel because just Just because Trump likes him now doesn't mean that Trump won't turn against him. Trump appointed Jay Powell and turned against Jay Powell. Trump appointed Chris Wray as director of the FBI and then he turned against Chris Wray. He's quite capable of deciding at the flick of a switch that he doesn't like somebody anymore and he'll give Kevin Walsh a certain amount of leeway because he wants to show everybody that he made the right choice. But Walsh is going to have to figure it out and I'm sure he's been having conversations. In fact, I know he's been having conversations with people before he was sworn in how to deal with Trump were Trump to turn against him.

40:53Katty Kay:I think this is the point. He's an establishmentarian. And like Powell and Ray, the gun could get turned to him. We'll have to see what happens.

41:02Anthony Scaramucci:Okay, we're going to leave it there. If you would like to hear more about ICE and the detention centers, that story has not gone away. And it is really important, I think, to keep on it. the situation in those detention centres, the conditions in those detention centres, and how members of Congress are being turned away from trying to do their due oversight from those centres. We'll talk about that in our episode with our founding members. And as I mentioned, we're also going to be talking about AI, which is becoming a political hot potato in the run up to these midterm elections. Of course, you can become a founding member by joining us at therestispoliticsus.com.

41:35Anthony Scaramucci:We would love to hear from you and we will take your questions. We will be back with more of the news later this week. Will you be back from Hong Kong? Will you return from Hong Kong by then?

41:45Katty Kay:I will be back from Hong Kong. We're ready to do our next episode. We'll have to see what's going on in the world at that moment, Caddy. But as they say, we live in interesting times.

41:55Anthony Scaramucci:We live in exhausting, interesting times.

41:58Katty Kay:As George W. Bush once said, that's some weird shit, Caddy Kay. That's some weird shit. But that's where we are right now.

42:05Anthony Scaramucci:And we'll leave it there. Bye, guys.

42:12Thank you.