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EARLY START

G-7 Summit This Weekend in France; South Korea Ends Intelligence Pact with Japan; Brazil's President Blames Environmentalist over Amazon Wildfires. Aired 4-4:30a ET

Aired August 23, 2019 - 04:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[04:00:18] JULIA CHATTERLEY, CNN ANCHOR: Cracks in the economy threatening a downward spiral. The Fed chief will try to calm investors today.

DAVE BRIGGS, CNN ANCHOR: Top world leaders gathering this weekend for the G-7 in France as they try to calm growing concerns back home.

CHATTERLEY: Brazil's president pointing fingers over raging fires in the Amazon. He says they're being ignited to make him look bad.

BRIGGS: And a school superintendent in Tennessee got a $15,000 bonus. What he's doing with it will inspire you.

Welcome to our viewers in the United States and around the world. This is EARLY START. I'm Dave Briggs.

CHATTERLEY: I'm Julia Chatterley in for Christine Romans. It is Friday. Happy Friday. August 23rd.

BRIGGS: Happy Friday.

CHATTERLEY: It's 4:00 a.m. here in New York. And we have reports this morning from France, from South Korea, and Brazil.

But first, it's hard to recall a wilder two-week period for the markets and the economy. Cracks are beginning to form. Some of them self-inflicted perhaps by the White House. In just the last two weeks, the yield curve inverted. Investors demanding higher rates in the short term. We've had new projections saying the deficit will soar past $1 trillion in 2020. Job estimates will then revise down, and the president repeatedly flip-flopped on a new tax cut.

This trade persistent uncertainties leaving the Fed searching for flexibility here. And yesterday we learned that the manufacturing sector is shrinking for the first time in a decade. All that means a pretty big day for Fed chair Jay Powell. He faces a serious test with a high-profile speech in Wyoming, looking here to reassure investors. He's also facing pressure from President Trump and expectations to deliver yet more rate cuts.

Here's one of the president's economic advisers, Larry Kudlow.

(BEGIN VIDEO CLIP) LARRY KUDLOW, DIRECTOR, NATIONAL ECONOMIC COUNCIL: I'm not going to second guess Jay Powell. I'm just going to say I think the handwriting is on the wall for lower rates.

(END VIDEO CLIP)

CHATTERLEY: Well, stocks were pretty choppy on Thursday after the bond market flashed warning lights for the recession, it could be coming yet again. Only the Dow managing to eke out a gain of just 50 points here. The "Washington Post" is reporting top advisers notified the president that some internal forecasts showed the economy could slow over the next year, complicating his path to re-election.

Now that contrasts sharply with the positive rhetoric we've heard from the White House. The "Post" is also reporting the administration has discussed creating a rotating Fed board where only some Fed governors would be able to vote at each interest rate meeting. Interesting.

BRIGGS: Indeed it is.

The leaders of the world's major economies meet this weekend at a sunny resort in south France. But storm clouds hover on the horizon in the form of disruptor-in-chief Donald Trump. And with U.K. Prime Minister Boris Johnson bringing Brexit woes of his own, expectations, let's just say, for this summit are, well, low.

CNN's international diplomatic editor Nic Robertson is standing by live this morning in Biarritz.

Nic, we are all old enough to remember when these were the most predictable gatherings. Nothing would really come out of them minus a communique. That is no longer the case. What are expectations?

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes. I think when you look at it now, expectations are probably at their lowest. I think perhaps that is the thing that -- that is becoming a constant. The communiques and recent global gatherings like this, G-20s, G-7s, are becoming weaker. And indeed, Emmanuel Macron, the French president, has now said he won't be putting out a communique now. And it does seem to sort of deal with the reality of a situation that the United States is under the leadership of President Trump, is out of step with the rest of the nations here.

But that also is only part of the picture. The other leaders coming here, Angela Merkel, two years left in her leadership in Germany, essentially a lame-duck leader. Her economy weakening, slowing down. The Japanese prime minister coming here looking for a trade deal or improved trade relations with the United States. Perhaps in the strongest position. But the Italian prime minister coming here, he's just resigned, Boris Johnson, Britain's new leader, he's just in the job. He may be out of it soon.

Emmanuel Macron perhaps looking to sort of lead the world here in the space where the United States is abdicating. Of course they're setting the agenda here. Emmanuel Macron saying the world is living through a deep crisis in democracy. He is putting inequality on the agenda here, that's agenda inequality, social inequality, economic inequality. Africa is on the agenda, too. But of course, trade and climate. And these are two of the issues that are really an anathema to President Trump to deal at a multinational level with them.

[04:05:03] And that's why I think that we're seeing the French president just dial back expectations so far. You're right, storm clouds gathering, everyone coming here looking for a little bit of sunshine. Maybe Boris Johnson will get some of his when he meets with Donald Trump.

BRIGGS: Yes. And then there's the country that's not there. Will Russia be discussed at this G-7 by Donald Trump? At least you have a beautiful background to say the least there.

Nic Robertson, live for us in Biarritz. Thank you, sir.

CHATTERLEY: All right. In a move that could affect U.S. intel gathering in a key global hot spot, South Korea says it's ending its military intelligence sharing with Japan in the wake of a broader trade dispute. The Pentagon voicing, quote, "concern and disappointment" as the move widens the split between two U.S. allies. It may also hinder U.S. efforts to fend off the likes of North Korea, China, and Russia.

Let's bring in CNN's David Culver live from Seoul with the latest.

David, great to have you with us. This is arguably decades in the making as far as the tensions are concerned. Walk us through the latest escalation here. And is there any way given the strategic importance here that the U.S. could perhaps mediate?

DAVID CULVER, CNN INTERNATIONAL CORRESPONDENT: Decades in the making, no question, Julia. And coming really at the worst time when it comes to relations with North Korea. Tensions here on the peninsula, they are certainly rising. Over the past several months, North Korea has test-launched some eight different types of missiles, and that's caused some unease. And generally, when that's going on, you have Japan working with South Korea, working with the U.S., and sharing intelligence and trying to fully understand what capabilities are with their northern neighbors here.

But with this now coming into fruition, and we should point out, it's still about 90 days away before the actual split between South Korea and Japan sharing this intel goes into effect, but if it were to, it would essentially force the United States to have to play middleman here.

So, as it was explained to me by the former commander of U.S.-South Korean Forces, the man who oversaw some 650,000 combined U.S.-South Korean troops up until November of last year, he said essentially this would be Japan perhaps using one of their satellites, noticing something in the northern part of Korea, telling the United States about it. The United States would deem that potentially a threat to South Korea, would have to go back to Japan, and say, can we tell South Korea about this? If they get the go ahead, then they can relate to South Korea.

It's incredibly inefficient. That same general, Army General Vincent Brooks, explains why he's still hopeful that there could be some resolution here. Take a listen.

(BEGIN VIDEO CLIP)

RETIRED GEN. VINCENT BROOKS, FORMER COMMANDER, U.S.-ROK COMBINED FORCES: So the next 90 days will be very telling to see whether South Korea is trying to generate leverage in their discussions with Japan or even in their attempts to get the United States to help mediate, which the United States has been less willing to do, or to deem a greater sense of favor with North Korea and let those who I think are the three potential attempted outcomes from this.

(END VIDEO CLIP)

CULVER: The general there trying to fully understand what the motivations from South Korea's side may have been and leading up to this, Julia. He says ultimately he's hoping that the U.S. will backchannel this a little before reacting too strongly. He wants them simply to pick up the phone, talk to South Korean leaders, and figure out what led up to this and if this can be resolved before those 90 days are up.

CHATTERLEY: Yes. Leverage I think in that trade dispute.

Great to have you with us, David. Thank you for that.

BRIGGS: Brazilian President Jair Bolsonaro says his country doesn't have the resources necessary to fight raging wildfires in the Amazon rainforest. The Amazon is vast, about two-thirds the size of Continental Europe and produces about 20 percent of the world's oxygen. Bolsonaro, long opposed by environmental groups, is now pointing fingers over the cause of the fires.

CNN's Shasta Darlington in Sao Paulo with more.

(BEGIN VIDEOTAPE)

SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: Fires are ravaging the Amazon at an alarming pace. According to the National Institute for Space Research, there have been more than 72,000 fires in Brazil so far this year, many of them in the Amazon, many of them started by loggers and ranchers. The destruction has really been felt all the way over here in Sao Paolo some 2,700 kilometers away from the Amazon when earlier this week the city was plunged into darkness at 3:00 p.m. It looked and felt like nighttime.

Environmentalists blaming the government. President Jair Bolsonaro, who's repeatedly said that the Amazon needs to be developed and has also defunded many of the agencies tasked with cracking down on illegal activity there. Ironically, when he was asked about the spike in fires, he blamed the NGOs themselves without citing any evidence, saying maybe they were starting the fires to make him look bad.

What's clear is not -- is that not enough is being done to stop them.

[04:10:05] Shasta Darlington in Sao Paolo.

(END VIDEOTAPE)

CHATTERLEY: Nearly 4,000 people have been evacuated in Shasta County, California, because of the threat from a fast-moving wildfire. The so-called Mountain Fire has grown to 600 acres and is 20 percent contained. Authorities say more than 1100 homes and structures have been threatened. So far, no injuries have been reported. But all students, faculty, and staff from Shasta College are among the evacuees.

BRIGGS: Breaking overnight in central California. At least 27 people were injured in a light rail train derailment in Sacramento. Officials say 13 were raced to area hospitals when portions of the train jumped the tracks a few hours ago. Fire crews say there were no life-threatening injuries. No word on a cause. More information as it comes in.

CHATTERLEY: All right. We're going to take a quick break. But coming up, nobody likes robocalls. I get about three a night. Now states and telecoms are joining forces to stop them. We're back in two. Stay with us.

(COMMERCIAL BREAK)

[04:15:39] BRIGGS: Some health insurance companies set to expand their Obamacare offerings next year. The "Wall Street Journal" reporting insurers are looking at stronger bottom lines after Obamacare's rocky start. Oscar Insurance is adding six new states including Pennsylvania and Georgia to the nine it currently serves. Also expanding next year, Cigna, Bright Health, Molina Health Care, Centene and Anthem. In some cases, the companies are going into markets like Nebraska where there have been very few options. Expansions come despite the number of customers shrinking overall. That likely due to the end of the financial penalty for going without coverage.

CHATTERLEY: The Immigration Office of the Department of Justice distancing itself from a controversial e-mail sent to its employees this week. The e-mail included a link to a blog post with racist and anti-Semitic material. CNN has learned the Immigration Judges Union says it received complaints from members across the country who found the post offensive. The Immigration Office now says the link should not have been sent. It says briefing e-mails like the one in question are prepared by an outside contractor not by the Department of Justice.

BRIGGS: One of the largest ever online scams is now history. Federal prosecutors say 80 people, most of them Nigerian nationals, have been charged in the U.S. and overseas. They're accused in a widespread conspiracy that stole millions of dollars from businesses and the elderly through a variety of scams and then laundered the money. 14 people were arrested in the U.S. on Thursday including 11 in Los Angeles. All the defendants face charges of conspiracy to commit fraud, conspiracy to launder money, and aggravated identity theft.

CHATTERLEY: Robocalls are the targets of a new joint venture between telecom and law enforcement companies, including AT&T, Sprint, Verizon, and T-Mobile are teaming up with attorneys general from all 50 states. They announced a set of agreed-upon anti-robocall principles that will include call-blocking technology at the network level at no cost to phone customers. Americans receive ag average of five billion robocalls every single month.

BRIGGS: How many of those go to your phone?

CHATTERLEY: Three. About three a night.

BRIGGS: Three a night?

CHATTERLEY: Yes. Yes. Solar panels, all sorts. I don't have solar panels. Insurance.

BRIGGS: I never get a robocall.

CHATTERLEY: From an accident I didn't have.

BRIGGS: You don't buy the solar panels?

CHATTERLEY: No. I'm not. Not yet.

BRIGGS: Not on a New York apartment.

All right, ahead, why was an elementary school cheerleading team selling raffle tickets for a semiautomatic rifle?

(COMMERCIAL BREAK)

[04:23:07] CHATTERLEY: Welcome back to EARLY START.

Some parents are outraged after an Ohio elementary school cheerleading team was asked to sell raffle tickets for a semiautomatic rifle. Now the children say she received an e-mail last month saying all members of the cheer team including her 7-year-old daughter would have to sell tickets for an AM-15 optic-ready rifle to raise money for the new Richmond Junior Lions football and cheerleading squads.

(BEGIN VIDEO CLIP)

HEATHER CHILTON, NEW RICHMOND PARENT: This is absurd. You're having elementary kids sell your AR-15, why? I can't see them selling some type of semiautomatic rifle when we have all these mass shootings going on going door-to-door.

(END VIDEO CLIP)

CHATTERLEY: The head of the New Richmond Football Program says he understands parents' concerns and he's given them options not to sell the raffle tickets for the rifle.

BRIGGS: An 8-year-old boy is recovering in a Colorado hospital after he was attacked by a mountain lion in his family's backyard. Officials say it happened Wednesday when the young boy was playing with his brother and then ran next door to play with his neighbor. The lion apparently went after the boy and bit him in the head while he was running. The lions who were found in the neighborhood have since been euthanized. Wildlife officials note this is the third instance of a mountain lion attack on a human in Colorado this year.

CHATTERLEY: Frightening moments for passengers when smoke filled the cabin on a Hawaiian Airlines flight. Seven people, five adults and two children, were taken to hospitals after the plane made an emergency landing in Honolulu. Their injuries, though, described as minor.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We just all had to kind of go like this to breathe, and said, prepare for an emergency landing, and evacuation.

UNIDENTIFIED FEMALE: They came with some wet cloths for everyone to breathe through with the smoke because it was really getting thick.

(END VIDEO CLIP)

CHATTERLEY: The airline now says a seal failed in the left engine sending oil to hot parts of the plane, causing the smoke.

BRIGGS: A Tennessee school official is literally giving back to his students.

[04:25:04] Hamilton County superintendent Bryan Johnson plans to spend the $15,000 he earned in bonus money to fund scholarships for his students. Johnson says the scholarship will be made in the name of his mother who passed away two years ago.

(BEGIN VIDEO CLIP)

BRYAN JOHNSON, HAMILTON COUNTY SUPERINTENDENT OF SCHOOLS: She was a pastor's wife, and she raised my sister and I to serve. And she raised us to press towards excellence. And so we're just excited to be able to allow her legacy to live on.

(END VIDEO CLIP)

BRIGGS: Terrific gesture. The fund will provide one scholarship for a senior in each of the district's learning communities.

Coming up, troubling economic signs are harder to ignore. The Fed chief will try to calm investors today as world leaders converge for the G-7 in France.

(COMMERCIAL BREAK)

CHATTERLEY: Cracks in the economy threatening a downward spiral. The Fed chief will try to calm investors today.

BRIGGS: Top world leaders gathering this weekend for the G. END