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Anxiety Rattles U.S. & Global Economies; Fed Chair Faces Biggest Test Yet; World Leaders Meet this Weekend at G7; South Korea Ends Intel Pact with Japan; Wildfires Burn in Amazon Rainforest; Dodgers Rally in Bottom of 9th Inning to Win 3-2. Aired 5-5:30a ET

Aired August 23, 2019 - 05:00   ET


JULIA CHATTERLEY, CNN ANCHOR: -- pocket made of soft materials.

[05:00:03] DAVE BRIGGS, CNN ANCHOR: Soft materials. Well, put it in your wallet seems --

CHATTERLEY: No, can't do that. Can't do that, comfort in your pocket. No, can't do that.

BRIGGS: All right. Thanks to our international viewers for joining us. Have a great rest of your day.

For our U.S. viewers, EARLY START continues right now.


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 G7 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 are 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.

Good morning, everyone, and welcome to EARLY START. I'm Dave Briggs.

CHATTERLEY: And I'm Julia Chatterley, in for Christine Romans. It's Friday, August 23rd, and it's 5:00 a.m. in the East.

Well, it's hard to recall a wilder two-week period for the markets and the economy. Cracks beginning to form, some of them we have to say self-inflicted by the White House here. In just the last two weeks, the yield curve inverted, investors demanding higher rates in the short term. We had new projections saying the deficit will soar past $1 trillion in 2020. Job estimates were revised down and the president repeatedly flip-flopped on a new tax cut.

This persistent trade uncertainty leaving the Fed searching here for flexibility and yesterday we learned the manufacturing sector is shrinking for the first time in a decade. All that means it's shaping up to be a pretty big day for Federal Reserve Chair Jerome Powell, a high profile speech in Wyoming looking here to reinsure investors.

He is also facing pressure from President Trump and expectations to deliver yet more rate cuts.

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


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.


CHATTERLEY: "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 reelection.

Now, that contrast pretty 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.

BRIGGS: Meanwhile, the leaders of the world's major economies meet this weekend at a sunny resort in Southern France, but storm clouds hover on the horizon in the form of disrupter in chief, Donald Trump. And with U.K. Prime Minister Boris Johnson bringing Brexit woes of his own, expectations are low.

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

Good to see you, Nic.

Behind you picture of calm, ahead of you anything but. Good morning.


Look, barely a ripple out on the ocean there, but it's known for ferocious waves here, perhaps we will get some of that turbulence when the leaders do sit down over the weekend. Everyone, of course, remembers what happened at Canada at the last G7, President Trump left early, refused to sign the communique, there was that face-off between him and Angela Merkel, an infamous picture. President Macron, the French president who's hosting this event doesn't want any of that and is setting the expectations very low saying that he doesn't expect there could be a communique.

He says we've been through a deep crisis in democracy and he says that he recognizes there are differences with the United States and those are fundamental differences, differences on climate and on trade and, of course, those are two big topics here. But it's not just President Trump that threatens to be a disrupter

here. Some of the other leaders coming in are in very weakened positions.

Angela Merkel, the German chancellor, is essentially lame duck leader, on the way out, and the Germany economy is hurting at the moment.

We have the British Prime Minister Boris Johnson who is just arriving here, a sort of leader for the first time, but his leadership is under threat back in the U.K.

The Italian prime minister resigned in the past couple of days.

Prime Minister Trudeau of Canada, of course, facing reelections in the next few months. Tough days ahead for him.

The Japanese prime minister, perhaps of all the leaders here, the one who is in the strongest position, having won reelection there. But the reality is that the issues that the French want to discuss here, that is, inequalities in gender, in social and economic, in issues around climate change, issues around offsetting what could be troubled times ahead for the global economy.

[05:05:09] The United States under President Trump is an outlier compared to the rest of the nations here, sort of being described as six plus one. Yes, all the leaders looking for their moments in the sunshine, Boris Johnson, hoping for a very productive meeting with president Trump because he'd like to bag that and take that back home, but the skies here, sunny, storms may be coming, as you say.

BRIGGS: Picturesque indeed. Nic Robertson, live for us this morning in Biarritz, thank you, sir.

CHATTERLEY: 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 issuing not one but two statements, the latter 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 North Korea, China and Russia.

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

David, just explain what latest what stimulated this latest escalation here and for the sake of intel-sharing, what the United States could perhaps do here to help mediate.

DAVID CULVER, CNN INTERNATIONAL CORRESPONDENT: Julia, this is rooted essentially in a trade war that's been going on between South Korea and Japan, and it's interesting because over the past several weeks, we have had these missile launches, these test launches coming from North Korea, yet domestically South Korea news has focused heavily on this back-and-forth between Japan and South Korea and that explains where mindset is. As far as the intel here and what's at stake, well, essentially Japan

assists South Korea in surveying what's going on in the northern parts of the peninsula. They have satellites that South Korea can utilize the data from and thereby understand what exactly North Korea may be doing. The U.S. works along with that.

Prior to this pact being in place, the commander who was in charge at the time, Army General Vincent Brooks, he explained that it was incredibly inefficient to try to share intel. Japan would have something that they see as important, they would tell the U.S., the U.S. would say, well, that affects South Korea, we have to tell South Korea, but they would have to go back to Japan to get permission to relay that to South Korea. So, there was this back and forth that was seemingly unnecessary. In 2016, when the pact came in place, he said it was a great success.

He is not ruling out all help of this continuing. He said they have three months where they can work out a deal. Here is the general.


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.


CULVER: So, to the general's point the focus here from the U.S. perspective needs to be fully understanding the motivation from South Korea before reacting and that's his real concern, Julia, is this reaction that could spark something that's blown out of proportion, essentially, and cause greater destruction. So, he's hoping some back channeling will go on between Washington and Seoul to figure out what's happening and how this can be remedied.

CHATTERLEY: Yes, critically urgent. David, thank you for that.

BRIGGS: All right. Just into CNN, a Boeing super tanker firefighting plane has now arrived in Bolivia to combat wildfires ravaging parts of Brazil. President Bolsonaro says his country doesn't have the resources necessary to fight these wildfires in the Amazon rain forest. The Amazon is vast, about two-thirds the size of continental Europe but produces about 20 percent of the world's oxygen. Some call it the world's lungs. Bolsonaro long opposed by environmental groups is pointing fingers over the cause of the fires.

Shasta Darlington in Sao Paulo with more.


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.

[05:10:06] What's clear is not -- is that not enough is being done to stop them.

Shasta Darlington in Sao Paolo.


CHATTERLEY: All right. Nearly 4,000 people have been evacuated in Chester 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 1,100 homes and structures are being threatened. So far, no injuries have been reported, but all students, faculty and staff from Chester College are among the evacuees.

BRIGGS: Ahead, nobody likes robocalls. Well, now states and telecom companies joining forces to put a stop to them.


[05:15:32] BRIGGS: Five-fifteen Eastern Time.

Some health insurance companies set to expand their Obamacare offerings next year. "The Wall Street Journal" reports insurers are looking at stronger bottom lines after Obamacare's rocky start. Oscar Insurance adding six new states including Pennsylvania and Georgia to the nine it currently serves. Also expanding next year, Cigna, Bright Health, Molina Healthcare, Centene and Anthem. In some cases, the companies going into markets like Nebraska where there have been few options.

Insurers say sharp rate increases left them catch up to claim costs but increases for 2020 should be mostly moderate. A number of Obamacare customers is actually shrinking overall likely because the penalty for not having coverage was eliminated.

CHATTERLEY: Racist and anti-Semitic content sent in an email by the Justice Department's Immigration Office. CNN has learned the Immigration Judges Union says it received complaints from members across the country who took offense to a link within the email. The immigration office says briefing emails like the one in question are prepared by an outside contractor not by the Department of Justice and the link should not have been sent. 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 charged in a widespread conspiracy that stole millions of dollars from businesses and the elderly through a variety of scams, then laundered the money. Fourteen people were arrested in the U.S. on Thursday, including 11 in Los Angeles.

CHATTERLEY: Robocalls are the target 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 an average of 5 billion robocalls every single month.

BRIGGS: I recommend you just don't answer calls when you don't recognize the number, but you do.

CHATTERLEY: Of course I do. I'm hoping it's someone who wants to talk to me. Why would I ignore calls?

BRIGGS: Hoping you won a prize.


BRIGGS: All right. Ahead, the Dodgers do it again. Another dramatic walk off win. Andy Scholes with that story in the "Bleacher Report."


[05:22:53] CHATTERLEY: Welcome back to EARLY START.

A new nominee for educator of the year, Hamilton County School Superintendent Bryan Johnson plans to send the $15,000 he earned in bonus money to fund scholarships for his students in Tennessee. Johnson says the scholarships will be made in the name of his mother who passed away two years ago.


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


CHATTERLEY: The fund will provide one scholarship for a senior in each of the districts learning communities.

BRIGGS: All right. The Green Bay Packers and the Raiders taking the field for pre-season game number three, but it wasn't a complete field.

Andy Scholes has more in the "Bleacher Report." Oh, Canada.


You know, this was a first for the modern day NFL. The Packers and Raiders, they had to play on an 80-yard field in Winnipeg, Canada, because of unsafe conditions in the end zones. So, in Canadian football, the goal posts, they are in the end zone and the holes left behind that they tried to fill under the turf, well, they just wouldn't stay level.

Instead of canceling the game, 20 minutes before kickoff they decided to make the 10 yard line the end zone. It was a little odd to watch, full back Keith Smith of the Raiders even admitting he forgot where the end zone was on the touchdown, he ran all the way to the real end zone. Even though this was the third pre-season game, most of the starters like Aaron Rodgers, they didn't even play.

You know, the main goal for every NFL team in the pre-season, try to get to the regular season healthy. Well, bad news for the Carolina Panthers. Quarterback Cam Newton injuring his left foot in the first quarter against the Patriots. He reportedly sprained his ankle and is going to have further tests today. Cam leaving the game wearing a walking boot. At least that walking boot still goes with his hat and scarf.

All right. For eight innings last night, the Blue Jays dominated the Dodgers, L.A. just one hit entering the ninth inning, they were down 3-0, but, well, you have to get 27 outs in baseball.

[05:25:06] In the bottom of the ninth, the Dodgers getting three straight hits and with the game tied at 2, Kike Hernandez coming through with a walk off single, second straight walk off for the Dodgers. A fitting way to end it because it was Kike Hernandez bobble head night.

The most recognizable mascot in sports these days at it again yesterday. Check him out. Gritty the Terrifying Mascot for the Philadelphia Flyers apparently nails when it comes to throwing axes, not one but two bullseyes.

So, David, if you are already have nightmares about gritty, this is not going to help.

BRIGGS: I was, and I will never sleep well again. I'm just glad that video is not from the front on. That terrifying mascot with an ax. Thanks, buddy, I really appreciate that.

SCHOLES: You're welcome. Have a great weekend.

BRIGGS: He's Andy Scholes, tweet him.

Julia, what's coming up.

CHATTERLEY: I shouldn't smile as I say this. Troubling economic signs getting harder to ignore, the Fed chief will

try to calm investors today as world leaders converged for the G7 in France. We'll will take you there. We're back in two, stay with us.