India and Pakistan edge toward the brink of war

[Bloomberg]( Today’s Agenda - India and Pakistan are [caught in a trap](. - Cohen’s testimony was [damning](, but maybe not [impeachment-level]( damning. - Government may be the [dominant economic sector]( of the ‘20s. - GE and Macy’s take [wobbly steps]( in the [right direction](. Weapons of Mass Distraction While most Americans were distracted by the congressional testimony of Michael Cohen, the world edged closer to nuclear war. Tensions have risen between India and Pakistan this week after India struck what it claimed was a terrorist camp inside Pakistan’s borders. This might have blown over quickly, with both governments throwing red meat to belligerent domestic audiences and leaving it at that. But then Pakistan shot down Indian planes and captured a pilot, and things got more complicated. Now it’s [increasingly difficult for both sides to walk away](, writes Mihir Sharma. India’s Prime Minister Narendra Modi has an election coming up, and Pakistan’s Imran Khan sits atop an antsy military just looking for an excuse to ratchet up tensions. It’s hard right now to see a way out that saves face for both sides, Mihir warns. Earlier, President Donald Trump shared dinner and [lavish praise]( with North Korea’s Kim Jong Un in Vietnam, at the start of a two-day summit aimed at getting the Hermit Kingdom to end its nuclear-weapons program. But James Stavridis warns North Korea’s nukes aren’t as clear and present a danger as the rest of its arsenal, which [includes chemical and biological weapons](. The world won’t stop being a dangerous place while we sort out our political troubles. Further Nuclear-State Reading: Iran’s foreign minister isn’t leaving after all; his [fake resignation accomplished nothing](, leaving him as weak as ever. – Bobby Ghosh Michael Cohen Speaks As mentioned above, former Trump lawyer and “fixer” Michael Cohen testified in the House for several hours about the crimes he says he committed on Trump’s behalf, if not his explicit behest. In his prepared remarks, Cohen paints a damning picture of a president he calls a “racist,” “conman” and “a cheat.” Though Cohen is not exactly the world’s best witness, as a convicted perjurer with an ax to grind, as Tim O’Brien pointed out in a walkup to the hearing, [Trumpworld is obviously very worried]( about the political damage his testimony could do. It “brings the presidential probes into viewers’ homes in a very human, apprehensible way,” Tim writes. Still, Trump can take some comfort: Throughout the hearing, Cohen repeatedly declined to say Trump told him to lie to Congress or told anybody else to collude with Russia. As Noah Feldman writes, the evidence might still be strong enough to convict Trump in a hypothetical criminal case. But Cohen [introduced nothing that would give Republicans]( political cover to vote for his impeachment, Noah suggests. Imagining the ‘20s Economy Tech drove the U.S. economy in the ‘90s, housing took over in the Aughts, and Silicon Valley has again dominated the current decade. Will tech rule the ‘20s? Maybe not, given the coming regulatory crackdown, writes Conor Sen. In fact, the [government may be the key player in the U.S. economy]( in the decade ahead, Conor writes, as it addresses the challenges of climate change and China. One thing that could help the U.S. economy is an influx of skilled labor from, oh, say, China. It just so happens students and workers are fleeing that country amid a slowdown and government repression, notes Noah Smith. But instead of [taking advantage and luring these people here](, Trump is chasing them away. Further Economic Reading: The Fed may finally be [emphasizing labor]( over prices. – Karl W. Smith Trying Times for Corporate Icons On Monday, General Electric Co. took a big step toward fixing its problems by selling its biopharmaceutical business. It cheered investors even more today with a regulatory filing suggesting a $14.5 billion hole in its insurance reserves hasn’t gotten bigger. But Brooke Sutherland digs into the numbers and finds GE, while being admirably transparent about the whole thing, is also [being a smidgen aggressive in the assumptions]( that let it claim its liability isn’t even bigger. Macy’s Inc. has had a rockier week, reporting blah holiday earnings yesterday. But Sarah Halzack is heartened by the retailer’s plans to beef up what it calls “destination businesses.” This is the kind of corporate-speak that makes human eyeballs glaze over, but Sarah says the meat of the plan is [basically the same thing that turned around Target Corp](. Further Hard Corporate Choices Reading: EOG Resources Inc. is the best of an unloved fracking industry, but still [needs to give investors more reason]( to buy it. – Liam Denning Telltale Charts Incredibly, given the market rally this year, Chris Hughes notes some [bankers are having a worse time]( now than at this point in 2009, in the teeth of the financial crisis. Take a look at IPOs, for example: Tesla Inc. is about to pay off a convertible bond in full even as its stock price suffers, which says a lot about why [people want to buy convertibles these days](, writes Brian Chappatta. Further Reading The House votes this week on a plan to [close the loophole]( that lets people buy guns at shows or online without a background check. Congress should pass it. – Bloomberg’s editorial board You won’t believe this, but [Elon Musk is still tweeting](. – Matt Levine Ketamine may help people with depression, but [we don’t know its other effects](. We’ll find out soon; it’s about to hit the market. – Faye Flam Kickers Time for some [nuclear game theory]( on India and Pakistan. Ever had a beer and thought, “Why can’t this taste like marshmallows?” Well, [you’re in Luck]( (-y Charms). (h/t Mike Smedley) What’s better than a quantum computer? Maybe an [ion-based quantum computer](. (h/t Scott Kominers) An iceberg [twice the size of New York City]( is about to break from Antarctica (h/t James Greiff) Somehow, the world is [greener than 20 years ago](, thanks to China and India. Note: Please send marshmallows and complaints to Mark Gongloff at mgongloff1@bloomberg.net. 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