tv Bloomberg Surveillance Bloomberg November 9, 2015 5:00am-7:01am EST
. >> great expectations. investors now see a 0% chance of a fed rate hike in december after friday's blowup pay figures. china's weakness is a slump in china trade flows worsesen and the economy drops to the lowest in almost three weeks. avoiding a lehman moment, banks face a shortfall of $1.2 trillion under the stability board failure rule. ine francine lacqua joining tom keene in new york. tom: big gross says it's 100%
probability. he's joined the optimists. he's like ok, bill, catch up. nice. francine: we also have to talk about bangs after the financial stability board made it real. banks have to hold this amount of money. tom: isn't that a fact, francine, the swiss banks are ahead. everybody is chasing zurich, am i right on that? francine: you are right but they have much stringent rules and has been the last couple months. tom: do people know we're on speaking terms unlike me and vonny? francine: is that for real? tom: francine, how cool is that? francine: let's get the bloomberg first word news. >> good morning. there may an crackdown in the wake of the british plane crash in egypt. the officials say the crash was caused by a bomb. the u.k. secretary says higher levels of security may be needed and could be more delays in airports.
in the u.k., government agencies say budget cuts. there is a plan today the treasury of the department that transports local governments and environments will have their budgets cut 8% over four years as part of an austerity drive, prime minister david cameron began in 2010. the world's biggest banks are avoiding a lehman brothers collapse. the stability board published a plan for banks seen as too big for fail. fail has to have lots of absorbing capacity, equivalent to 16% of their assets by 2019 and will have to rise to 18% three years after that. and it may take weeks before we learn whether voters rejected the military ruling party. the opposition leader urged supporters to stay calm even if the opposition wins yesterday's election, the military is still guaranteed 25% of defeat in parliament. and the world's largest -- third largest platinum producer has avoided a potential
shutdown. south africa will raise $400 million by selling shares of 94%. and the stockholders will get 46% new shares for every one they hold. lonmin with high dead and falling platinum prices. more on these stories 24 hours a day on bloomberg.com. from the first word desk, the same desk but the first word desk, vonnie quinn. tom: what a thrill. francine will jump in with european equities because i'm a moron and didn't do it. it's u.s. centric after what we saw friday in the jobs report, 2.34%. the euro-dollar, 1.07 and the yen is more interesting and the crude over in europe, the world price, 47.75. the second board, we're showing the complacency.
the dollar is the feature, 124.77 is the weekly weakness in yen and really moved in the last 48 hours of trading. francine, over to the terminal here, a quick shot to get the monday going, 30-year bond, two decades, volker off to the left and the lehman, the banks news, down we go. the great moderation really still in track when you look at that long-term u.s. look at the 30-year in england. francine: we look at the jobs report and janet yellen's expectations and it is having repercussion on european equities. it's early but we're in full swing in europe. tom: and the answer is a his'. francine: no, they're concerned about the fed liftoff and european equity is down for the third time in five days. let's get to the guest host. now the head of renaissance macro. tom keeps saying you're the
ultimate economist we have and when we look at the forecast and expecting the o.c.d. to come down with new forecast, they keep getting revised downwards. are you not worried there is something out there be it trade or inflation, much scarier than we thought. neil: inflation is probably scarier than trade. a lot of these arguments for being negative on the u.s. economy have been with us for quite some time. global economic weakness will spill over to the u.s. creating a feedback loop and disinflation in the u.s. and weaker export growth. but at the end of the day, jobs continue to grow at a rate sufficient to keep pushing the unemployment rate down and i think that's ultimately what matters. for a policymaker. you know, 185,000 jobs a month, francine, with on average the last three months is more than enough to push the u.s. jobless rate down. if the progress in the labor markets flows and there's no
evidence that it is. then you start to get worried. but, you know, so right now i think the onus is really on the more definitelyish members to make their case, the more bearish folks in the market consensus. francine: tom, weigh in on this. when you look at the jobs number, is december a done deal and are the aamericanning markets ready for a liftoff even though it's a small interest rate rise? neil: i don't think they're -- if you look what happened in 2013 when we had this temper tantrum like event. the aamericanning markets that got hit the most were the ones with the biggest current account deficit. so you have to ask yourself has there been a significant account improvement in these balances the last two years. some have and some have not. some of the latin american countries have seen wider deficits than in 2013. there will somebody pain particularly across some swath of the emerging market complex. that being said, you know, the fed has to make sure that the u.s. house is in order and i think the labor market is
giving the fed a green light and think that will be the case for the foreseeable future. my expectation is that they go in december and go again in march. francine: tell me about the pace of the interest rate rises. i also want to bring in -- we spoke about the cargo ship saying global growth is slowing down and trade is weaker than it significantly would being under the growth forecast we see. is there a danger the fed has to reverse course? neil: it's more of a structural issue. there's no law that says trade has to grow faster than g.d.p. francine: the global economy, right? neil: it is but trade elacticity has been slowing for quite some time. in the 1990's, trade would grow two times faster than global production and now growing one for one. again, i just come back to the u.s., it all comes back to the u.s. labor market and the big debate really for the fed was
whether the phillip curve was still useful or not. i think the governor went into the meeting and made her case. i think yellen and fisher made theirs. and i think it's pretty clear who won. tom: you go to the heart of the matter which is the elacticity or responsibleness of the global economy. there was a book "globalization and its discontent." how discontented are the emerging markets? we have o.c.d. coming out this hour and katherine man in the next hour. are they discontented with the u.s. or note the u.s. is the engine along with the united kingdom that will keep them going? neil: the unfortunate reality is the u.s. is a pretty weaken begin for global growth. tom: it's all we got, right? neil: it is. i grow to the global trade elacticity argument. a lot of the improvement in global trade in the 1990's and easterly eye 200's was probably a response to one-time policy changes that are now fading and
we have more automation and that creates -- makes labor cost less important to companies in the u.s. you have more reshoring in places like the u.s., the u.k., germany. that all will be to the detriment of emerging markets. tom: you and i had endless interviews. the idea brazil is a one-off or does it show linkages to other commodity based emerging markets that are challenged? vonnie: i'm curious the markets seem to be leading the fed up to this previous meeting and now we have the market maybe almost lagging and the market participants that don't see a december hike. neil: for years now, market participants have gotten used to the fed bending their rate estimates to the market pasts. and i think next year it's the market i think that will have to readjust their assessment. the fed signaling a gradual interest rate path. that means four rate hikes. the market barely priced for three between now and the end of next year.
i think early next year the unemployment rate in the u.s. will be below 5% and inflation close to 2% if you assume stable oil pricess. so we're right there. and i think you're going to have a more hawkish shift in the market than is currently priced in. now then again, i've been saying that for a while but i think it's been lining up in that direction. francine: we talked about emerging markets. what about china? they need more stimulus and we had dire figures from china today and then there's a school of shot that says they'll have to reduce interest rates and they are euro bound and will be copping the fed years down the line and is game changer for the world. neil: for china, what we're talking about is having a short run problem hitting the growth target and the longer run structure. the tradeoff are two things. it is a good sign china is doing more traditional forms of still has and shows you they are tranigsing their economy
and market participants are looking at these old economy indicators and industrial output and rail code loading straight and won't give you the best sense of what is going on for china. we want to see consumer spending growing faster than the overall g.d.p. tom: we'll dive into the u.s. economy and in 20 minutes get the o.c.d. report and always important but also christian le guard's new mediocre. they're unfortunate in paris. they have katherine mann, one of the great international economists and we have her on set at 6:00 a.m., francine lack because and tom keene in new york. bloomberg surveillance. dd
francine: welcome back. you're looking at live pictures of david cameron. the prime minister speaking in london at the confederation of british industry. this is a big week for david cameron because he's finally going to send a list of requests to renegotiate the u.k.'s place within the e.u. and time for a global audience. look, if he gets this right and if he is seen to have a victory back home, then the referendum about whether the u.k. -- tom: who is the momentum right now? francine: the momentum 140/40 and too early at the moment so the renegotiation will be a game changer. tom: this is a huge deal. we're like yeah, yeah, yeah. francine: this is a huge deal and a real risk and more hedge funds are talking about why the u.k. could maybe leave the e.u. let's get to the bloomberg business flash with vonnie. vonnie: thank you very much. there could be a strike by flight attendants and the german airline says it won't affect 70% of its services. a serious strike by the lufthansa cost the airlines
more than $350 million. the energy company apache is trying to solicit the takeover bids. and they hired goldman sachs to work on a defense. no word who the buyer is and has a value of $18 billion. the latest trade figures from china. on to a three-week low. exports fell for the fourth straight month and imports fell for the 12th month in a row. demand for coal and iron and other commodities has plummeted. that's the business flash. francine: the biggest international banks need to raise $2.2 trillion by 2022 to prevent another lehman moment according to the plan for tackling banks seen as too big to fail. let's bring in john glover out of london. when you look at hsbc and jp morgan, have they done a lot or will they have to do more in terms of capital raising? john: they've done a fair amount. the development market banks have, the major ones, have got
-- are in a position to get to t-levels that they need. there shouldn't be any problem from the developed markets. and probably the chinese banks have the biggest issue but they've got more time. francine: mark carney heads the financial stability board and he was saying this is really a game-changer, right, major failure. the rules make major failure less likely. we knew the figure, the main worry, as you were saying, on chinese banks, how can we make sure that actually they don't pose a systemic risk? john: talk to the chinese ultimately because the point is that the f.s.b.'s aim is to bring in capital market investors so to quite a large extent they police the activities at the banks. they -- as mark carney themselves said, they have skin in the game. if you don't have capital markets and the chinese aren't
all the way there yet, then that's something of an issue. so they've got to deepen -- strengthen their capital market so the banks can access it and have to develop the investors base they need to ensure that their activities can be policed. francine: thank you so much for that, john glover in london. let's get back with neil. we were talking about the risks you see out there in terms of deflation. how much do you worry about systemic risk and when you look at the hedge funds exposure to commodity producers such as glencore or these big banks, can we make sure actually the next shock doesn't come from the financial sector sthp neil: first we have to acknowledge the financial sector is in a much healthier position today than it was five or six years ago. you know, if you look at things like cash on bank balance sheets, you know, it's up substantially. the u.s. banking system is significantly healthier today than it was at any point in the
last five years and that's being reflected in banks's propensity and willingness to lend money to households. i do think the previous speaker was right. if you look at places like emerging markets, banks, c.d.s. there is higher than it is in the u.s. i don't think there's a systemic risk from the u.s. and that's usually where a systemic risks come. tom: citigroup makes clear the only reason to raise rates opposite of what you think, neil, is it there are instabilities out there. where would we see financial instability? do we see it in a libor market and ancient times or offbalance sheets? i don't buy we see it offbalance sheets. neil: to me if you see a financial instability you'll see it in something like the equity earnings multiple, the p.e. multiple and if that's surging you know there's something going on.
tom: there's a bubble issue. neil: right now, i don't think it's an issue. tom: neil dutta with us. we'll get to him with a bang up jobs report. nux hour we'll speak to catherine mann and the court being held at the o.c.d. in paris and they'll be out with their global report and talk to dr. mann and about the co- dependenceys of the united states and china. stay with us. bloomberg "surveillance."
francine: all eyes on david cameron, the u.k. prime minister this week, there giving the speech to the confederation of british industries. why we care, because this week he puts the finishing touches to a letter he'll send to the e.u. and will be the basis of renegotiation. and that plays in -- tom: are you talking about -- francine: this is the letter to the u.s. council. we're big on traditions and it is important because he lays out what he wants to negotiate and plays out to the referendum. it's time for my morning must read and had to be about europe. harold james writes, after a prolonged euro and sovereign debt crisis polarized and radicalized the confident creating a deep north-south risk, thousands of refugees had pitted the east against the west. add to that, numerous over contradictions and divides and the e.u.'s class seems to many more likely than ever. tom: that's quite a statement.
he is one of the giants of economic history. francine: it is a statement, a statement a lot of people will disagree with you because it's the way the e.u. works. tom: you see a tension? francine: the north-south, i think we're over that and now have to deal with the refugee crisis and the east against france and the hikes. let's get straight to neil dutta. when you look at this and look at the e. urment, there's -- e.u., in europe we think it will stay together but no matter what happens, the political will is there for a strong union. do you see it differently on the side of the states? neil: no, we all know europe is not yet an optimal currency area and was established at the time the euro experiment started and we all sort of knew that but in terms of radicalized politics, the cyclical recovery in europe is marginalizing more of the radical parties and look what's going on with the spanish election. the sort of far left party is losing in the polls pretty
substantially. so let's not forget that quietly under all of these sort of negative headlines, we are seeing more integration in europe. tom: vonnie, you lived it in ireland. ireland is totally different than the united kingdom. do you see a further integration or is there a polarity? vonnie: personally i'm not expressing an opinion but adds fuel to the fire to the extreme parties but when it comes down to voting for new leadership, i don't think it actually votes them into power except on the margins. tom: in the east-west, francine, tell us about the right-left polarity in the united kingdom. i was taken aback by mr. corbyn as you celebrated, not celebrated but remembered remembrance day this monday, explain it to the americans. francine: neil points out, the first time we saw in the u.k. is you do have more radicalized parties and to vonnie's point they don't get elected but
shift the policy. if you have extreme policies, you don't have a moderate politician that can make points that talk to everyone. tom: is david cameron a moderate politician? francine: he's center right so he's more moderate than the extreme parties like in france or the other side in spain. tom: i'm trying to figure out david cameron on "saturday night live" and can't get there. neil, can you get there, david cameron, "saturday night live"? vonnie: mr. corbyn maybe. i would watch that. tom: that was a great morning with harold james. francine: germany's flagship airline lufthansa cancels thousands of flights as the strike spreads. francine: welcome back.
partnership is addicted to add $1 billion to each company by the end of 2008. cabin crew strikes continued. talks were said to have collapsed. the thanksgiving turkey might be changed to a ham. the bird flu outbreak is turkey's will be more expensive while supplies reach record highs. news outome breaking of the ocd. it they have been cutting their growth forecast. they are keeping their 2017 growth forecast. came -- tax tex rn or unchanged. tom: there are like 400 headlines out. the meaningful one is september
gdp. maximum in economics of global recession part are we in a global recession and 2.9% to mark --? neil: i don't know. nobody really does. i think we have a recession centered in some place. it if you look at europe, it's in recovery. japan is in recovery. the united states is in recovery. francine: is it just low oil prices and week euro? ecb ishat's what the trying to do. they are achieving that. the u.s. is doing better. that's part of the issue as well. individualo each country as well. i am looking at estonia right now. brazil is a -3.1%.
at one, it's positive point. brazil has got to be a leap of faith by the ocd. there is a lot of squishing its in this report. they have seen a loss of momentum in the u.s.. we'll get more with catherine. things are up here. -- cine: vonnie: david cameron will campaign to stay in the european union if his demands are met her in a is not surprised -- satisfied with the status quo. the u.k. could survive without being part of the eu. suspected -- expected to return home. fearsas in response to
after a russian jetliner was brought down upon. -- the wall street journal says the move the aimed at countering russian interference. the white house and congress would have to send off on sending more troops abroad. with president obama today. they will talk about boosting u.s. military aid to israel. volkswagen says its own employees flagged the latest omissions problems. of 800,000 more cars had irregularities. employees told their superiors about the problems. almost 12 million cars of been affected. you can get more on these and other breaking stories the new bloomberg.com. tom: it just keeps going.
we don't follow it like you do. this is a huge deal. francine: it's huge deal. the company back to being sincere or not. the ceo was named. push it is now in the spotlight. employees flagged this and they didn't do anything about it? does germany just assume that they are coming to the rescue? francine: if this is dishonest the, this is not a global growth problem. me coughcine bought drops because i have been under the weather. i don't have access to them are would have got you a box. hans nichols doesn't have them. francine: should we ask him?
they have canceled 1000 flight. this affects the travel plans -- plans of 100,000 passengers. track --ols: the last strike was in 2012. they have a defined benefits plan. now they are fighting about the size of the contributions and when flight attendants or cabin crew workers can retire. this is separate from the big fight. this is still unresolved with the pilots. struck 13strike, they times this year. strike the past tense of ? tom: i guess you struck? : it's like dive worked over. or dove.ux --
international flights are affected. those are the big hits to the brand. the flight attendants did not strike sunday. that is because the southern states in germany had school holidays and they did not want to stand people. the serious strike happens today. 113,000 passengers are affected. we are just at the beginning of this. this could be a much longer assist. francine: what does this mean to the bottom line? has in an airline that the past been struggling. neil: no one really knows. nichols: we don't know what the damages being on to the brand. how many customers, how many passengers?
this is the national carrier of germany. if you're a german businessman going from berlin to flight for -- frankfurt, your travel office has did. if those lines break down, can they become the dominant carrier? tom: thank you so much. we will keep you abreast of this so many people are traveling international in our global wall street community. they will pay attention. he is chairman of financial strategy solutions at citigroup. that barely describes his excellence on it gdp. good u.s. fiscal picture, he is on a bloomberg . stay with us. ♪
tom: in the view of new york city you can see 47 chief financial officers and they spent the weekend it should they pull the cord on another that deal? rates are rising and prices are lower. if you are in the business of that, you want to issue the issuance now. it is a beautiful november morning. in newe has joined us york. the sun comes out here. it's amazing how that is. we are bringing in a neil has been dead on about the economy. a terrific we had jobs report on friday. reactioneil on the job
and what it means. let me go to the gross". neil: nothing about this is a slamdunk. i would be telling clients to short the front end of the treasury yield. tom: what does that signal to the rest of the financial world? what does that do to stock prices? is the punch bowl full? the rate gets below 5%, the ability the stock market to continue strong gains goes down. i think it's very likely that over the next five years, the gains in the stock market are on net negative. unemployment is there you. five percent. francine: can we bring at your
single best chart western mark -- western mark tom: they are going to look for that. francine: we have a great story saying at this level the last time it was at this level, the fed had to it knowledge it was hurting exports. does the dollar go up from this? neil: the move over the last few weeks and has been endogenous. people have been getting better in the u.s.. when you look at the market reaction, bc bond yields up in the dollar rally. you see equity prices coming up as well. that is a strong growth trade for the united states. i think focusing -- it's important not to reason from a price change. i think the dollar reflects stronger growth prospects in the united states.
tom: go back to what we see in the other dynamic, is this a sea change we will see in december? there are certain points we all have in our head. tip point into a new era? is it a gradual mike asian? neil: we're talking about the first rate hike in almost a decade. people have not seen this environment. i think it's important. i do think that what's important is this idea that the fed is not going to raise rates. that's going to put to rest sooner rather than later. i think in the front end of these cycles, you get some bets are put on and the fed never does it. i think they will go several
times over the next two years. francine: what happens next year? neil: i think there will be four rate hikes next year. francine: even if the currency keeps going higher? neil: it goes back to the site via about is the dollar strengthened him feeding the labor market? if there's been one reliable thing, we talk about how everyone has been up the mystic on growth. the fed has been too pessimistic on unemployment. it's been falling faster than the fed anticipated year after year. my suspicion is that happens again next year. tom: for those only jobs want western mark --? neil: this whole idea about polity, that's the argument you get at this point in the cycle. in the beginning were not creating enough. tom: the jump in wages was the
tom: let's get to our business flash. francine: there has been a shakeup. vonnie: there has been a fine. they failed to meet a deadline to deactivate 5 million on registered some cards. the market value has plunged almost a quarter. they have agreed to buy -- buy plum creek timber. this will create the largest private owner of timberland in the united states. toy are headed to brazil save the iron ore venture after a deadly accident. minor was killed. 13 other workers are missing.
prosecutors want to suspend their license to rate. francine: let's take a look at what's coming up. several fed presidents will speak this week. it's the ecb president speaking on thursday. friday, the eurozone third quarter will be released. we talked a lot about the fed after the jobs report. son next? on nextdo you focus western mark --? neil: i think with europe right now, they have this positive feedback between improving and at the same time that's not going to keep the ecb from doing less. they are going to reinforce these numbers to the upside. the reason that's important is because if you look, a lot of discussion is whether this is
all a zero sum game. is that a zero sum game for the u.s.? the only channel of monetary policy is the currency. it makes the lives of the fed easier. it's easing financial conditions in the united states. he saw that the last time we got an announcement out of the ecb. this eases financial conditions in the event. tom: does this filter down to the american public? i don't understand how we don't get to better paying jobs. median income is flat lighting. neil: we are also seeing smaller households. it, i think for main street, a lot of this discussion that we have is not as important as what's going on
on the ground. i think the data is improving. we see that in consumer confidence. we see that in people's willingness to buy it durable goods, things like cars. that's a good sign that consumer confidence is on the rebound. people are buying cars and homes. francine: thank you so much. let's go to dubai. we're joined by elliott gotkine. i know you've got a lot of of planes flying behind you. we may hear some noise. [inaudible]
what impact does that have on the dubai airport western mark --? very levels of stress. versed with-- well these procedures and we will remain as vigilant as we need to be. there is no real change in the threat level. [inaudible] elliott: the threat level is something we use to dealing with. we were mange vigilant. we won't deviate. elliott: airport security is
highly regarded. it something like that likely to become commonplace? we took special measures. considering the attendance and the strategic importance of this show. the actual change would not the reflected in the air or procedures. now, you they say for might be needing growth. strategicot a set of plans. we have shown how we can overcome capacity shortages. one of our biggest problems is there traffic -- air traffic control capacity. we are trying to overcome that. we've got several different master plans we are pursuing.
there is an existing airport, to buy international. we've got plans to extend the craft. [inaudible] elliott: thank you for joining us. francine, whenever you say something i like, i'm going to make airplane noises. ok. we're going to continue in dubai. interview important with an interesting guy. he closes airline transactions for airbus. he is the guy that closes the sale. this will be very interesting. francine: i love these airshows.
you have airbus trying to sell the a 380. this is a mammoth plane. tom: i have never been on it. francine: it's massive. it's a face-off. tom: we are staying with the gulfstream g four. we are staying with that. the dubai air show. up, we will talk international economics. francine came to new york. she regrets it. stay with us. ♪international economics.
this is after a soaring jobs report. the market continues to react announces its report. economy stimulus and needs it now. good morning, everyone. this is bloomberg surveillance. we're live from new york. it's monday. -- are us in new york you here for the week? francine lacqua law is with us. cameron speaks in london and there is a lot of i can or. the debt you. -- dutch weigh-in. francine: i am going to my thoughts out there. i don't take this is a useful headline. this is a dancing game. cameron says he wants to negotiate with the eu.
leaders are waiting in, saying this would be a killer for london. got great here for the first time. his london strong because of london or because of global wall street because there is no alternative in europe? francine: that is the question. leaves the eu. they are saying it's going to be a disaster for london. it's going to be a disaster for them. tom: let's get started on monday. vonnie: for the first time in a year, obama and netanyahu will meet face-to-face today. they can patch up their fractured relationship. the nuclear deal with iran is still causing tension.
promises he will campaign to stay in the eu if his demands are met her in he's not satisfied with the status quo. he will have a speech about europe tomorrow. --says cameron can survive and can survive. prison -- england can survive. myanmar was ruled by a military coup for a century. bringing financial clout to a protest at the university of missouri. students want the president to quit, he is not addressed campus racism. the team is on strike. it would cost the school $1 million to cancel the next game. snlld trump's appearance on lifted the show to its highest
ratings in four years. he will be back on the air when the candidates debate. you can get more on the stories and other breaking stories 24 hours a day at the new bloomberg.com. them?hey went easy on people wanted them to go after mr. trump and they didn't. vonnie: he is still topping the polls in many respects. tom: dr. carson was in the news over the weekend as well. let's get started with a day to check. you wonder where we will be on that in a few weeks. oil is 4448. i'm going to call that indeterminate right now. let's wander over to the bloomberg terminal. there is a great moderation, a 30 year trend and a 30 year
bond. this is 2008. we are almost below that level within our moderation. we saw the ocd release numbers today. bring that up in. thing that terminal function up again. we had a huge response to that. that is the author that i use it that is my personal terminal code. she is with us this morning. we're beyond honored to have dr. man with us. , is the trade deficit sustainable, it became a classic. everybody read this book. book, but it is a zeitgeist must-read at the moment. how did you go from that to the ocd western mark desk?
catherine: this was a great opportunity to work in the center of policymaking in the economic sphere and --. tom: what was the single message bouncing off the imf? catherine: we are putting out a lower 2015 than anybody else. we wrote down our outlook from some number to now. we wrote it down to 2.9. that is below anybody else. tom: you have been a critic of institutions. now you are on that side. what's it like? catherine: i think it's healthy to have debate and discussion. where we are making assumptions. one of the things we have done in this outlook, we paired our assumptions be widely. when we are wrong, i hope you're
not, i hope you're wrong on the be clear whatl the transmissions were to get us to the growth rate we wrote down. think we know how the economy works so people can understand about our thought process francine: all of the growth forecast, are you concerned you will have to revise this downward if china implodes? neil: we don't think china is going to implode. catherine: they do have a number of stimulus is in place. applications to the rest of the world. they are able to transition to a consumption led growth. that is good for china. it's not good for the rest of the world. it's good for commodity. it's good for commodity in orders. that puts downward pressure on monday prices read investment
floor is going to put a under commodity prices. active,a reaches the that has a lot of questions for commodity prices and the advanced economies as well. francine: what is the biggest risk out there. are you concerned this hurts emerging markets? we go back to square one. inherine: we came out wetember and at that point, said it was appropriate to move in september. i agree with him. it will take in the uncertainty off the table. last actened is the with of money out there, they went back into the market. now you see them going again. getting that first move off the
table and that gradual path, that's what emergent markets are like now. tom: how are emerging markets different? is brazil cohesive and separate? there was a wonderful summary about prosperity. it's different now than when you wrote your book. those are two different economies. tom: is the world different western mark --? isherine: i think the issue can't the u.s. is a locomotive again? the jobs report is good. if we look at the comparison of investment, europe is still flatlined on investment. it has never recovered from the depths of 2008. still theconomy is
locomotive. the rest of the global economy is much bigger. it's not clear they can play the same role they did in the last 25 or 30 years. that's the really important weston. can europe get off the floor? can it have the policies necessary to get going? experiment onn what would be the outcome of oflective action in the oecd a half percentage point increase in public investment in infrastructure. result the?e the faster than grow that half percent. their gdp would go down. this is a good strategy to increase investment.
get the gains for europe. tom: what did tip o'neill get that the rest of america doesn't yet? i'm lost. tom: he was an old school politician. we need more tip o'neill economics. catherine: we need in the united states. we need even more in europe. francine: is qe unhelpful? it doesn't put pressure on politicians to spend on infrastructure? catherine: there are three types of policy. frankly, you've got to make progress on all three or none of them work. francine: people feel more comfortable? catherine: in europe, the cheap cash is not getting out of the market. you've got debt overhang.
the banks have not been performing loans. there is a lot of credit out there. there is a lot of liquidity but it's not going into investment. coming up tomorrow, we will have a conversation with the president of the council on foreign relations. impartg america needs to a more efficient foreign policy. we will talk to him on syria. he is one of our most popular guests and stay with us. ♪
western mark this is the dating website going so well for tender. tom: what is that? i would never know. francine: tom is lost for words. i think this is a pretty good price. we will go back to that. speed dating used to be what's your major? was unreal.ve it francine: tom thinks swiping is a using a clorox. they are reporting $.42. a strike by flight attendants
forces a german airliner to cancel 1000 flights. it will affect more than 110,000 passengers. the world's largest platinum boozer has shut down. they will raise $400 million by sharing -- selling shares. by falling is hurt platinum prices. exports fell for the fourth straight month in china. coal andd for foreign iron is slumping. that's the latest. tom: it's an honor to have catherine man with us. she changed the world with the dialogue of china and the united
states. basically owns the idea of this most unique and twisted and harmful relationship between america and china. how bad is the codependency? catherine: i think things have changed somewhat. i would not say the relationship is harmful. i would say it's necessary and bonded. they do depend on each other. compared to back then, the relationship is much more dependent, but in a good way. chinaithin that, we have and china with generational changes. what is the prescription for washington? what do they need to do western mark -- #catherine: china needs to do work. they need to move toward a consumption-based growth model. they need to undertake physical thecy that will support
elderly and education. to theirf going back traditional way of getting to growth, which is high investment dependency and construction dependency. that transition is a tough thing to do. they are making progress. this rough patch we're looking at with a significant decline in trade, that's testing their policy makers. summers says the world is not expecting is economicthe deal performance. our objective must continue to be mutual growth and prosperity. these are two countries working together. are you comfortable that china will become more consumer led? catherine: i think they will.
the change in the one child policy if it's complemented with the types of policies to support conception by young families, kids are expensive. if all you are thinking about is saving for the future, changing the policy will be negative for consumption. the one child policy really has to complement a consumption taste policy growth model. tom: that's great. dr. summers talks about an institutional architecture. where that's in paris or washington. what's the institutional architecture in beijing? catherine: they've got the same sorts of relationships between the central bank in the finance ministry. legitimatere relationships? catherine: i was there earlier this week.
i think it was last week. this was preparation work for the g-20. witht a real sense talking the ministry of foreign affairs and the central bank and the that theyolicy group really have a sense of where they want to go. i think the g-20 presidency is an excellent form for them to look forward. they just put out their five-year plan. it does emphasize inclusive growth and balanced growth. they've got the script. they've got what they want to do. now they need to implement. is with us.ne mann she is in paris. coming up, it's an alphabet
catherine mannn. we will be in paris december 4. this will be for the important climate change talks. francine: we will probably get an agreement. we need to see if it goes far enough. tom: they are trying to get the on copenhagen. francine: copenhagen, we did not yet anything at all. tom: let's carry that forward. we have a little more on climate change or weekend. matt levine on exxon and climate change. this was bloomberg view. this goes to the eye via of the dialogue and the pushback
against a lot of scientific evidence. what will you listen for in your paris at the meetings western mark --? we addressed the issue. the economy is fragile. we addressed that had on in one of the chapters. of waysthere are a lot we can do now that are progrowth and pro-climate. the give a lot of examples of what some countries have already done that have been pro-climate and progrowth for their economies. i have -- we have to get that on the table. toughti-science, that's a one. everyone who is going to be in science is going to be pro-science. tom: that's one of the big questions. is everybody on the same page? they are in think
regard to the science. they are not in regard to the policy. have beene french working very hard behind the scenes to get an agreement. we're focusing on incentives. we are following and on the policy. if we could get another factor, there is such complexity of existing policies. if we could simplify them, that would get us a long way. tom: we will do a lot on this. up, he knows a lot about radio. stay with us. ♪ the only way to get better is to challenge yourself,
the slowdown has threatens the ecb outlook while inflation remains low. investors also bracing for a fed move as on survey december u.s. fed hike climbed to 60%. israel's tech boom is adding jobs. the tech industry continues to turn entrepreneurs into millionaires. read those headlines on bloomberg.com. let's get to the bloomberg first word. vonnie: thank you so much. the u.k. could get along just outside of the european union, david cameron says. that british business will back me in this negotiation because, frankly, the status quo is not good enough for britain.
we'd to fix these challenges, fix these problems. that is what the negotiation is about. then we can throw ourselves headlong to being in a reformed europe. u.s. military leaders want to send more troops to europe on a rotating basis. "the wall street journal" reported that it would be russian to clear interference. netanyahu will visit the united states. netanyahu is expected to ask for more military aid. thousands of british and russian tourists stranded in egypt are returning home today. airlinetries stopped bomb thatcause of a
brought down a plane. volkswagen says employees flags the company's latest emissions problems. 800,000 more cars had irregularities. workers told supervisors about it during an internal investigation. 12 million cars are effected -- affected by the emissions cheating scandal. you can get more on these stories on bloomberg.com. i'm vonnie quinn. tom: thank you so much. francine lacqua joining us in new york this week. we are thrilled about that. week --for part of this until i wear out my welcome. francine: were the other way around. or until you wear out your voice. tom: this is an important section for us here. lock is one of the
world's experts on the gaming, the guessing, and the forecasting. professor, i go back to an idea the idea that breaking things apart and making it simpler is important. are we too complex when we try to game what janet yellen is trying to do? >> yes, we often do over complexify things. putelps to step back and things in proper perspective. , how really helpful to ask often do events of this story -- sort 10 to happen and then start to adjust in response to the news. tom: are we smarter with all of
our modern media and the speed of data? or should we go back to the time of the slide rule? philip: there are two kinds of it. you can overreact to news. that seems to be a lot of people in that world. or you can be too rigid. you can be too slow to adjust. being a super forecaster requires making a balance. francine: what is it most difficult to forecast. -- ispolitical things that the political things or is it economics? is it much more difficult to look at what monetary policy will be? philip: i would say that predicting short-term fluctuations in market is extremely difficult.
it is hard to say if politics or economics are more difficult. short-term economic trends are notoriously difficult, as you well know. tom: tell me about the economics of financing. should we game what the fed does or a they just playing our tune? philip: i would suggest that most investors are pretty well advised to diversify their portfolios, minimize transaction costs, and stay the course, and not try to over guess things. francine: super forecasters. i want to ask a question two to catherinet mann. is it much more difficult now that i was? catherine: thank you for calling me a super-forecaster, i'm not sure i am. i think the interactions are
more challenging now. you have more countries that are equal in weight. aspect.one the other aspect is the magnitude of financial flows and the magnitude of trade flows are so large and understanding how those interact amongst all of these economies does make things challenging. tom: professor, one last question, the polls of the presidential horse race? ian wisdom onck what poll we should follow. philip: we do geopolitical forecasting. nate silver is more the guy who does the domestic political forecasting. i would look at what they are saying at 538. how often does that candidate tend to win? tom: thank you so much. greatly appreciated.
from minister cameron -- prime minister cameron making headlines with brexit. vonnie: thanks, tom. businessour bloomberg feed. an initial bid. the bidder is not known. there is a big acquisition in the lumber business. timber --or's buying .arehousers buying that is the latest bloomberg business flash. tom: i just got a great week in which totally explains -- tweet theh totally explains
conflict in climate change. there is a modest group of people that do not in any way agree what is going to go on in paris. i'm trying to figure out if that is a game changer. whether barack obama will hold back. catherine: climate change is the ultimate in collective action. you can either have collective action to move forward and get what is done done or you are going to decide not to do anything and we go back to 2 centigrade and there is a high probability of that event. francine: we are delighted to have you in studio, catherine .ann this was on my mind for quite some time. we have so many m&a deals. is this almost because it is the end of cheap money? do not makeost m&a
sense. now, what i amng worried about is the mergers and acquisitions which are driven by cheap money and the high stock valuations producing competition in the marketplace. if you have one big company, they don't need to do any real investment because you do not have to compete for market share. it is really bad for the prospects for real investment going forward. tom: this is what we do with catherine mann. we do rip up the script squared. [laughter] tom: we are going to do binomial functions in a minute. if you do this and you end up with low nominal gdp, where everybody has to merge together, that completely screws up the finance function, doesn't it? we see it across a number of different categories. people will argue that for pharmaceuticals, the mn day is important -- m&a is important
because it brings in the new ideas with a system that can do the trials. i'm not going to argue with that, but across the board in general, it is not going to be good for the real economy. i want to go back to your chart. francine: back to the script. tom: back to the script. there is a shocking lack of investment in europe. europe is so far behind. outlook, we dour this.t the u.s., japan, the euro area, they all have the same decline, the same depth of recession, in terms of the same loss to investment, but europe never took off because, in part, the ecb was late to the game and increased interest rates. they were late to the game in terms of quantitative easing. there were issues that presented them from moving forward with the same pace.
then, of course, the fiscal approach in europe has been very different than what was undertaken in the united states and the u.k.. francine: this is because of austerity, right? austerity well, actually brought yields down and then they also kill the economy. yields are down for two reasons. if you kill the economy, there are no yields either. there was a downward spiral. now, we can pick up the pieces. we have done some exercises on how structural policies combine with the quantitative easing that is in place. moving forward with the public sector investment, that package of things really could take things off --allow things to take off. tom: i'm going to steal a chart from francine lacqua. everybody gets upset in europe
with how i pronounce her name. we are going to talk about the collapsing crisis and a modest and gentle rollover. global gdp, 2.9%. that is a 2% markup, that redline. professor, it is the idea that we are searching for a new dynamism, a new dynamic. where is it? catherine: good question. if we knew where it was, we hopefully would already have done it. if we look at the combination of countries and the magnitudes of the various country groups, we really need to have europe back on track, growing faster than the projection of 1.8% that is better, but it is actual -- absolutely too slow for complacency. consumption and exports. the euro depreciation has been very positive for supporting exports. there is a concern that the ,ittle bit of an uptick in euro
of course it depends on investment coming back, it depends on structural reforms being put in place -- the policymakers cannot be complacent. they've got to keep making these reforms, putting together the package of fiscal, structural, and monetary. francine: are you more worried about a monetary policy mistake or fiscal policies not being there? catherine: i'm more worried about fiscal policies not being there. mario draghi has made it clear what he is doing. he has been transparent about his objectives. they are a long way away from targets. my concern is about structural, where momentum has really fallen in the countries. there was a lot of change, a lot of structural reform done on the periphery, ireland, spain, italy, greece. we still meet structural reform done on the big guys. tom: catherine mann with us from the oecd.
this is a really important announcement from dupont. the chairman and ceo of dupont has been interim and he has been named permanent. he stepped into the crucible at tyco a million years ago and salvaged the company and salvaged thousands of jobs. he is greatly respected at getting things done in a collegial manner and doing it with a lot of issues. that will come in handy at dupont. they demand a changing of the guard. they have got that with mr. breen this morning. that is a very interesting announcement by dupont. coming up tomorrow on "bloomberg .urveillance," david bloom hsbc is a twisted house. a 1.5% yield. david bloom tomorrow.
quickly. yen, it was weaker earlier. the gets you out near 1.2470-ish area. that with recent super weakness. weaker chinese yuan. catherine mann is an absolute all of my foreign-exchange check right now. i did this for catherine mann. the rubin dollar of the 1990's. we did not put in the first royalty check she got. it was a massive dollar move.
is a redux of the 90's. catherine: the thing about that chart is that used to be able to call it the brooklyn bridge chart. now, with the average income of the market, i'm going to have to call it something else. what happened in those other moments? it is when the u.s. was much stronger than the rest of the economy. everybody flows in. they saw growth. that is where we are again. people say it is because the fed is going to raise interest rates. they are raising interest rates because the u.s. economy is strong and that is what people are investing in and that is what you see happening in that diagram. francine: the last time the peoplewas at this level, said it will have an impact on exporters. are we going to see the same? what does it mean for interest rate hikes? catherine: it has already had an impact on the exporters.
of the pieces of research done at the federal reserve is that the extent to which the decrease in exports or export competitiveness that comes from the higher dollar has greater implications for the u.s. economy and it lasts for longer than in those earlier time periods. it is more important than before. that means that the fed is going to be watching very carefully for the extent to which the dollar goes higher. i think most of the money is already in place. the portfolio reallocation has been done over the summer. a little bit more to go. i think the damage is already been done. i don't think it is going to affect the fed's liftoff decision. whether or not it affects the trajectory, they are very clear about it being a very gradual trajectory. have now they suggested that maybe it will not be as gradual was a might have
to suggest that. catherine: i doubt it. i think there are enough headwinds in the global economy that are going to affect the u.s. economy that they are going to have to be gradual. i think they will stick with the gradual. francine: tom, you are leaving for the radio. tom: leaving for radio. francine: have a great show. i will join you in a little bit. tom: the visuals are incredible. francine: here is what we have for the week ahead. several fed presidents will speak this week, starting today with the boston fed president. mario draghi speaks on thursday. catherine, when you look at the next potential shock, are you worried that the fed will have to reverse if they hike in december? what does it mean for implications for mario draghi? catherine: the fed does not want to have to reverse. that is why they have been so careful about not moving too
quickly. they want to make sure the u.s. economy is sound and the rest of the global economy can also bear any brunt. if there is not a move in december, it will be because they do not think the time is right from the standpoint of the package. i do not think it is going to affect mario draghi. his focus is on the european economy. is that the faces other two components of policy, fiscal and structural, need to be in place for his policy to have traction. he made that very clear at the center of the speech he gave in june in portugal. he said, why am i talking about structural policy? it is because he cannot get to his 2% target if the economies cannot adjust. it is about structural. vonnie: how much has the oecd discussed the migrant crisis in europe and how much that will impact the crisis -- the economy in europe?
we have discussed the potential for it to be beneficial for economies if the migrants are integrated well. it is also the case that the oecd has put out an outlook for migration that talks about best practices on how to best integrate migrants so that they can be successful members of an economy, both for themselves, their families, and the economy. we know a lot about this and we have incorporated it. tom: a lot of recommendations for leaders. i hope they are watching. i hope the europeans are watching. thank you so much. great to have you here. --bang" is up next "bloomberg " is up next. ♪
buy its way out of trouble? major changes that the second-largest country in the world. -- company in the world. ♪ >> welcome to "bloomberg ." i'm david weston. stephanie: we are about to have a big tv week. now.berg kicking off what more could you want? stephanie: can you outdo trump on "snl"? let's get some news from vonnie quinn. vonnie: