tv Bloomberg Surveillance Bloomberg November 13, 2015 6:00am-7:01am EST
their descent. macy's-nordstrom's. for retail america, maybe one answer -- do not open for thanksgiving. hour, luigi zingales and at their turner. good morning, everyone. it is "bloomberg surveillance." it is friday the 13th. i'm tom keene. francine lacqua is in london. how was your trip back? francine: it was nice. tom: it is superstitious, friday the 13th. francine: in italy, it is the 17th. we are looking at lackluster growth in china, france, germany. what does it mean? possibly external stimulus. barack obama with an opinion piece on it. it will be interesting to see whether people accuse each other. tom: we are going to go the two
-- we're going to go to luigi zingales. officials sayan hellfire missiles were aimed yesterday at an islamic state executioner. there is a high degree of certainty that he was killed. was shown in video released by militants beheading half a dozen hostages. the peshmerga raise their flag today in the northwest iraq the city -- in the north -- in a northwest iraqi city. they control the road that was a key islamic state -- for the first time in a half a century, man market soon be ruled i a civilian government. the election victory in the -- is the opposition party
empowering them to name a president and inform -- and form a new government. and donald trump attacks ben carson. calls iowans -- it happened last night during a campaign stop. .e mocked carson trump says he is shocked that iowans are backing carson. trump: how stupid of the people of iowa? how stupid of the people of the country to believe this crap? so here is the good news. he is now saying all of that stuff happened, because otherwise he is a liar. several polls show carson leading trump in the race for the presidential nomination. the iowa caucuses are less than three months away.
get these and other breaking stories less than 24 hours away at bloomberg.com. good move, calling the people of iowa stupid. tom: i do not know where this ends. it is a long way from what i remember. i am trying so hard not to comments. vonnie: voters still love -- tom: does mr. trump still have an inner circle? or is his advisor himself? mark halperin with more on that "with all due respect" and on bloomberg politics as well. 2, nobody cares. the euro stronger. that is a little bit of flight to quality, as derek halpenny told us. .uickly to the terminal i want to look at the bloomberg terminal. copper adjusted for inflation, long-term decline much like my chart of the year from the
1980's into 2002. the china boom. here is a little bit of luigi zingales' mess up here. this is the chart with the curve. we roll over, and it is convex as well. about, oflot to talk the bigger picture. i want to congratulate you on the review of your book on capitalism. what is it like to look at american capitalism if you are from another country? have thate prism you we do not have living and growing up in this wonderland of capitalism? is twofold.nk it coming from a country that does not really know capitalists, this is a great country, and that is what attracted me here. and over my life i had more than i desire. it is a fantastic place, where even somebody coming from nowhere, speaking barely english
, can make it. tom: you still speak barely english. i want to talk about nominal gdp and animal spirit. real rate, nominal rate, all that. forget about the mass. are you concerned -- forget about the math. are you concerned that this country cannot rekindle its animal spirit because the topline line is not there with real inflation, real gdp? there isam concerned not more innovation in this country and that there is not enough competition. i think there is an increasing company -- an increasing power of industry over the government that makes it more difficult for young people to enter and bring innovation, succeed, and compete. tom: that is the second time this chair we have heard that this week. catherine mann said the same thing earlier this week, about concentration of industry. francine: and the fact that a
district and by possible cheap money and that at the end of the day, when the cheap money goes away, it may not make sense to have all these mergers. and talk about animal spirits, what do the presidential debates in the u.s. do to confidence? if you are an investor, a politician in europe and you look at what is going on in the u.s., from a political stage, that must impact foreign policy. luigi: actually, it makes me more worried. , when trump was floating the idea of running, i wrote a piece comparing him to berlusconi. now people are asking why people in italy floated for berlusconi or it now i am asking why americans are in love with trump. thinks talking about -- i
-- when he says things as outrageous as calling the iowans stupid, he resonates with people who are sick and tired of people , andre too manufactured they do not see that he is not ,ort of carrying the white flag but he does it in a way that attracts people. atncine: but when you look 2016 and we talk about the top risks in the world -- we talk about china, central-bank divergence, and deflation -- do we need to talk about politics more? luigi: i think so. francine: politics in the u.s. or elsewhere? everywhere.nk i am sorry to say, but when i wrote my book i said populists are on the rise, and the
question is what type of populists are we going to do with? we see them emerging in different countries, but in all forms it is threatening, and i see this in america as well. we have a significant faction of -- support for bernie sanders -- that is not good for the political system. tom: we are going to beat this book to death. in your book you talk about the history of populism in the united states. you are living it in italy right now. mr. renzi is trying to be a change agent. mr. cameron won a stunning election. we see it in europe. this populism -- is it good to get us back on the growth track? luigi: i do not think that so far it is being channeled in the right direction. we are seeing certainly in france, it has taken a very
negative direction with nationalists, a la le pen. a new movement in spain maybe is going to we've the next election, but with a very strong platform, anticorruption. i think spain in this moment is the most likely country to go and channel populism in what i call the right direction. francine: bringing you back to the u.s. for a moment, we have just seen some positive wage growth in the last jobs report. would more of that help? luigi: it will definitely help. i do not think having two or three quarters of good job growth will change the perception, but there is no doubt that the level of anger that was defused in the united states after the financial bit, so i dropped a think the situation is better in the united states than in
lawmakers need to take urgent action to ensure that the u.k. keeps its banks. here is vonnie quinn in new york. vonnie: thank you so much, francine. euro area economic growth unexpectedly slowed in the third quarter. gdp missed estimates, down from .4% in the previous period. the european central bank is currently examining the need for fresh stimulus. --hulu isin talks in talks to add time warner. this is according to people familiar with the matter who say time warner prostate could equal those -- 21st century fox, walt disney, comcast, ndc universal. apple is bailing on music and trying to migrate music to apple music. the service that was launched in turn. -- the service that was launched in june.
beats in 2014. big full disclosure, i am a user of apple music, but i am not sure it is the best service yet. but i like it. i like it a lot. retail -- apple's retail, the stores are packed but not as much as they used to be. nordstrom took a macy's., as did we are sensing a lot of distress in this sector. it is difficult to know whether it is the death of the department store or whether people want individuality, or whether it is the middle-class consumer. tom: i would wonder where nominal gdp is. that would be my amateur take. vonnie: we have seen a really disastrous quarter for the u.s.
consumer. and president obama is saying do not count on u.s. consumers. we are bringing in our u.s. -- u.s.ence bloomberg bloomberg intelligence consumer expert. we are getting more retail sales on later on today, which might tell a different story. >> that's right, retail sales are expected to rise at a faster rate. in broader consumer spending, it has been pretty strong and continues to be the main engine of domestic rose in the u.s. the key is whether that will hold on and perhaps pick up from the retail perspective. vonnie: obviously we got wage growth, which was better last month. but the stock marketenjoyed tho. josh: the stock market affects consumer sentiment, which feeds into consumer spending. because the october jobs report was so strong, that is what we
are looking for. critically, based on the comments of new york fed president build ugly yesterday, that will be important for the fed's view, whether or not they will be able to lift off in december. the how do you deal with next question -- that retail is a pool of stuff? is it a valid analysis? josh: by mixed, you mean -- tom: we are buying an iphone instead of three dresses for vonnie quinn. are buyingpeople online. they want the customization, and that convenience. you can see department stores discount,ifying into backdoor types of operations, and those are suffering as well. it is not just the price point. francine: joshua, how do we look
at the middle-class? will the way they shop change in the next five years as much as they did in the last five years? figuring out how much they are going to change in the past five years, -- in the next five are lesse middle-class exposed to the financial with less assets concentrated in the financial markets, so they are more focused on jobs. standuigi, where do you with all the heritage of the blue school with professor becker and professor friedman, with the idea that we need to ,ook at retail as one america or that we are so polarized on inner quality -- on the inequality and wealth that we need to look at two retail americas?
is that a valid analysis? luigi: i think it is a valid analysis. income inequality has increased dramatically. the problem is the median gainedr has not really power in a long time. tom: where are we with big-box? i will be blunt -- the retail america i do not know versus all the fancy pants stuff in new york city? they are universes apart, aren't they? josh: there is a recent study says it is which organization you work for. if you are working for apple or google -- tom: josh wright, thank you so much. we will see those numbers at 8:30 this morning. we will have that on "bloomberg surveillance" on bloomberg radio. we also have daniel yergin.
in london is francine lacqua. francine: it looks like an andy warhol picture. now time for the morning must-read. work ifisitions only your suitor is a public company and you cannot afford to buy the enlarged business. state owned enterprises do not have credit limits on their check books. we are talking about the fact that 2.5 months after fending off the $46 billion deal with , china waltzes in and nta says it isynge not a done deal. whether we look at this as an angry tech company and whether we look at this as a tech play, meaning china needs to get into the business, this is a big into
europe. tom: luigi zingales is with us as well. this is one of the key talking points of your book "capitalism," what do you do about foreign money coming in across the transom, particularly when it is artificial capitalism ?ike we see in china how do you adapt? luigi: i think it is a big challenge. this is becoming an acquisition by a company that is state owned, and i can be problematic. tom: how does italy react? is a worldwide company. it is not even located in italy anymore. tom: have you ever driven in a jeep? luigi: no. that is what we need from luigi zingales. is the trade agreement
going to be a good thing for the u.s. consumer? luigi: definitely. the trade agreement, i think it will be good for consumers. vonnie: in the u.s.? luigi: in the u.s. and worldwide? we going toigi, are see many more acquisitions from china? china is emerging. companies are increasingly attracted to overseas companies, .e it in the u.s. or europe are we going to see more of those, and is there going to be regulatory concern? luigi: i think both. we are going to see many more of those. china used to have a phenomenal growth rate, still has a high growth rate, but it is natural that companies are trying to look for growth outside and they will start to acquire companies all over the world. somenk this will generate
concern every time there is one of those waves. when the japanese were buying everything in america, there was a concern about japan taking over america. we know how that ended, so i do not think that we should be that concerned, except for the fact chinae have to remember is not exactly a free market economy. francine: luigi, thank you so much. we do need to remind ourselves of that. coming up, i dare turner. this is "bloomberg surveillance ." ♪
much as 1.8, ferragamo. a cold meaning to goldman sachs, there was a substantial rise in chinese metal demands that could balance out the copper and aluminum rout. 0.2%.se the missed estimate may signal and more difficult return to sustainable growth. that could be said for most european countries. let's get to the bloomberg first word news with bonnie. -- with vonnie quinn. areie: kurdish fighters declaring victory over islamic state. the peshmerga raise the flag today in a northwest iraqi city. ae kurds say they now control road over key islamic state supply routes. oil fields controlled by militants in eastern syria are
now a primary target of airstrikes. stopped --paign has has not stopped their production of oil. donald trump has called iowans stupid over their support of ben carson. carson'sd on concessions about a violent youth. donald trump: he says he had a pathological disease. if you are pathological, there's no cure for that, folks. vonnie: several polls show carson leading trump. if you pay more and get less with buying your thanks giving turkey, blame bird flu. out one flu wiped million turkeys in 15 states. frozen turkeys are largely --
are largely unaffected. most were processed before the outbreak. do you have turkey on thanksgiving? tom: we had to mortgage the youngest child to get the turkey this year. we got one of those heritage organic things. you would not be caught dead looking at something like this in italy or in london. we do this idiocy in america. luigi zingales is with us from the blue school, in chicago. -- he has theer .ost concise read in the crisis it is a terrific, concise, pro read on what we have wrought and where we are heading. you gave three lectures at the london school of economics -- i am taking four or five years ago. adair: four years ago. tomko what has changed from those lectures? adair: those lectures tried to
sum up an overall view of economics across the crisis. -- new book tries to be tries to talk about why we are caught in this incredibly difficult and slow recovery read we are a long way from out of this post crisis malaise. i am attempting to explain why that is the case. the core of it is the huge buildup of debt. i think it is in particular private debt which occurred before the crisis of 2008. tom: daniel yergin will be with us later today. he would say that we cleared markets on a hike. afraid to clear markets? adair: i do not think you can say we have so much debt we can just let it default. we tried that and it was not a great success. we have to recognize that the total amount of debt in the world, private and public
combined, is now so great -- and people like ken rogoff have said this -- that we are sibley not going to work our way out of it in the classic sense of -- that we are simply not going to work our way out of it in the classic sense. write it off or monetize it or have a high rate of inflation. the store point is to understand what a deep mess we are in. tom: here is a terrific quote from adair turner's wonderful new book, and this goes to luigi zingales in chicago -- it was milton friedman who clearly explained why inadequate nominal demand is one problem to which there is always a possible solution. the precise impact of any given size of helicopter money drop would depend on how much people spent rather than saved their newfound financial wealth. lord turner, the bottom line is we are all saving it, not spending it. adair: but we have also not done what friedman called helicopter
money because we keep telling the people that these quantitative easings have to be reversed. we keep talking about exit, we keep talking about the big challenge we have with fiscal consolidation. what milton said and what ben bernanke said in 2003 is there is some circumstance when you should make the central bank money creation permanent, and we have not use that tool yet. i think what milton friedman reflected and what i have reasserted, is that if we really face secular stagnation, unable unable toally -- stimulus the market -- tom: do you support the call to raise inflation? on, we needfocusing new tools to hit the inflation target, particularly in places like japan and the eurozone, where we have seen yet another disappointment for eurozone
growth, which does not at all surprised me. francine: what you're talking about is a radical new idea, that we should use central banks to fund budget deficits because the private credit is in a bubble. how seriously do you think this radical new idea will be taken? will happenhink it effectively in japan in the next five years. japan cannot repay its government debt in the normal sense of the word "repay." people will focus on that increasingly in the next five years. the bank of japan, having accumulated all this on the balance sheet -- selling it back will my happen. sometime in the next five years, we will realize there has been a permanent monetization in japan. the interesting one is the eurozone. we simply cannot get the eurozone economy going just by qe, just by working through the exchange rate. i think there will have to be creative thinking about -- the problem is how to get the demand
through to the real economy. qe and ultralow interest rates work in an indirect mechanism -- by asset price effects and wealth effect. but they are slow and imperfect ways to stimulate the real economy. the eurozone is in a deep problem. we will continue to have slow growth and subpar inflation. francine: adair turner, this radical idea would work in this kind of environment. otherwise we are concerned about uncontrollable inflation, right? adair: that is absolutely right. and what i said about in the book -- and what i set about in the book is that the total problem with helicopter money, revert money finance, it is not a technical problem. technically it is possible to control it. but once the politicians realize
it is impossible, -- but once the real -- but once the politicians realize it is possible, why wouldn't they want to do it permanently? if you are going to use it, you have to have a clear political regime that places it within constraints. i argue that we could give to independent central inflation targeting central banks. we could give them the authority , instead of $375 billion of reversible qe, let's do $40 billion of direct stimulus into the economy. tom: is this the fed that is not independent anymore? i dareco i think this -- co i think this is a fed that is still independent. what i am suggesting still preserves a central bank independence. it's as one of the tools that an independent central bank should have is the authority to say at this moment in the cycle, what we need is a certain amount of
direct helicopter money. but we can give that independent authority to the central bank. how you spend the money would of course have to be somewhat determined by the government. but something ben bernanke said in 2003 in relation to japan, he said some degree of coordination between the government and the central bank on how you spend the money is not upsetting the fundamental principle of independence on how much -- tom: do you agree with lord turner? luigi: i agree, especially for europe. war, the central bankers for the last four, they created a central bank that is -- tom: this is the money question. is the european experiment now removed from the heritage of this bank? -- of this bank -- of bundesliga --
adair: the devil in the title of my book is a quote from the president of bundesbank. he gave a speech close to suggesting that mario draghi was beginning to grow horns and launching qe. i think mario draghi has done a very good job within the constraints of his situation, of trying to find as much freedom to move as possible. he said at jackson hole last year that he cannot do everything without some physical element. vonnie: exactly. there was a great op-ed in project syndicate today. are you concerned about ponzi so-called borrowers popping up? the growth of private credit we have before the crisis, with the vast majority of that kind of credit not funding new capital investment but funding the purchase of assets that already exist is
bound to produce these strong cycles. if you have more credit, you have higher asset prices, and you have more credit. the problem we have with ultra-loose monetary policy is we are trying to stimulate the economy by restimulated liver growth of private credit that got us into the mess in the -- by rims -- by restimulated -- by the growth of private credit that got us into this mess in the first place. the issue of whether we need higher inflation targets has been discussed by the former chief economist of the imf -- and by ken rogoff and paul krugman. i would not necessarily oppose that, but the thing i would love to have would be a globally coordinated commitment to some
overt money finance to increase fiscal deficit in order to achieve even the inflation targets that we have got. how do wefocus on, get even to the inflation targets that we have got, rather than this idea that by setting a higher inflation target, that will itself magically pull through a growth of nominal gdp. focus thisre i would supposedly coordination, which sadly i do not think is going to occur. adair turner, thank you so much for your thoughts. we will be back with adair turner and luigi zingales. this is "bloomberg surveillance." ♪
francine: welcome back. this is "bloomberg surveillance ." these are live pictures of london, with the british banking association saying the u.k. needs to take urgent action to keep tanks in london. now it is time for today's single best chart. tom: i want to drop in a data check. markets are still adjusting off the carnage we saw yesterday. .he german two-year, -.37% copper continues this morning. to the marketght this morning after the excitement yesterday. the excitement yesterday is our single best chart. , an approximation of oil adjusted for inflation, and adjusted for rising developed nation wealth going back since
time began. luigi zingales, the bottom line is we are back to where oil is cheap again. i know at some point that is good for society, but before that we have to get through a lot of carnage, don't we? in theyes, that i think united states this is overall positive, especially because we have put more money in the pocket of consumers. turner, not to speak of specific companies -- let cord core, noble group, bhp -- how long does it take to clear? adair: i think we are in the middle of a very deep global recycle, and to the extent that markets ignored it up today -- up to may or june, the scale that was coming from the chinese slowdown was completely predictable 18 months ago, a year ago, and got ignored now. we have seen a significant shift down in the oil price yesterday. i agree with luigi, it should be
the american economy. what is startling how little positive benefit this year the global economy has had from a higher -- from a much lower oil price. the benefit has been much less than we anticipated, and i think it reflects just how low the demand is going to be, how big the turn down a china is going to be. to your point, these corporate have a long way to go. many of them, i suspect, are still working on the assumption that oil is bound to go back to 70 or 80 three i do not think that is bound to occur at all. francine: when you look at the 'hanks -- at the banks exposures, if glencore word to go down, with this be a systemic risk? hoping i am not ier proud of what i did, but
actually do think we have a banking system itself which is much better capitalized than it , and theyears ago major regulators of the world will all be running stress tests, and those stress tests will include looking at particular sectors. so i think that although the commodity producers, the big , although they are a large sector of the economy, in the sheer weight of how much credit they have extended, they are nothing like the u.s. housing market. real estate is the big battalion of the banking lending system. is with us ander luigi zingales is with us as well. bookcan you say about a with joseph stiglitz and paul turner? you cannot do that. daniel yergin is coming up on oil. we will talk to him about the prize and the quest for hydrocarbon stability. stay with us. from london and new york, this is "bloomberg surveillance."
what an interesting friday market. euro at 1.08 moments ago. the canadians lost to the pittsburgh penguins. i had a little bit to do with that as well. loonie, 132.70 4 -- 1.3274. what do you have this morning, david? stephanie: i'm sorry, you're getting me. nordstrom.ws out of we are paying attention to jcpenney today, and who better then federica marchionni? we will sit down with cisco cbo -- cisco ceo chuck robbins. lot aboutwe talk a
grexit and the referendum. today we had the british bankers association saying that the u.k. needs action to keep tanks in london. -- to keep banks in london. we have a great guest in new york, adair turner. given what we know, should britain wish them the best of luck and send hsbc off, somewhere else where they would be able to tolerate a monster sized financial institution? adair: one of the crucial issues is what happens when a large troublee hsbc gets into hearing if you think this is a place where -- if you think that the place where it is headquartered has to look after it, then there is a big issue for a country being home to a monster sized bank. there is another way to approach it, which is to say we should think about a group like hsbc as being an agglomeration of separate banks, and if it got into trouble, the u.k.
authorities, the treasury and the bank of england, would look out for the u.k. subsidiary, but hong kong would look out for the hong kong business. to a degree, in terms of what are called resolution plans, that is the approach which the world takes to banks like hsbc, or particularly, to for instance like the spanish bankers. withannot do that approach a goldman sachs because the trading business is so integrated that you have to think about it as one big thing. in thispeople miss debate with hsbc is you have the option of having an approach to resolution which is not a global approach, it is a sort of federated approach. i think that does change this debate at their. on the whole, the u.k. government i am sure would like to keep hsbc in the u.k. the one thing we have to be clear on is hsbc is not going to go to hong kong for a lifer
capital regime. -- for a lighter capital regime. if you think that, you have not hpmk.he guys at were relatingou in the u.k., would you keep them here? adair: i do not think that regulators can get in the job of being worried about things to do with competitiveness, etc. that is for politicians to set down what the regime is. but when you start introducing into the objectives of the regulators a thing which says make sure this is a sound bank, but, by the way, you have to make sure it stays here rather than elsewhere, that is not a regulator's job. that is something that we did before the crisis of 2008. a legitimate criticism of the old fsa that was really the politicians' fault was that it was to focus on the competitive is this -- on the
competitiveness of the city of london. tom: luigi zingales, thank you so much for being with us today. lord turner, congratulations. "between debt and the devil." we greatly appreciated this morning. we will continue this discussion through the morning again. dan juergen is joining us -- daniel yergin is joining us. in the last hour or so, iron ore seems a little bit more strengthened. "bloomberg " is up next. good morning. ♪
aficionados are not going down, they are going up. spending more at auction to in new york city. we are going to take you there. stephanie: welcome to "bloomberg ." is will quickly tell that it friday the 13th without us telling you. david: feeling lucky today? stephanie: hopefully lucky. this is an unlucky day. cory johnson is with us, our tech editor. thank you for being with us. welcome to "bloomberg ." and a louise is