tv Whatd You Miss Bloomberg August 16, 2016 4:00pm-5:01pm EDT
stocks closing lower, slipping from all-time highs. joe: "what'd you miss?" the take on the election, fiscal stimulus, and the fed's next move. ways in on magnus the economy and trade after the brexit vote. washingtonpdate from , going dark in colorado and pennsylvania. scarlet: we begin with market minutes. stocks retreating from record highs. housing starts beat estimates, , but iter than expected is the commentary from fed officials that may have changed the tone in the market. joe: some of those safety yield
place leading the way down today. oliver: i'm going to start with that. to emerge,lear story losses in utilities and telecommunications stocks. groups that had supported the market for so long. when the expectation for rate hikes are not changing too much, we saw a bump up in next break, but not a huge amount. look at the health care sector, , only for stocks in the index were of, many losing 2%. oil versus the energy stock index, a bit of diversions.
-- of divergence. two haveee where the separated, a big jump in oil today, not quite as big in the energy stocks, pretty flat despite the gains. on the government bond market front, the spread to between the two-year and the 10 year, dropping a little bit. some interesting stuff with that print,y weaker cpi causing some flattening, then the feds dudley came out and said a september rate hike is still on the table. dip was the key event of the day. scarlet: the yen strengthening past 100 for the first time
brexit.agg said -- as joe mentioned, lots of questions over what the fed does next, with the boj does next, when it comes to monetary policy. pound recovering from a one-month low. you can see the slight move higher. there could be an increase in consumer prices, and what interpretation the is that there is less justification for the boe to ease. change.a chart of daily big outflows on friday, signs the enthusiasm for gold is fizzling. we have seen a big rally and oil lately.
nearly 2% today. that chart explains a lot. scarlet: those are today's market minutes. joins us now.man quote and get a right into the biggest story in the world, the election, what it means for the economy, donald trump was recently quoted in an article in the new york times. we have the quote here. if we can bring it up, this is it. saying we needy to spend more. pop. called priming the prompt
to sometimes you have to do that a little bit to get things going. we have no choice -- otherwise, we are going to die on the vine. this, he is right. it is pretty much by accident. it is true. i think i understand. my strong guess is that hillary's economic advisers would like to propose more deficit spending, but they figure it is probably not a good thing to say because the public does not like that, and so she is being cautious. spending,frastructure we need more. >> how do you come to this he came to this without the right reasons? economics, he hates china
and trade. everything else, he is for tax cuts for the rich, increases for the rich, he is on all sides of it. this week, he is saying that's what he wants to do, but there is no actual plan. what does his history of borrowing and spending to build his empire tell you about how he would approach the national economy? >> we have this illusion that business experience has a lot to policy,running economic but they are both different domains. it doesn't tell us much about what he would do. and particular, the trump style, bar a lot of money, then walk away from it. that isn't going to work for the
united states government, so not useful. of whether hes stumbled into this by accident, his economic viewpoint does not seem to be in line with the classic am conservative, republican views we have heard lately. what do you think the reason is that you have conservative voices getting behind him. suspects.al the same old gang. they are making a judgment that what he would actually do are the ones they want. also, their thing has always been let's be where power is, and they think this is their best chance. obviously there will be no room for them, no one will be listening to them if hillary clinton wins.
the important thing is they never really cared about deficits. except with which a stick to beat president obama. campaign rhetoric. what they do believe in our tax cuts for the wealthy, and trump is promising that. has his background, but he's whong to target americans are looking to him to bring them up. , chip that economic malaise in the u.s. is contributing to his support base? -- how much is that economic malaise in the u.s. contributing to his support base? >> economic anxiety is not a aod predict or of who is
trump supporter. maybe if the country was looming, wages rising, and manufacturing strong, all of that anxiety would be on hold, but i'm not too sure about that. the idea that this is what it is about. trade, all of these subterranean and pulses driving the republican vote are now coming to the surface. talk aboutt's hillary clinton. you have written that her vision is notable for its lack of outlandish assumptions. she is not justifying her proposals that they would cause a radical quickening of the u.s. economy. strengthening the social security safety net by taxing high-income earners. it is center-left governance,
an obama third term. a lot of people in the orbit think that clinton-type policy with more infrastructure spending might have a bigger impact on growth than she is willing to assume. assumingsentially nothing in terms of growth impact, but they are not willing to bet the farm on it. ofis partly a question whether we will see more. are significant tax increases at the top end, fairly significant additions to itmacare, so it's not that is minor, but it is a continuation of the same kind of governance we have had. fiscal the time for stimulus over?
2-3 years ago, the u.s. economy was well below capacity. the fed was not that effective. quantitative easing is marginal tool at best. now the economy might be at full employment, but we don't know that. suppose there is trouble in europe or china. suppose there are more problems out of housing. we have very little room to maneuver. the fed can't do much more than it is doing. fiscal policy would be useful as insurance, an additional sort of demand, and we know it can't the started on short notice. is a precautionary case for business stimulus rather than we need it right now. of course, we can borrow very
cheaply and we need infrastructure. want to bring in something carl icahn said. are think trump's policies possibly the only thing that will save us from going down this decline we are in on productivity. scarlet: the latest productivity numbers were disappointing. investors, big business, policymakers misunderstand the most about productivity? i'm not sure that investors misunderstand, but i think what carl icahn is pretending to misunderstand is that the president has a lot to do with that. the productivity slowdown is a global phenomenon. ll and in a lu technology. there is nothing a president can do about that. >> we have been trying to discern if there is some kind of
market reaction to a clinton or trump presidency, and it's hard to figure out at this point. it should investors be concerned? how are people trading in making money and markets the thinking about it? >> we don't know what he would do. there is no reason to believe he would stay in the bounds of anybody's notion of responsibility. one nuclear war can spoil your whole day. never mind my investments, how about my life? scarlet: stick with us. we will discuss more after the break on whether it is time for central banks to change course and move away from their current mo. this is bloomberg. ♪
scarlet: we are here with paul krugman. reservethe federal thinking about a rethink of monetary policy. federal reserve know when it comes down to it? much. there is an accumulation of evidence that monetary policy is pretty ineffective. we came into this thinking monetary policy at zero rates was ineffective, then qe, then negative rates, which i have to admit i did not think was possible, but it is not actually doing very much. you have negative rates in europe and they still can't move
inflation. massive qe, how much good did that do? so it looks as though we are going back to square one. it was that the only thing you could do to credibly promise higher inflation, and only by changing, creating the impression of a regime change even after recovery, that was he only way monetary policy was going to get traction, and we are most of the way back to that view right now. scarlet: was the president of the san francisco fed correct in saying wishes at higher inflation targets. that for aeen for while. i went to the ecb research conference and said that. they were all polite and ignored me.
that's where i came in and 19 98 talking about japan, the same thing. joe: we got this note from john williams where he laid out possibility for rethinking, committed to higher inflation, stabilizers, and when i read it, i thought this is stuff people have them talking about for years. i guess the real story is that it's coming from someone so central at the fed. >> a lot of it is history. there was blood, sweat, tears, and toya to get inflation down, and the all settled on this 2% target, and very hard to say that maybe that was set to low. that is something they have been reluctant to rethink, and even now. the fat that anyone at
is willing to entertain that fed is willinge to entertain that notion -- see nextyou want to week? interested inore reading research papers. radical rethink is going to happen, it will not happen in open discussion on the floor. it will happen behind closed doors. blackballedve been from jackson hole since i criticize alan greenspan years ago. the value is to have the central bankers exposed to smart academics. >> we will look into the blacklisting. joe: you were in japan and met , i'm minister shinzo abe
curious what your prescription is for japan, and having seen the abenomics experience over the last couple years with mixed results, what is your take away? what did you learn? >> we are seeing the limits of monetary policy. abenomics was the supposed to be unorthodoxnsion, monetary policy, and fiscal reform. the second error never came along. there has been note net fiscal stimulus. was a consumption tax hike, a big mistake. i was one of the people who help e not to do ab another round. i am an admirer of governor kuroda. i think the central bank of
japan has done wonders things giving its history and constraints, but has not had the backing of an expansionist monetary policy. scarlet: can the boj get done what it needs to do? >> i think so. japan needs a higher inflation target. they need to go further. scarlet: are they as constrained as the fed is? constrained in the same way? >> i don't think so. can do stuff in a way that the u.s. president cannot. they have decades of stagnation. they have become the most adventurous policymakers in the advanced world. more with paul krugman and the state of macro economic
joe:joe: i am here with paul krugman. take, a lot of debate lately on the state of macro economics. you have written about it. people complain the mainstream has gone off in a bad direction. what is your take on it? 1970's, a strong critique of keynesian economics, stagflation was a big shock to the system,
and in response, everybody moved off towards models where people rational, russian expectations, limited role for government policy, and a big mathing up. it has turned out that all of those models have behaved badly since 2007. they have not handled the events well. , old-fashioned ways have worked better. joe: you hear talk about mmt school,the where you fall on this debate? >> neither. -- macro as we did
it from 1936-1970 turns out to have a lot of insight to the current situation. there are places where i agree with them, but i don't need their approach to get there. collective, for a using stuff that seems to work, keeping an open mind, knowing your old books, and empirical work. of goodeeing a lot empirical work from younger economists. in the primary, you were critical -- of the economists were providing the fodder for sanders. was that an unusual situation for you? , i did not object in
principle to more spending, but i do believe in staying honest with your modeling. i don't think it was deliberately deceptive. i just don't think it was competent. there were assumptions made that were wildly implausible, namely because the people doing them did not know their stuff. krugman, thank you for joining us, fascinating discussions on this. thank you very much. scarlet: coming up, from one noted economist to another, around the world with george magnus of ubs, discussing china's economy. this is bloomberg. ♪
"what'd you miss?" first word news. not sure why donald trump's campaign is struggling to stay on message, but still believes that donald trump is america's best option for the white house. he spoke in an exclusive interview with bloomberg >>. >>i would like to see trump win this because he's the only hope to save america is the way we know it. mark: he also said he's considering the possibility of forming a super pac, but cautioned it is not a certainty. the united nations is "gravely concerned about the safety of civilians, including thousands of children and aleppo."
syrian opposition monitoring group said airstrikes on rebel held parts of the city left 15 civilians dead and many others wounded. the european aviation safety agency is proposing medical , wanting pilots results from drug and alcohol screenings included in mental health assessments and a better system on keeping tabs on pilots with mental issues. a germanwings pilot crashed the plane into a mountain in the french alps, killing 150 people on board. fewer people in the united states are getting food stamps. enrollment is down 9% from its than 43 million. one reason, seven states are ending benefits earlier than they have to. are almost twice as many americans getting food stamps as there were before the recession. global news 24 hours a day
powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: thank you. u.s. stocks, let's get a recap. falling, dollar did pair official comment spurring speculation on hiring borrowing costs as the data today show the recovery is uneven. the indexes declined from record highs. under 13.vix is still "what'd you miss?" volatility in the yuan has dropped to the lowest level. nation central bank in
control? joining me now from london is george magnus. thank you very much. china'sater, is monetary policy and currency policy on a more sound footing? keel is on an even compared with this time last year. at the turn of the year, we had panic for muchof the same reason in december and january. the pboc introduced a basket, trying to manage the the currency, and december, capital controls of been tightened, the economy is looking more stable thanks to robust stimulus , so for theoduced
time being, things certainly more calm. matt: are you of the opinion that we should be paying closer attention to the signaling of the underlying chinese economy or are things that strong that we can move on and move past the depreciation? >> my feeling is that if global were guilty of overreacting in august last year and january this year, then i think at the moment that they are being a little complacent. maybe markets have had just too many things to think about, fed exit.y, brigg
at things havein lmed in the chinese market is because of an external growth in credit and a big fiscal boost with the share of government spending rising three percentage points of gdp and last 18 months. a lot of infrastructure spending , compensating for the decline in private investment for the first time since records began, so the problem is that these things won't be able to continue. the chinese government won't be able to sustain these things. dissensionsme great going on within the government as to whether they should be pursuing these policies in the first place, so my hunch is that things will start to slow down
during the second half of the year in the economy, and the renminbi will weaken again. what is the cost of china maintaining stability at all costs? cost is that in the short run, which is to say for the foreseeable future, we have exactly this kind of situation where nobody really pays a huge amount of attention to what is but as most economists would probably recognize or concede, and the longer the and policy stance continues with credit growing to times or three times the amount of nominal gdp and with fiscal stimulus as well, the bigger the and theiradjustment risk of a financial instability
is going to be, perhaps at a time when the chinese would not beose it, and the year will really important because at the end of 2017, the 19th congress, wants to putident it before his people. the longer you don't rock the boat, the rougher it is likely to become. this is something we have seen and our own experience, and china is looking to be headed in the same way. something you said about the narrative on china stability getting stale, the city's surprise index for china took a sharp leg down after mediocre retail sales, , so we are already seeing the inability for china
to hold up that credit and fiscal driven stability that was a story for the first half of the year? >> yes, that is right. the secondary story away from the headlines is that the more the economy continues to sevcon centcom do next they going to time? will they increase fiscal spending further, cut interest rates at a time when the economy does not need it? are they going to allow credit to grow? these are issues which were a so-called authority of source that everybody understands as close to the president in may, and nothing has happened. this is the issue really.
it is just not sustainable, and the longer the government tries to stick to this old model of keeping the economy going at any 6.5%, subscribing to the to 7% gdp target, the more damaging it is likely to become. only predict with certainty that it has a lifespan of three month's or four months, that would be so much easier as an investor, but you can't do that. it is liable to erupt at some point and could be within three month's or 13 months, very difficult to say. scarlet: it is kicking the can down the road. george magnus of ubs will stay with us. vote withpost-brexit a spotlight on trade. this is bloomberg. ♪
oliver: it is time for the bloomberg business flash, some of the biggest business stories in the news. volume, autonomous vehicle by ford in 2021, skipping interim steps of driver assisted and match bmw. the second-biggest u.s. automaker is working with 40 startups in addition to expanding its silicon valley operations. morph into a to multipurpose trip planner. testing a new mobile app tentatively named airbnb trips, personal itineraries, information about rentals, dining, and happy hour even's. itse planning to increase china investments and participate in the countries
internet plus strategy. tim cook made the announcement today during a meeting with the chinese vice premier. reports that apple is setting up an independent research and development center in china before the end of the year. that is the bloomberg business flash. scarlet: i am scarlet fu. "what'd you miss?" u.k. inflation accelerated faster than forecast. two signs that the pound's post-referendum decline is pushing up prices. for more now, we are back with the george magnus. we are getting these data points indicating the vote and a resulte hit that was affecting the u.k. economy. meantime, the timetable to negotiate is getting longer, more protracted and complex.
what does that mean for the likelihood of a brexit from the eu? has that decreased? answer thatcould question. it's the same question all 65 million of us are asking, not to mention europe. if you cast your mind back briefly before the referendum, politicians saying that if the vote is no, we will have to give notion of our intention to quit the day after the referendum , and that didn't happen. in july, people were talking about the possibility of triggering the so-called article year,ore the end of the and that's not going to happen now because theresa may has said it will not be until sometime in 2017. now we are seeing all sorts of theussions going on with
government of scotland, government of northern ireland, the germans and french have elections in 2017 in march and september, so there is a sporting chance that the negotiations won't get going until the middle of next year, and maybe not until the end of next year, if at all, so people are beginning to understand a little bit more now. arguably they should have done so before the referendum took lace, but people are beginning to understand about how in norms the complex and time-consuming this is all going to be. we just flashed the lineup of data in the u.k., unemployment, retail, and largely the market is looking at these numbers to figure out what is going to go wrong and how bad brexit will be, but when you see , is theres doing well a chance here that perhaps there will be a certain point that we
can say the data is not cropping up yet and may be the fallout is not as bad as we expected? >> that is a good question, and b answer.a and vote affects the potential level of demand in the economy. we have not had anything other than anecdote about what is ,oing on in the real economy and it is only a months worth of data, so we won't get a real feel for this until october. the doe concern in the government's concern here is that we could get tipped into a recession if investment spending and employment hires, if these things dry up, then we will go over the edge. that is a possibility. it is by no means a shoe in.
i don't want to diminish this or say that it is not important, but if we did have a recession, it would not be a 2008-2009 kind of downturn, because the banking system is fundamentally ok, so we were not have credit kind ofn, that downturn, and we would recover from a business downturn within a reasonable time. in my view is much more important, the economy's potential to grow over the next 5-10 years. if we screw up and make a mess , bothde and investment british companies and foreign companies that want to set up in the u.k., if we restrict the imported skilled labor, these are the things that will really impact the british economy's to grow satisfactorily,
and that would be much more dangerous than six months of a recession. joe: some of the pro-brexit campaigners said it is ok if we leave of the common market because countries will be beating down our door and we will sign all these bilateral trade as we weren't allowed to sign when we were part of the eu. what do you think the u.k. trading relationship with the rest of the world will look like after it leaves the eu? diluteded.that is all people have the idea that the world is a wonderful place ,o do business and trade several british ministers and politicians have said the world
is lining up to do trade deals with britain, but the reality is quite different. and world funk, export claims are 15% below the trend line we would have seen if the financial crisis had not happened. that is number one. number two, is protectionism is rising in ways that most people don't see, and the reason they don't see it is not because of terrorists, but because of that isff barriers gathering momentum throughout the global economy. of the perpetrators are g-20 economies that we want to do our trading with. the third thing is that the british economy depends a lot on services exports. services to of our the eu, the united states, and japan. we will not be selling a lot of services to the chinese come the indians, and emerging countries. if these nontariff barriers come
let's figure out what is going on. welcome. what gives on the latest poll? anything happened between last time and now? is getting worse for trump. virginia is starting to look out of reach. i think his campaign is more worried about the polls in florida. oliver: trump through the primaries was all about the polling, but now he's not talking about it so much. is he giving any commentary on the latest numbers? like he is reconciling himself to the idea that he might just lose. a couple ofoned times that if he loses, he will take a long vacation. it's interesting that some of his supporters are dismissing a lot of these polls and insisting that rally attendance is a better measure of support for evenandidate than polling,
though the polling was quite accurate during the primaries when it said he would win, and he did. joe: you sound a little skeptical of the rally measures. there has been talk of the people urging the rnc to cut and run to avoid a down ballot bloodbath. do you see any chance of that happening? it seems unlikely to me. that would be a major departure for thendards and norms party committee to abandon the presidential candidate and tiredly. -- candidate entirely. there was some reporting that the chairman would do that unless he endorsed paul ryan, and then donald trump came out and endorsed him. i think he will have the party support through the election. for donaldat is next trump, i foreign policy speech,
and economic policy speech. to be putting a lot of stock into campaigning in places like virginia, so how does he turn the momentum around? tonight he is in wisconsin, another state moving rapidly out of reach for him, so he's not abandoning the chance to win in these places. they are looking at the upcoming debates as the next key turning point in this campaign. he has to win the debates are probably his campaign is over. joe: thank you for the update. scarlet: coming up, which you need to know to care of for tomorrow's trading day. this is bloomberg. ♪
scarlet: don't miss this. u.k. unemployment and average weekly earnings tomorrow morning. oliver: target earnings tomorrow at 8:00 a.m. joe: i will be looking at fed minutes out tomorrow at 2:00 p.m.. the odds of a september hike low, the odds of a hike this year diminish, but we will get a sense of how they see risks to the economy and the outlook. scarlet: a lot has changed since then. joe: we had strong data, retail sales data, questionable cpi data this morning, so a lot to go through. isver: even though sentiment nothing will happen, the
to all all due respect that has come after, john locklin did it first and he did the best. ♪ ♪ mark: the pioneering put will aughlinow host john mcl has passed away. we will talk about him later in the show. hasnmouth university survey hillary clinton leading donald trump in florida among likely voters. a washington post poll of virginia voters