Outperforming. The Philadelphia Semiconductors index outperforming. This rally on trade optimism set to resume u. S. And china set to resume talks in october and strong Economic Data with jobs and services. We are seeing a rush out of safe haven assets. 2. 2 . Utures are down you can see the big like lower came one week after the Services Data around 10 00 this morning. Gold is trading around its lowest in two weeks and it is on pace for its worst day since june of 2018. Also selling off is another safety asset. U. S. Treasuries. You have the u. S. 10 year bond yields searching 11 basis points. A lot of selling and bonds. This is the biggest move upward in yields we have seen since january. Investors are selling bonds. That is helping financial stocks. Banks getting a boost from the higher yields. Also getting a booster the tech stocks, particularly the semiconductors. That on pace for the best day and a number of months. Individual stocks moving higher. Nvidia up 5. 5 , macron up 4. 5 . Micron up 4. 5 . The optimism on china has given a boost to semis. David thanks so much to kailey leinz. We continue wait for Boris Johnson to speak. In the meantime we talked to linda mcmahon. Make the large Multinational Company ww d is today w w d is today. Wwe is today. She now heads a super pac supporting the president. Linda thank you. A lot going on. David there is. I want to talk about your new job. You are a successful business person and have dealt with the Small Business administration. We are hearing some people concerned about where the economy is headed. You enter into your new responsibilities for the super pac and talk to business leaders. Are they concerned about giving money to your pack with where the economy is headed . Linda i have not heard anyone being hesitant about donating to the pac at this point. I have learned a lot about super pacs. I came on justin april. I came on just in april. It has been a learning curve for me. We look to see that donors most often start to donate after the first of the year on the election year. We are being successful with raising money. Donors want to look at how we plan to use this money to help reelect the president. President. Our focus is only on the president ial race. It is not any state or local races. Strictly the president. Donors are supportive of the president. They want to know how the money will be spent, what our plan is, and that is what we are talking to donors to explain what we will do with the money to help reelect the president. President trump came to office committing to growth and things like tax cuts, which got done, deregulation which is in the process of. At the same time we have this trade dispute. As you talk to business leaders, Small Business leaders as well as large ones, to what extent are they concerned the president might be taking back with one hand what he gave with the other . Linda the president campaigned strongly he would take this trade war to china. It is not a surprise. When he was elected, he wanted to build the economy to get it strong. We have an economy that is the envy of the world. Small businesses are still optimistic. Recent studies are showing Small Business owners are still optimistic about where this economy is going. Our consumers are still spending. Big businesses also are looking positive, though there is little bit of weakness. We are still seeing an incredibly strong economy. If you will take on the trade dispute with an economic giant like china that has been picking decade,ets for the last you can do it only with a strong economy. You are seeing farmers taking a hit and saying we still back the president. There is a point at which farmers will say ok, that is enough pain. Therell be a little pain for longterm gain and that is the game plan. As you say, the consumer is supporting this economy. It is 70 of the u. S. Economy. At the same time we have members of the Federal Reserve expressing concern we may be putting pressure on the consumers. As you know, Capital Investment has trailed off after coming up dramatically after the tax reform came through. It has trailed off again. Are you concerned that what is going on with the business sector could trickle through to the consumers . Linda you know what is interesting about consumer still spending . What we are seeing as how much consumers are saving. They are putting away money. They have more money in their pockets, they are buying more goods and services. It is a strong indicator that they are saving money about the confidence in the market. I am not seeing that swing just yet. David that is interesting. You get an advantage in raising money for the president because there are there are less than there were, but there a lot of candidates on the democratic side and they are focusing on one another. How much of an advantage does that give you before it starts winnowing down substantially . Linda the more the democrats are arguing among themselves, that gives us leeway. The president keeps doing what he is doing, which is running the country and being the leader of the free world, and i think he is continuing to focus on making sure our economy does stay strong. He is locked in on this trade dispute with china because he knows it is the right thing for our country. It also makes it more difficult to target what you are doing when there are so many people on the other site. It will be much easier as we get into the balance of the election year, when the field has winnowed and when the democrats suggest their candidate so it is one on one. Then you will start to look at whose policy is going to rise and where the voters are ready to vote to reelect the president , which i strongly believe will be done, or to elect a democratic opponent, which i cannot imagine what happened because our economy is so strong and all of the programs i hear is faust on the democratic side will ruin our economy. The markets pay a lot of attention to what is going on in washington. From bank of america said to bloomberg he thinks President Trump come as he gets closer to the election, will back off on the chinese issue or come to some sort of resolution because it may pay those it may pose some danger for his reelection. His he committed, no matter what happens, the American People and to see this thing through . Linda that is what he said last night or yesterday, that he, in terms i think his comment is directed more at wall street. He said he had to look beyond wall street for the good of the country. That is what he is doing. To sum, as you look at business, whether it is ww ee or the Small Business you dealt with all of the years. What is the main hope, what is the growth coming . Where you see increased growth . That was the president s principal agenda when he got elected. Cuts, andh the tax when i was at the Small Business administration i went all over the country, all 50 states, i toward businesses, i talked with Business Owners and talked with them their hope tax cuts will be passed and regulations will be rolled back. They told me they would invest in people and plants and equipment. They are continuing to do it. There optimism for growth is so high. All of the indicators with Small Business today are that Small Business are very bullish on this economy and still willing to invest and to grow. David really appreciate you spending time. That is linda mcmahon, care of America First action coming to us from washington. Coming up, i speak to autonation ceo Cheryl Miller and then ray dalio of bridgewater gives his thoughts on the trade war, the fed, and more. Live from chicago, this is bloomberg. David this is balance of power on bloomberg television. Live from chicago, im david westin. We turned to Mark Crumpton for first word news. Mark dorian has weakened slightly, making it a category 2 hurricane, still enough to cause damage on the coast of the carolinas, where the storm is close enough or Hurricane Force winds to hit land. Dorian center is about 50 miles east southeast of charleston, south carolina. In the bahamas, one estimate says damages from dorian may total 7 billion. At least 20 people in the bahamas were killed. Despite a string of stinging defeats in parliament and the resignation of his own brother today, Boris Johnson is continuing his push for an early general election. Joe johnson had returned to government as an Education Minister when his big brother replaced theresa may as Prime Minister in july. Prime minister johnson is hoping a snap poll will help him deliver brexit by october 31. Officials say johnson will introduce new legislation on monday despite parliaments rejection of such a plan on wednesday night. Italys new government took office today. Firstemier contes coalition imploded last month after his right being leak partner led by salvini fuld out of the government. The new coalition has a slim majority, where contes coalition faces confidence votes in each chamber next week. China is urging canada to reflect on its mistakes and release a detained huawei executive. The chief Financial Officer of the chinese tech giant was arrested in vancouver in december at the request of the United States. China is opening china is hoping the new canadian ambassador can help secure her release. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am Mark Crumpton. This is bloomberg. Lets get to emma chandra in london. David we now want to go to london. We are waiting for Boris Johnson. We have emma chandra in london. Explained to us what we expect to hear from mr. Johnson. Three stinging defeats in parliament. Emma three stinging defeats and the humiliation of his brother quitting as an mp and minister and in his government, saying he cannot resolve the tensions between family loyalty and the national interest. Nevertheless, we are waiting for Boris Johnson to speak in waitsfield in the north of england. He is do to make the case for a general election, saying he thinks it is important to go back to the people to help resolve the political crisis we are seeing him solve in the u. K. The expectation is the u. K. Government will try to ask mps on monday to support an early general election. That is because they expect the bill that is currently going through the u. K. Parliament to prevent a no deal brexit will lords andsage in the lords receive royal consent monday. That removes an obstacle labor has to backing a general election. They want to know a no deal brexit can be avoided and therefore we are expecting Boris Johnson to make that case for a general election to say it is up to the people to decide how we resolve the political crisis in the u. K. We are waiting for him to speak. David thank you very much for reporting from london. In the meantime, we have a very special we have David Rubenstein having interview with ray dalio. We will listen in right now. Both of these books are highly recommended by me to read if you care about the Business World and the investment world. We will go through those and then talk about what he is doing today and also his current investment activities. Why we start at the beginning. Talk about the u. S. Economy. You are seen as somebody who has said there might be a chance of a recession at some point. You see any chance of recession in 2019 or 2020 . Chance is probably a 25 in each of those years, probably, of a recession. Ink the important thing am big on principles. I think it is important to understand how the economic machine works, so when im looking at that, and i want to take a few minutes and get into the important things that pertain to a recession. There are two negative quarters of gdp. Will be hovering close to that level. Certain variation around it. The bigger things are a combination of the absence of effectiveness of central bank policy. We can talk about those, together with the weller with a large wealth gap, so when the next downturn comes what that will look like socially and politically. Issueections, which is an between capitalists and socialists who are the rich and the poor, and then the emergence of china in relationship to the United States. Those four factors are factors that have not existed since the 1930s. I think they are unique. When we get into the question of the recession, i think it is how that will affect those other things. World,in the investment your firm was wellknown for quite some time before the last recession. It was a successful firm before. In the last recession, your firm performed extremely well, better than any other major hedge fund. As i recall, we were up 28 or something during the worst year. Are you anticipating a recession now . We were listening to ray dalio speaking to David Rubenstein. Prime minister Boris Johnson is about to speak in the north of england. Lets go live. Everythingn for youre going to do. This is part of a big effort by the government to deliver on the priorities of the british people. As you may have seen yesterday, i hope you saw it, there was a big announcement about more spending for the mhs, 20 new hospital upgrades above the 34 billion we are putting into the nhs. We are leveling up Education Funding around the country so all schools get an uplift, both primary and secondary schools. In my view, policing safe streets is the absolute bedrock of society. It is what drives a successful and productive economy. It gives people the confidence to invest, to improve their neighborhoods. Safe streets are absolutely vital for our country. It is you and the police were delivering safe streets. I want to thank you from the bottom of my heart for what you do. I used to be the mayor of london. Police commissioner for london. I know the incredible work the police do. The most important thing i think politicians can do is back the police. Give you the top cover for what you do, whether that is ensuring you have the proper Legal Protections for important things like stop of search, or making sure you have the funding you need. This program, as you know, is just the beginning. The first of a program to recruit 20,000 more Police Officers. Are you new recruits . Fantastic. Thank you for what you are doing. Everyone is learning the cautioned. Do you know what you have to say when you call someone . You do not have to say anything. Isnt that right . If you failed to mention later relywhich you on lets get this right. Do you remember it . Hey all know it co something you later rely on in court, may be taken into account. Anyway, you get the just. It is part of the training of the police in a lawabiding country that we know peoples rights and we give them their rights. It is part of the trust between the public and the police. It is absolutely vital the public has that trust. Police in our country have a unique relationship with the public. It is quite unlike what you have in other countries around the world. I am proud of the way we do it and of our record in bringing prime down. We want to go on to recruit another 20,000 officers in this country. I hope you think that is the right thing to do. I understand prime is now more aligned. People in this country want to see Police Officers on the streets spreading that sense of reassurance, making sure everyone in their neighborhood feel safe and loved after. And insist on that looked after. We will insist on that. This first push will cost 750 Million Pounds for the first wave. There will be more. Quick pointke a about spending money in this country, which is that there are some people who are suggesting that we should spend a billion to stay in a month the European Union on october 31. I do not think that would be good news. Im going to make sure we do not have that unnecessary delay. I will do everything i possibly can to make sure this country comes out of the eu on october 31. Unfortunately, parliament voted scupper our negotiating power and to make it much more difficult for this government to get a deal. Is giveant to do now the country a choice. We either go forward with our plan to get a deal, take the country out on october 31, which else somebody else should be allowed to see if they can keep us in beyond october 31. I have to tell you i do not think that would be the right way forward, and if people really think that this country should stay in the eu beyond october 31, then that should be a matter for the people of this country to decide. At the moment, what parliament is voting for, or parliament voted for yesterday was a system by which the eu itself would decide how much longer we have to remain in. I cannot think that is the right way forward. All i can say, and i hate going on about brexit. I do not to go on about it anymore. I do not election at all. Frankly, i cannot see any other way. The only way to get this done, to get this moving, is to make that decision. Do you want this government to take us out on october 31, or do you want Jeremy Corbyn and the labour party to go to that crucial summit in brussels on october 17, effectively handing over control to the eu and keep us in beyond october 31. I think it is a nobrainer. Sorry to bring this painful subject up this afternoon. That is the reality of what we face. For me, there can be only one way forward or our country. I think what the people in this country want us to see is the government of this country focusing not on brexit, that has been going on for three years. I think the people in the country want to see is focusing on their priorities and their needs and they want to see people like you serving Police Officers, men and women being allowed to get out on the streets and do your job. They went to see a government that funds you properly and allows you to get on and do that. It directs all of your attention on all of your concern on that. That is what i want to do. Debate,settle this eu we must come out of the eu on october 31, and then i want to get on and deliver all of the priorities of the british people. Policing, making our streets safer, that comes first. That is the top priority of this government. Thank you all very much for what you are doing. I am sorry to have tested you on the cautioned and got it wrong. You are going to go on. You have fantastic careers as Police Officers. It is a wonderful job. I know you will find it immensely rewarding. Thank you all very much for coming along this afternoon. I think i will take some questions from the media. They have been patiently waiting in the back. Andy ofng to go to channel five. I am here, hello. Ask ifple entitled to your own brother cannot back to, why should anyone else . Brother n my own i want to paper attribute. Andy is asking about my brother joe, who is a fantastic guy and a brilliant minister for science, for universities, did a fantastic amount of good work for us, for this country. Joe does not agree with me about the European Union because it is an issue that divides families and divides everybody. What joe would agree is we need to get on and sort this thing out. What joe certainly would agree, and i think he said as much this afternoon, is that this government has exactly the right priorities when it comes to dealing with issues that really matter to the british people. Im talking about making our streets safe, im talking about improving our hospital and improving our education service. I think joe for all of the work i thank joe for all of the work he has done and the support he has given for our domestic agenda. Paul. Ow to if your own brother has lost related topic, but a different question. If your own brother has lost faith in your plan, shirley you will have to be the net surely you will have to be the next member of the family to resign. P. M. Johnson my intention is to deliver on the mandate of the people. We have a democracy in this country. The way we work is that when the people of britain take a decision, parliamentarians are sworn to uphold that decision. That is what we say we would do several times in the house of commons to respect the result of the 2016 referendum on the eu. When people voted by very substantial majority to leave. We all said we would do it. That is what i want to do. I have to say i think there is a stark contrast between my approach i hate to a Party Political but that is the sad reality the approach of Jeremy Corbyn and the labour party. Not only are they voting to make it impossible for this country to decide on its own to leave the eu, but they are also making it impossible or the people of this country to have an election. I think he must be the first leader of the opposition in history to refuse to have an election. It seems to me to be a breach of his job description. He should be actively seeking election. I dont think i have seen anything like it. On my job is to get us out october 31, and that is what we are going to do. Beth, sky news. Became promised her, you said you would unite our country. Instead, you are splitting your party, and now even your own brother feels he cannot serve under you. If your own brother doesnt trust you to act in the national interest, why should all of we . P. M. Johnson you will have seen what jo have to say about our agenda. People disagree about the eu, but the way to unite the country, im afraid, is to get this thing done. The longer this goes on, the more dither and delay we have from parliament, inspired, im afraid, by Jeremy Corbyn, the worse this will be. What people want to see is a resolution and us getting this thing done. That is what were going to do. The sun. Hello, Prime Minister. Can you make a promise today to the British Public that you will not go back to brussels and asked for another delay to brexit . P. M. Johnson yes, i can. I would rather be dead in a ditch. Resignou would first before going to that . P. M. Johnson it achieves absolutely nothing. What is the point of further delay . It is totally pointless. Mail. Ily thank you. Your own chancellor has become mp to bet tory concerned about your purge of 20 rebels from the party. Do you regret your actions, is it too hasty, is there a way back to those mps . P. M. Johnson i think what of parliament is us coming out of the eu october 31. Im afraid the bill passed alas, makes it more difficult for us to negotiate. Letter that the Prime Minister would have to give to brussels, demanding an extension beyond october 31, and then brussels, the eu, would decide how long the u. K. Would remain in the eu. I cannot see how that is democratic, unless that is put to the british people. If that is really what parliament wants, to give the eu this power to keep us in the eu theselves, to scupper negotiations, then i think there should be a clear choice for the country, and we should decide, who do you want to be at the crucial summit october 17 . Do you want Jeremy Corbyn going there with his plan to extend and delay and keep us in the eu or do youd a day, want to settle this thing, bring us together, and deliver on the mandate of the people . That is what i will do. That is very, very clearly the way forward. That is the point i made to all of my colleagues and friends in parliament. Course, discipline is always amongst a here we are body of men and women who know that sometimes you have to administer discipline. You have to be very clear about your message, and that is what we are being. Proctor, from the guardian. Thank you. Prime minister, exactly when are you going to hold an inquiry into islamophobia in the party that you promised to do on my television . P. M. Johnson we are going to have, as i think we have agreed, we will have a general inquiry into all manners of racism and , as soon as that can be gotten underway. But i have to tell you, we have a zero tolerance policy toward islamophobia and all matters of hate crime and prejudice in the conservative parties, as you can imagine. Be. Ink that is going to one more there, one more there. Denis staunton, the irish times. You have been quoting the late reverend ian paisley who spoke about how his people were british but his cows were irish, as a justification for the idea that there could be a different regulation. Do you foresee a different regulation for anything else in Ireland Northern ireland . P. M. Johnson you are right, that is what ian paisley said, the people were british, but the cattle were irish. In that idea was the germ to the idea of crossborder Movement Across the Northern Irish border. David we have been listening to Prime MinisterBoris Johnson speaking in wakefield. Now lets go to emma chandra. He talked about his domestic programs, said it is a subject that no question he wants out by october 31. Can he get an election . Emma that is the big question. Again that thee general election is the only way again that the general election is the only way now to resolve brexit, to resolve the political impasse we are seeing in the u. K. He started to talk about it done magic domestic agenda, saying he wanted to move on to that, saying it is up to the voters to decide brexit policy. He said the choice of an election would be between him and the conservatives making sure britain left by the 31st of october, and then the opposition, which would like to delay further. He says parliament is preventing a general election from taking place. He referred a number of times to Jeremy Corbyn, saying he should be agreeing to an election, seeing as that he has called for one many times. He also took a number of questions from the press, a lot of those focusing on the resignation of his brother who is a conservative mp and minister in his government. Many of them asking how the country can trust and support him, if his own brother cannot. David thank you so much to emma chandra reporting in london. Another big interview today, Cheryl Miller took over the reins at autonation in july, becoming the ceo of the countrys largest Car Dealer Group by volume. She was welcomed to her new position with strong secondquarter results that beat on profit and revenue and sent shares to the highest level in 11 months. We welcome now Cheryl Miller from new york. Thank you for your patience. We had to listen to Boris Johnson, obviously. Lets talk about your business at autonation, where it stands today, how are you doing . The customer remains in good shape. We are excited about the rest of the year, certainly, we had to the quarters, so a nice time to take over at autonation following two recorders, feeling good as we go forward. David lets talk about growth. Autonation has been moving away actually from new car sales into some of the higher end preowned vehicles, driving profitability there, also with parts and service. Is that your path to success for the future . Cheryl the way i think about it is running the core business. We have new vehicle sales and that is one portion of the business. We are seeing customers move from nearly new into preowned. The average payment per vehicle right now is 550 a month. That is a lot for consumers, so we are seeing a shift into used. In the service segment, which we refer to as customer care. Margins there are strong and we have good numbers leading to those two w recorders earlier this year. Corners earlier this year. Consensus is the consumer has been supporting the economy, while businesses is having some doubts and retrenching in some places. Can the consumer holdup . We have some adverse members of the Federal Reserve expressing some doubts about that. You think about autonation, these are big ticket sales. We came into the year expecting the possibility of three rate hikes. Instead what you see is one rate cut already, likely to have one more coming. So affordability for our customers becomes much better. We have a great vehicle selection, a lot of choice, but the customers ability to afford is much stronger now than i would have expected sixmonth ago. At the same time, the customer is still employed. The unemployment picture is pretty solid. Solid. What im hearing in the showrooms is actually a pretty positive sentiment from our customers. David one of the things we have seen across the auto industry, particularly with new vehicles, is perhaps selling less. Looks to be flat or down in terms of new vehicles in north america this year, but the value as we go to more trucks and suvs, are you seeing that go up more in trucks or sedans . The u. S. Consumer has really started to state that the man preface for trucks preface for trucks and suvs. The last thing we have seen over the last couple of years is the availability or trucks and suvs in nearly new. The demand in the production is better matched today, so we feel good about that. We are down about 9000 units in inventory yearoveryear but we still have the important products for customers. We sell over 30 brands, so we have something for everybody out there. The inventory we have on hand is in great shape. The things that has caused people to be concerned about the future for growth in the United States economy is the trade dispute, particularly the chinese trade dispute, but also spilling over into automobiles with europe. Is that affecting your business . Usmca actually landed in a pretty good place with respect to the industry. We are keeping an eye on europe, a lot going on in europe this morning as well. As we think about china, the Worldwide Industry we are glad to be diversified across so many different brands and we think through this with respect to parts, new vehicle sales. And we think about it from a consumer lens. Anything that has the potential to increase prices is not good for the consumer, so we are continuing to evaluate that as a whole. To the extent there was pressure on tariffs from new vehicles, we sell a lot of used and nearly new as well, so those would not be subject to those tariffs, so we feel good about the diversification of autonation. You said it usmca came out pretty well from your point of view, but it has not been ratified by congress. If we cap going with nasdaq, how much of a difference would it rather than u. S. Mca, with that help your business . Cheryl a lot of the production is in north america for the u. S. Market. We are closely watching that. There are some good components, in the finalization of usmca. David really appreciate your patience with us today. Autonation ceo Cheryl Miller. Cheryl great to be here today. David now lets get more on trade from the gmm nonstick coatings ceo. Usedprovide the coatings by some of the biggest makers of pans and pots. R is causingtrade wa some uncertainties for his business. Great to have you with us. We have talked to you before. How much worse is it today than six months ago in terms of your business because of the u. S. China trade dispute . I was on the show a couple months ago and i was optimistic. Really, in the last eight weeks, we have seen our customers slashing orders across the board. I can only point to the trade uncertainty. I believe there was a report that came up recently from target where they said they are not taking any price increases by anyone impacted by the tariffs. Every one of my brand produces in china, so prices are going up. What is interesting, a lot of my clients are now coming to us saying, can you reduce prices . They are trying to reduce their margin. Unfortunately for us, costs are going up this year. There are some pretty big Tectonic Forces at play. I think if what im reporting to you is true in the aggregate, there might be some dark clouds on the horizon. Suggests, we dont know if it will happen, but that is pressure on the margin because somebody has to eat that extra cost. That could reflect itself in earnings, and even potentially in layoffs. Without a doubt. I was listening to her previous guest. She made the point that the consumer does not like price increases. To suffer, butng ultimately come in the end, capitalism predicts that these Cost Increases will end up with the consumer. Our president likes to say that china is paying for these tariffs, but basically anyone who shops in america is paying for these tariffs. I hope it does not happen but inflation is a tremendous horse that could hurt the economy. In 2008, nobody saw the recession coming until everybody saw it. Itn you relitigate it backwards, you saw all the causes. If we had a recession in 2019 or 2020, this trade drama would certainly be one of the precipitants. Of the lastattern 18 months has been back and forth but not in a good direction with regards to u. S. China trade negotiations. We are hearing they will speak next month in washington. At the same time, this could be reversed fairly quickly. Ase people speculating that we get closer to the election, President Trump will assign he does not need this for political purposes. How quickly could it be reversed . Are supply chain being first permanently . For sure, supply chains are being changed with permanently. I am dealing with it in my company, we are seeing business leaving china, going to india, malaysia, vietnam. People are firing real bullets. Chinese letting factories go, standing up in other places. On one hand, that is absolutely permanent. Personally, if what you are saying is true, maybe President Trump and president xi are speaking secretly and they will agree, we are going to get a deal in q1 2020 and look like heroes. I hope that is true because we need that deal. When it comes down to is they are causing a lot of uncertain the in global trade, and they are firing real bullets. Said President Trump has he is happy with supply chains being changed because people on to come back to the u. S. And manufacture things. Do you see any of that in your business at all . Ravin 100 no. I cannot even believe people listen to that. This president has an unbelievably genius like telling of convincing people of things that are just not true. Aisle, we can all agree, china has been a bad actor. So china needs to be treated in a certain way. But the notion of what the president did visavis the tariffs, bringing jobs back to america, is just false on its face. American consumers are paying for these tariffs. All global demonize business, but 50 of the sales of the s p 500 go to other countries. I really think its amazing that he has been able to pull it off so far. David really great to be with you, in your home city, remain gandhi, the ceo of gmm nonstick coatings. Negative yielding debt has reached 16 trillion as the ecb is expected to increase accommodation when it meets next month. And the fed not far behind. We welcome here in chicago, jim bianco. One of the benefits to being here is i get to be in your hometown. You have written a column recently about negative yielding debt and how it could pose a financial risk. Why is that . Jim the Financial System was based on when you loan money out you receive income. The Banking System, pension system, even security settlements, is all predicated on the idea that when money at we get income. If we are going to turn that around, when the loan money out, we also have to pay more money, simply put, the Financial System is not set up for that. We would have to change the whole Financial System if negative yielding debt is a permanent. David what happens or does not happen could pose a risk to the economy with negative yielding debt. Jim right now it is all on the bed. Of the negative yielding debt is in europe and japan. Their Banking System is a little bit shaky because of it. But there are banks, which is have the option of investing in positive yielding countries like the u. K. And the u. S. Chairmaner greenspan said, it is inevitable we will go to negative yields, and they will lose that option. We will not have the option of investing in europe with a positive yield. That will put the Financial System at a loss position. David what do you see in that world . To loan moneyant because they cannot make money off of that money they are lending . Are we seeing that in japan, switzerland . Jim we are starting to see that a little bit, pulling back, but keep in mind, those countries are dominated by a handful of large banks that are global in nature and can find ways around, as long as you have a reserved country like the dollar being positive. We are seeing they are operating at a loss, the Financial System is struggling. The experiment of negative yields is not working the way everyone thought it would. They thought, we would pay you money to take out a loan. We are going to rush out and buy a house, start business. It has not worked that way. David it has not worked yet, so we have to do more of it. That is the top. , where thems to be markets think they are headed. Can you turn this around without coordination with Central Banks . Otherwise, are they computing with each other . Jim that is part of the problem. If you look at the u. S. , theres an argument to be made we dont need to cut rates. I am sympathetic to that argument. But the reality is, if we dont, we enable europe to go deeper negative, which allows money to come here. Without that coordination, it affects our policy and their policy. It is paramount that we get some coordination. David what should the fed do when it meets . The market believes it is cutting. If the market believe there is a greater than 50 chance it will cut, they will cut. Jim the risk is if they dont cut rates aggressively with the market demanding it, they set up a potential shock and that they disappoint the market. They will cut rates 25 basis points. Would needints another market event to happen before the 18th. We dont have that now. We have a strong market today. Looks like 25 is what they will do but i would lean toward being more aggressive. David if that is what they should do, doesnt that exacerbate the problem . And then permits the ecb to go lower. Jim i dont think it does. By closing the gap, it puts more pressure on them, that it is more painful for them to go lower. Their banks dont have the 2 option in the u. S. To invest their money. They now have a 1. 5 option. David you also point out that there is a problem because you say you cannot have negative returns on deposit because banks are saying i have a negative return from a central bank, so i will pass it on to my depositor. Some are saying we will not let you do that. Jim the banks started out in europe my only passing on negative deposits to those under 5000 euros. What has happened is legislation is coming down to say that you cannot go below zero, so you are going to put the banks in a permanent inverted yield curve. They will have zero on their deposits, negative Interest Rates. They cannot change that in a negative Interest Rate environment because of legislation. David what has brought this about . There are various equation that you cannot put a negative rate in, it doesnt work. Some people say it is a matter of pure demographics. Jim there is that. Technology and demographics have lowered Interest Rates. Beingt Central Banks aggressive, their value in Interest Rates may be between zero and one. Central banks have pushed it over the edge. They are like a dr. Who never quits on the patient. They keep trying more, and they wind up getting in this part. They have pushed themselves into a place that they did not think they would be, and now they are stuck. David is there a more basic point . After the crisis, Central Banks said we have to bail the world out, and came in with aggressive action, quantitative easing, things like that. It worked in saving us from going into the ditch but did not work in getting fundamental growth going. Jim thats right. The price you pay by not having it worse in 2010, 11, is lethargic growth since then, especially europe, which may now be sinking back into recession. They have to start to think about their policies in terms of, are they helping . The answer with negative rates is it is not. David is the answer fiscal . Jim i would like to think so, but if you look at the ways the governments are structured, the way the german governments mindset is, they will not start spending money to that level. If they did, it would help, but it would be a tall order. David doesnt that encourage more government borrowing . Jim it does, but more supply would be pushed in as well. Right now, they are still negative. They have the option right now, they can borrow all they want or free, but they are not doing it. David great to see you, jim bianco. He is a Bloomberg Opinion columnist. Coming up, my interview with starbucks ceo kevin johnson. That is coming up this afternoon at 2 30 eastern time. Coming up here is commodities edge, with alix steel. She talks about the saudi aramco ipo. This is bloomberg. Alix copper crushed, nickel ignites. Indonesias longawaited export antics affect her life first. Driving into teslas lot. Porsche reveals its vb. Can it compete with tesla . And the next big oil boom. I speak with the ceo of vista oil and gas as part of my new special, a deep dive into Latin American Oil production. Im alix steel. Welcome to bloomberg Us Commodities edge