Toolbox, but there are no plans to use them. Since the decision, we did see the market pare back a little bit, pricing around negative rates. Bailey also saying the bank of england forecast has an unusually large downside skew. The reaction, the pound suggests the market took the boe forecast as pretty robust. 1. 3172. Dailey also says it is hard to draw a conclusion from the bank of vacant forecast and we must be careful not to over interpret faster indicators. Hes speaking in a briefing to journalists right now, saying the boe could use like forward guidance, negative rates of the toolbox. Tom it looks like it is moving the market with lower Interest Rates seen across the u. S. Sterling on a tear, 1. 31 69. Look for our conversation with the governor of the bank of england. Francine lacqua and the governor, 8 00 a. M. New york time, 1 00 p. M. In london. She has some very in pointed she has a very pointed questions from our economics team. From news in new york said he, ritika gupta. Ritika democrats are demanding more republicans concessions. Chuck schumer says there has been some forward momentum, but he is calling on the white house to do more. White house chief of staff mark meadows says if the two sides cannot agree, President Trump make take executive action to extend Unemployment Benefits on the moratorium. Twitter and facebook blocked a video shared by council linked to President Trump, both saying the video violated its policies on coronavirus misinformation. In a clip from an interview, the president that children were virtually immune from the coronavirus. Says that state mike pompeo urges american come is to bar chinese applications from their app stores. Pose a significant threat to americans personal data. Fears of a food shortage in lebanon, the massive explosion in beirut destroyed major grain silos. Grading a crisis and a country that imports nearly all of its food, and comes at a time when lebanon is suffering its worst economic crisis in decades. The government is trying to get a bailout from the International Monetary fund. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more im ricky. Untries, francine, . Tom yet i am ritika gupta. Bfrancine . Tom . Tom equities, bonds, currencies, commodities. To fourear, we go digits here. We like to go to four digits in our data check. Im really looking at the 10year tips. This is a stunning real rate 1. 0837. Of a that is an extra ordinary statistic. They wreck we go to four did was nejra, we go to four digits on bloomberg surveillance. Nejra those real rates have largely been pushing gold higher. You see a little bit of risk off in european equities. A lot of earnings suggest the dollar near a twoyear low but making a comeback and a fourth the pound very much in focus. One of the g10 performers up. 4 . Negative rates are in the toolbox but they have no plans to use them. Pricing has come back into the markets on negative rates. Market took some of the guidance on the boe as well, slightly hawkish. Ning us is jeffrey you geoffrey yu. Why not start with the bank of england as we have just had those comments come through from Andrew Bailey . Are we going to see negative rates at all in 2021 . The market has repriced a little bit off this mornings news conference. Thefrey if you look at Monetary Policy report, there is an interesting q a session st. They basically say the volume of lending could actually be restricted with negative rates if lenders are concerned about future capital ratios. At the banks in the u. K. They say are resilient, but they are concerned about future capital ratios being too low from covid. Saying it is not effective under the current environment, pick something else. Yu, an ace head of research at the federal reserve, i give him credit for the focus on the toolbox. But a toolbox is based on its ability to change things, which we call degrees of freedom. How limited are the degrees of freedom and the bank of england and the fed to avoid negative Interest Rates . Geoffrey they are extremely limited right now. Shuttingan economy down, how it could go from 110 to 50 within two days or three days by Government Order . Banks again, those economic shocks come if they lead to loan losses, no matter what you have in the box, the banks are not going to buy it. The banks will hoard cash and conserve capital. Lets do a tom lets do a history lesson, geoff yu. Do it or wherey they forced to to follow the market . Geoffrey the market was pushing them in that direction, from that point of view, they overtly alter their position because they genuinely believed it would have a stimulus effect. They found the right point in the cycle where banks needed incentive to expand their Balance Sheets to develop. Right now it is completely different because we cant have a cycle but we will have a cycle that falls short. That is the difference and that is why it is a negative rates. Look at sweden. They went negative, now they are not thinking about going negative because in this environment they dont think it works. Nejra the front end is where we are seeing the potential for negative rates being priced. At is a 10year gilt yield 12 basis points fully pricing lower for longer from the bank of england . I know that stimulus has something to do with the pricing in the 10year as well, but what is the dynamic right now in that 10year . I have had somebody tell me this morning we could get zero on the 10 year gilt yield. Geoffrey that i think right now is more unbalanced or pricing in real curve control. Ory are going to go to japan even beyond to australia with 35 basis points at the three have your point. Point the threeyear point. Profile, you have not lower the premium anyway, so it is understandable that the 10 year trading lower. What does all that mean for sterling . Geoffrey sterling, i think you have to look at the eurosterling story differently. We would say to the euro story, it is a lot more negative getting their act together. I think cable upside is dollar weakness. The dollar long, u. S. Equities, u. S. Tech, all of that money has not been liquidated per se. But hedges are being put on. If the u. S. Get this all through, sterling could have a correction here. Nejra tom geoff yu, i have to rip up the script here. Rip up the script now and go to something that your colleague in crime, kit juckes at socgen, wrote about this morning, which is the dichotomy big nation currency dynamics and what we are beginning to see in e. M. Which clearly come on an idiosyncratic basis, looks like an unraveling. Are we there now for the great unraveling in e. M. . Can bey with e. M. , they very selective. They did not do much, but very concerned about the strength about the currency. We know how important it is to the economy. , for example. Won is that going to be enough investment . The markets are looking to go longer again. What we are seeing in our flow data, there is nothing underlying e. M. Assets. The currencies are being brought. That tells me that people are hedging against dollars rather than going long e. M. Situations like turkey, for example, that is e. M. 101. Tom really well said, folks, and this is why we like to have mr. Yu on. Dollarbought, it is really simple. Really out to test new strength in thai baht in a moment. That is polar officer, geoff yu that is polar opposite, geoff yu. With the turkey workout, the ecuador workout as well. What should we take away from eurolire weakness this morning . Geoffrey no matter yield, the going developed world negative, that is a healthy conversation for payment, and with the great risk, that is telling you that the markets are strongly selective about where they see strength. Thailand has reserves. It is not burning through reserves. Good reserve coverage. Those are the places that will attract inflows despite the economy. The lack of a balance of payments, markets are not going theuy that, and a lot is in opposite camp. Think ony in asia, i balance, the market is looking to go overweight again. Of the whyf yu mellon stays with us. Later, we hear from bank of america. Dont miss it. This is bloomberg. Tom two weeks in a row, an extraordinary week here at bloomberg surveillance. Nejra cehic in for Francine Lacqua, who is now in a conversation with bank of england governor Andrew Bailey. A lot going on at boe, particularly this discussion of negative rates. We have the labor economy of america front and center off the difficult report yesterday. , about 25port claims and its after our conversation with the governor. As you look at the correlation and the litmus paper of the global system, geoff yu, with Great Respect to your sense of history, what does it signal to see the lower rate regime that we see worldwide . If you are glass halffull, basically the lower rate regime is a comprehensive attempt to reflate or overheat the economy. Economy at the next phase of the average inflation target. Your glass half empty, very simple, 20, 30 years of low rates, negative rate, qe, and nothing happens. Might as well give up. But at this point, i am still in the camp, lets reflate as much as we can. Tom with all that is going on in the glass have full, class glass have empty, many people say it is on a sustained decline in aggregate demand, with an economist looking for a difficult recovery that doesnt get us back to the prepandemic level vector . Geoffrey at this point, going back to the point about the ,. K. , at least for unemployment there will be agridemand aggregate demand. U. K. , it in the doesnt seem like it does. In the u. S. , they are Still Deciding on the picture. They are willing to use low borrowing costs. It will favor the places where they generate aggregate demand. Nejra in this low rate and negative rate regime, there are some strategists out there who are saying that now is the time to underweight the s p 500 in favor of gold. The two have been positively correlated since march. Would you agree with that, or would you say hold the s p 500 and hold gold. Or does it depend on whether you are glass halffull or empty, as you were just referring to . Geoffrey if you are glass halffull, equities will be best for the medium to longterm, especially those with Pricing Power that will react to investment. You will get Market Expansion and rerating. Yes, there can always be a hedges part of that asset allocation, even as sales go against inflation risk. Says equities over the longer term, they are probably a much better play, but it is in aggregate demand story, than equities will have to react to that. Gold by now is pure inflation. You cannot reach pricing aggregation into gold, whereas inequities you can. Nejra on inflation, do we have much further to run to the upside on u. S. Inflation expectations . Because that of course does impact how much further the real yield can fall. Geoffrey sure. You are looking to break even. That is probably the first chart we should all look at. Now, better70 right than a few months ago, but the trigger way to go, if the fed wants to overshoot inflation, it is talking well above new route to coof 2. 5 zero, that kind of range. 2. 50, that kind of range. We are talking at least 50 basis points higher with and overshoot. Tom geoff yu, thank you so much. Everyone looking at the bond markets, where yields come indecisively, 30year u. S. Bond ready to go back under 1. 20 . It is a headline item. I want to point out the unraveling of turkey. We are seeing dollarmira dollarlire get weaker. Euroturkey is really not all that good as well. Coming up later, Marilyn Watson of blackrock. That will be one of our themes here with the lower rate regime. Governor bailey in the 8 00 hour with Marilyn Watson. This is bloomberg. Good morning. Ritika this is bloomberg surveillance. Toyota boosted posted a surprise profit despite a former loss. Recoveryg it sees a after the coronavirus pandemic after global sales were hammered. The largest Engineering Company in europe dealt with the pandemic betterthanexpected. Siemens profit rose 8 in the fiscal third quarter. Jump in earnings at the Software Business offset declines in other areas. Sales fell less than expected. Quicken loans, Rocket Mortgage trades 1. 8 billion in a scaleddown ipo. That fell fast short of the 3. 3 billion that Rocket Companies has aimed for earlier. Investors pushed back on the company valuation, and they believe that rocket should be priced as a consumer or Financial Company rather than as a technology business. Rocket is controlled by billionaire dan gilbert. That is the Bloomberg Business flash. Tom i really want to say the data right now is more than interesting. Green on the screen, but that is not the story. Yields come in, no question about it that the 10 year yield moments ago broke down to 5. 313. Atyear bond at one point. 0012. Yen 1. 0561. At 105. 61. Lira unravels this morning. Francine the pound is rising against the euro after the bank of england said it did not plan to tighten policy until the inflation outlook was more clear. We will have a full conversation , with what they mean for markets. European stocks are sliding on earnings. You mentioned u. S. Futures. A lot of the focus will be on jobs data and the latest american stimulus package. And gold is pushing once again further above 2000 an ounce. It is the Third Straight day before news on whether the u. S. Will approve this trillion dollar aid package to counter the coronavirus. Look at gold. That is what we will doing that is what we will be doing in the next hour. Later, we hear from the bank of england governor come as i was saying. That interview will be 1 00 p. M. In london, 8 00 a. M. In new york. We talked about the forecast, and we of course talked about covid19 and what Central Banks can do. This is bloomberg. We talked about tiktok. Lets talk about it again. Make a dealised to to buy tiktok. Facebook has responded to facebook has adopted features that rival other popular platforms. Here to talk is david kirkpatrick. Author the facebook effect. I have not asked tom keene whether he is on instagram. How much market share should they get from tiktok . I think they can get a lot in general. New will probably create customers, but they will take customers away from tiktok. I think they are being opportunistic right now. We have a lot of people who want to use these seemingly frivolous applications. There may be room for both. Francine there is room for both regionally. Even ifbreak down tiktok gets acquired by microsoft, is it still going to be seen as chinese social media . I do not think it will be seen as chinese if microsoft bought it. It is unclear how microsoft would handle it if they did own tiktok. Users are likely to remain loyal to tiktok if they can. Celebrities have said they would stick with tiktok until the last moment. On the other hand, others have been hedging their bets by telling their followers, follow us over here on instagram, i am going to do more on snap, whatever. For users of tiktok, it is confusing to know what to do. Moneyr business is making using tiktok, or using it as a promotional system, youre confused right now. Other thing about facebook is they do tend to release high quality products, even though they copy to get there initially. Good and i think tiktok is an ecosystem of its own. Tom david, you are more qualified more than anyone i know than for the news that broke last night. Take twitter ban a video from the Trump Campaign. Our facebook and twitter under the same rules as traditional media in terms of venting material . No. They are not under the same rules as traditional media. Traditional media have been far more rigorous in ensuring whatever they carry is accurate and truthful. There is still a gray area in social media. Offacebooks case, because zuckerbergs obsessive belief in what he thinks is free expression, there is a strong impulse not to regulate. Aitter, i think there is tremendously increasing divergence between the two isvices i think twitter setting the standard. Tom whether it is trump or anyone else, are they impinging on the right to free speech by banning selective videos in what seems to be an arbitrary way . Francine that that is certainly what the administration thanks. I do not look at it that way. When you are essentially a public media, which as you suggested they are, they have responsibility to their viewers, readers, listeners, whatever. What they are seeing is socially responsible and not hugely harmful. Kinds of expression really are harmful. What i came to the president saying children cant first decidedtter that is not acceptable. Facebook followed. I do not think that is surprising free speech. That is simply taking concern for your users. Will a Trump Administration or press to retaliate . Francine will the administration, or President Trump retaliate . Trump is doing his best to to anyone, that is his impulse. I think he would do so with good reason. He is dependent on these services, so hes not threatening to ban either one of them. Francine could he try to break them up . Of whathas been sort his impulse has been, be sympathetic to move toward regulation in other areas because he is unhappy with the way they treat his account. Am therey trumpi have been teletory attitudes when it comes to social media. I do not think a breakup is in prospect. I think what we sought the house hearing was that there really are good reasons why all of these big social media and Internet Companies need to have more oversight. I do not think retaliation is the issue right now. Tom david kirkpatrick, thank you so much. Thanks. Tom author of the facebook effect. Twice in one week is too much. I cant say enough about the book, though. Seriously. The data is moving. To turkish lira continues unravel due to the knock on effect of what receipt in beirut. Movement is so great, i have got to look at the screen in real time. Enteric your city, ritika gupta. Both democrats and republicans are looking at the clock as they try to negotiate a new stimulus package. Democrats want more concessions from the white house. Staff mark chief of meadows warns President Trump may take executive action if there is no agreement on extending jobless benefits and a moratorium on addictions. The Trump Campaign moratorium on evictions. Beats whatampaign joe biden raised. Trump japan has spent 82 Million Dollars on tv ads so far, compared to 49 million for biden. In bayssive explosion ridge storing grain silos. Ritika lebanon is suffering its worst economic crisis in decades per the government is trying to get a bailout from the International Monetary fund. Goldman sachs warrants development of the Coronavirus Vaccine could markets. The increased probability of an improved vaccine by the end of november is undefined by equity markets. One possibility is a selloff in bonds. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am rich a good group to come of this is bloomberg. Francine thank you. Outontinue to keep an eye what is happening in beirut after the explosions. Lebanon, butabout also the ties lebanon has with france. Up next, thecine we will talk about bank of england, mortgages and the u. K. This is bloomberg. Bloomberg surveillance. We are seeing a boom thanks to people seeing a home because of the pandemic. Blue blurt learned the jep bloomberg learned the Japanese Electronics company is seeing sales of the switch game console up to 25 million this year. Posted an adjusted loss of 2 billion. The pandemic rounding virtually all of the german planes. Cut alla says it has the jobs they plan to eliminate. Toy do not expect to get precrisis levels until 2024. Commodities trading client searched. Et debt surged. That is twice what it did a year earlier. That is your business flash. Tom thanks much. Francine coronavirus cases continue to mount with her with california reporting its second deadliest day. Chicago announced it will be clay it will be keeping Classes Online welcome to september. We spoke with the National Institute of allergy and Infectious Diseases center dr. Anthony fauci. The way i talk about it is that you should have a default position. What is your fundamental principle . The fundamental principle is you should try as best as you can to get the children back to school. Psychologically and maybe for nutrition. And then there are secondary downstream ripple effects for families that might have to stop work to take care of the children. The goal should be to get them back. But, then you have to have a. Fundamental to everything is the safety, welfare and health , ande children, teachers secondarily come of the parents which may be interacting, which obviously they well, with children. It is a big country. You have to have flexibility because nothing is unidimensional. You have parts of the country where there is a very little infection. Without with impunity commuted open up schools no problem. We call them green states. And then there are those that have some degree of activity in which you really want to do Something Like youre suggesting. Hybrid, physical spacing, masks, outdoor classes, whatever you want to do to mitigate spread. There are other areas where, at any given time, and it may be temporary, there is so much activity in the committed d you want to think twice before you start putting kids back to school. Zone, you arethat going to have parents who are not going to want to bring their children back commit teachers who are not going to want to show up. When you talk about schools, you cant say the United States is one place. It is multiple regions. At the same time, how do we create a sense of confidence in teachers, parents and students that you need to do these things dont cut them short if you do, youre reasonably safe . It is two messages. You cant forgo them, but if you do it is ok. That is a tough message. Take an you try look at some examples. There have been examples of schools that have opened where on day one you wind up having children infected. Were going to have to have a policy. We did mention one thing that is important, the cdc has put a lot of work in guidelines on how one can mitigate the spread of infection and transmission of infection in schools. People should take a look at those. Dr. Fauci, larry summers, saidr treasury secretary that what we are doing is essentially launching thousands of cruise ships for love 19yearolds. He is referring to college dorms. Does he have a point . If not done correctly, when you congregate people together when you look at what universities are doing, a lot of them are doing something similar in some specs to what some of the Major League Sports are doing. They are testing everybody once they get there. Intermittently surveilling, and trying to determine if you do get an infection, put them in a sequestered way. Some colleges are going online completely. Going online for certain years and some are doing it completely open. Notn, it is onesizefitsall. With david westin yesterday, managing the message experts are to be listened to. There is a science of economics. There has been a set of economists in america, Jeffrey Sachs of columbia, William Easterly of new york university, and in england the high ground is owned by john k and paul collier. They have questioned our economics, questioned our servitude of economic man. Paul collier joins us now, professor of economics at oxford. This is such an honor. I cant in manager i cant imagine. Is new heresay versus the primal scream of your wonderful . What is the new in greed is dead . We are both proud of this book. Realized wefast and needed each other. I am a specialist and how to social how to build cohesion command john is a specialist in managing uncertainty. We realized that these themes Work Together now for businesses. That is the theme of the book. All businesses are kept by deep uncertainties. Coronavirus is a classic example of derailment by something where there is not a model. The chief executive does not know best because nobody can be guided, nobody has got the core knowledge of what to do. We do not know. That is the hallmark characteristic of radical uncertainty. Tom this goes back to peter bernstein, his definition of uncertainty on risk as well. Professor collier, what i find fascinating, this comes out of your wonderful article, all of these structures of everybody who watches bloomberg surveillance is under threat. You go back to game theory and you refer to the wonderful ronald coast. All of the doubt that has been shown by others, is economic man dead . Is this servitude of our models dead . It is. We have been shown to be dangerous. Doesyou uncertainty, it not lead to despair, it leads to actions. One of the actions is building resilience. The other is, if you do not know you find out. Decentralizing decisions to the face where experiment and experience and rapid learning and adjustments to error can best be done. You need to devolve. Killer, in order to devolve safely, you need to be able to trust the workforce. Cohesionhere building within the organization comes in. The whole team needs to be unified on a common purpose. A great thing a leader can do, the chief executive, is communicate common purpose. We think of chief executives as not just commanders in chief pulling levers, that is pretty dangerous when facing uncertainty. The role of the chief executive is to inspire all of the people in the organization that we, collectively, have the same purpose. Then, you can safely decentralize. That is the core message. Back a serious book, we go and unstick chal of the principles of the model. Francine it is a great book. Let me ask you about covid. And the u. K. Economy, where will the best where will the biggest scarring come from . In the next few months, when firms run out of the Government Schemes and then have to decide what to do. Some should close. Opportunities are being damaged permanently. Some Organization Needs to be kept alive. The great asset of a modern economy is all that organizational capital to affirm. Capital iszational not in the equipment, it is in people. A lot of firms are choosing to keep their staff in posts, even though theyve not much to do because they dont want to destroy their hard build organizational capital. Investmentthat trust in people, that will build loyalty. They are actually investing in loyalty. Shorttermare taking profit views, they are paying the price. Francine this is because there is governments government support. If you are a big are small business, sometimes you cant keep staff if they are doing much. Does it need to be extended . We dont know. Disastrous if we get a coordinated force unemployment. Some firms really need those, but that process of discovering which firms are permanently damaged and which firms need to be kept alive, that is best done by decentralizing. What we need is a lot of Venture Capital. We have not got enough around britain. America is in better shape because it is more widely distributed invert in britain, almost all of the Venture Capital is in london. Two thirds is in southeast england. We rapidly need to decentralize Venture Capital. Tom i have got to astor this, this is not working out the polling both. I do not think donald trump is going to read your book, i hate to break into you the president flex the art of the deal. As notme minister may be all that different. Why is democracy not going the collier route . I think it will. Would dispute your description of boris johnson. Boris johnson is actually proved pretty pragmatic. Premiership by getting a lot of posts in the north of england a lot of votes in the north of england. He has got to make the economy work. He knows he himself does not know that there are sensible ways of experimenting. The acid test would be whether he devolves some power to regional governments. Trump, i tend to agree. I think he is a lost cause. He never was a hopeful because, frankly. Tom as we end the interview, what is so important about greed is dead . This shift, the regime change, youre write about it,. Does this have a lasting permanency echo lasting permanence . I think very much so. What we are trying to point to hear is the turning of the tide. That is the moment i think we have captured and it has been accelerated by coronavirus. Strategy of the top already in deep trouble after the 2008 financial crash. We have seen that from the trumpes that brought electors, brexit. We have seen the signs of political disturbance. Is nger is that populism. Tom we are out of time. Paul collier, we are out of time. You will be hearing much more this isreed is dead, an extraordinarily important book whether you are agree or disagree with it. Read it asnt should well the supreme minister. Speak great pleasure to to him this morning. Francine lacqua will speak with Andrew Bailey. Markets and the move. Stay with us. An extraordinary thursday. This is bloomberg. What happens when a wireless carrier puts its customers in charge . Well, the good news gets shared. And it gets rated 1 for customer satisfaction. But dont just take our word for it. Take theirs. Its your wireless. Your rules. Only with xfinity mobile. Call, click or visit a store today. Tom this morning, the bank of theand has studied experiments known as negative Interest Rates, and calls it less effective. Chairman powell will watch it carefully. Governor bailey, in conversation with Francine Lacqua coming up. The adp reported it was not good. Claims this morning are more important. Friday, the president looks for a big report. The doctor on the pandemic. The message is clear, listen to the experts. Surveillance from america. From london as well. Princi, the process of the bank of england is different than what we all know. There is no press conference right . Francine no. I know for some Market Participants it had been quite confusing. We were so socially distance