Transcripts For BLOOMBERG Bloomberg Surveillance 20160815

Day. The little bit of china a little bit of japan, a little bit of brexit. We shaken up and see what happens. Tom we are were shaking up cocktails this weekend. The way this week is well. One of them took the numbers back to 1896. It is hot, hot, hot. And i am not going to do august. Im fascinated by the japan releases. Francine yeah, and that puts a lot of pressure on governor kuroda, as if he didnt have enough. Lets get to nejra cehic. Nejra the uks exit from the European Union could be delayed until 2019, according to the sunday times. They say new departments set up for the transition may not be ready to start negotiations as early as protected. Because of that, it may be late next year before the u. K. Invokes article 50, a part of the eu agreement that gives the country two years to leave the bloc. Operations have resumes at john f. Kennedy airport after reports of gunfire led to two terminals being evacuated. Police determined that no shots were actually fired. They havent said what led the initial report. Fighting in aleppo has killed dozens of civilians, according to a Monitoring Group based in the u. K. Syrian and russian bombers hit rebel held areas in the city, killing at least 46 people. Meanwhile, rebel shelling held areas killed nine. Three student protest leaders in hong kong have avoided prison sentences. A judge sentenced them to community service. Two years ago, protesters occupied key thoroughfares for 11 weeks, demanding unrestricted elections for hong kongs leader. At the summer olympics, jamaicas sprinter you seybold ran into the history books, with his recordsetting title in 100 meters. He beat the u. S. For the gold. The winning time was 9. 81 seconds. The u. S. Is still on top with 69 metals; china is second with 45; Great Britain is third with 38. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. Im nejra cehic. This is bloomberg. Tom thanks so much. Lets look at our data check. Equities, bonds, currencies, commodities. Euro has done nothing since time began. Hsbc 1. 50 , we will be joined in the next hour, looking forward to that on shortterm paper and the fixes that 11. 93 . It will blow through stronger yen, you wonder what that will do. this is my asset class data check, i just added the yen and you can see, we havent really talked about how a significant china could be. We had some pretty terrible data. Tom talking about sterling. This needs a little explanation. I for this up in my head. This is very cool. The red line is above the white line to the left. Real gdp is higher than nominal abenomics,n before and that is a great signal of deflation. Deflation. To total the white line is above the red line. Thats a success of abenomics. The green 4 and you were supposed to get there, and what i would suggest is this is a chart that shows what would have happened if abenomics hadnt happened. I think thats an important idea that should be a credit to mr. Abe. What would it be like if they continued their policies . Francine what i also liked is that that is the defense line of a lot of central bankers, it will certainly serve governor kuroda. I was trying to figure out this morning what it meant for the future is. The blue line you can see here is wti crude future prices. Is crude long positions. What this chart tells you you can see the big divergence that Money Managers are increasing our prices since the most since january. The white line is that that. You can say that speculators are increasing that, which is driving up the price of wti. Japan grew less than forecast. Important one. 0. 7 . Issing estimates of lets get more on all of this with larry hathaway. We have so much to talk to about. China, japan, and oil. Are you concerned about japan . Tom was pointing out that they would have been in worse shape but they arent in any better shape. Not necessarily. The green line, nominal gdp, that target is elusive and probably out of reach. First of all, its a fully employed economy. Unemployment is at very low levels. It hasnt been this high in several decades. The economy is not going to grow. The labor force itself is shrinking and productivity growth is modest. The potential rate of growth in japan in terms of what we saw in the print today, when you are fully employed you cant grow faster than your potential. Fiscal policy will ease, and that is the attempt to take inflation higher. I dont think we should be disappointed, is performing pretty well. Francine unemployment was going down. Almost full employment, Something Like that. My chart was going like this, which means that they really have a demographic problem. Of course they do. It it does reflect i dont think japan will open up masculine aggression anytime sheet, itse bojs about trying to get nominal inflation up, but they are pretty inflation will resistant. The import Price Inflation in that is slipping away. Tom i want to get to a theme good morning that we have had her five hours today, the idea of the japan is occasion of the rest of the world. We will show this later with Carl Weinberg. This is deflation in japan, hawaii chart were sloped matters. Back in the late 90s of where they got on deflation, and then we roll over to a little bit of a pickup where they take over. Japan is it doing all that bad. The great fear is export deflation strategy to the rest of the world. Is that a legitimate fear . On a big so. Japan is too small to matter. Distant, distant fourth. There is affecting inflation in the United States or elsewhere. The world doesnt import that much, japan is where its safe and falling export prices may have an impact. But that is really a rounding error. Tom will this be a fee that jackson hole, this conundrum of trying to reflate . Be theink it ought to lets leave that for a moment. The issue is we have reached the limits on Monetary Policy. Diminishing returns arrive the long time ago. Inflation is pretty invariant, it just isnt as sensitive as it used to be, whether its japan or the United States, and if you are concerned about getting inflation close to the target, you probably need to think about other things, and what everyone is thinking about is the greater policy mistakes. Tom that is the key phrase in this analysis, the old formulas dont work like they used to. Francine right. But maybe the helicopter doesnt land. Is that the final frontier of Monetary Policy, that they will give it one last go to see whether helicopter money will do something for inflation . Helicopter money is a loaded phrase at it means Different Things to different people, but to some extent there is fiscal expansion ring subsidized by Monetary Policy, maybe not as directly as some of the althoughr analogies there is more fiscal maneuvering and japan will begin to utilize it you may see it in the u. S. After the november elections youll definitely see it with theresa may if she has her way. From that perspective we are going toward a fiscal 11 extension, which is one of the reasons risk assets are so bad. Hathaway. We will continue here this morning, Carl Weinberg will join us, he has been way out front on the struggles of the japanese economy to get that animal spirit back. From london, from new york, this is bloomberg. Francine happy monday. Tom keene is in new york. We will get back to currencies, but first lets get straight to Corporate News and a Bloomberg Business flash. Nejra francine, william hill has rejected an improved to takeover offer. The bid is valued at more than 4 billion. William hill chairman gareth davis says the offers continue to undervalue the company. Private equity firm kkr has emerged as a potential bidder for Entertainment One, according to people familiar with the matter. Entertainment one owns the cartoon character peppa pig. Last week it rejected a 3. 1 billion takeover from itv. Are takingondon longer to sell than they did before the brexit vote. A property website says homes are staying on the market five days more than it may. Homeowners in london have tried to encourage buyers by cutting the average asking price almost 4 just about 1 million. Thats a Bloomberg Business flash. Francine this is what i picked up for my morning mustread. We know theresa may is in switzerland for her annual holiday,a nd this is what the sunday time editors have been writing. This is after they also got sources at whitehall over the last couple weeks to say, actually, brexit wont happen until 2019. In their column this morning, how to make good on her promise is doubtless high on this is mays to do list. The country still has confidence in her ability to keep a level head; so far she has hardly put a foot wrong. Two things. It is true, she has really been a safe pair of hands, but we havent negotiated yet. And it is quite interesting that she is the second Prime Minister ever to hold in switzerland tom i assume she, like you, are at the piano bar. I assume she went to Davos Francine she hikes, she doesnt hang out. Tom i hike, too. What happens in september . Is there a jumpoff for this new government . Is there a catalyst in september . Francine we dont know, and this is one of the issues. We dont know how ministers are going to approach this. Theresa may has repeatedly said brexit is brexit, but has not said when she will invoke it. September, nothing really happened. We dont know whether we will find out about the negotiating tactics are not. Whats clear is that there will be a summit. The eu will be preparing ground, even if we believe the sunday times saying that the minister is on our side, they arent even ready to think about you. We are in the middle of a stalemate. The eu might begin a contingency plans, but it cant plan for the exit until article 50 is invoked. Fore is no legal basis acting on any preliminary decisions. This government has chosen to postpone the decision, maybe later into 2017. A few weeks ago that would have drawn the ire of european leaders who wanted britain to get on with it. I think they are now both on holiday but are also likely to be consumed by other things. They begin to realize that brexit means something for the u. K. , but not very much for the eu. They probably have more patience than we thought they might have had back in late june. Tom the markets are going to tell her what to do; that is my experience as politicians meander along and all of a sudden the markets speak. He will show this chart a lot. This is sterling 54 days on for brexit. That chartlarry, tells me we are going through 129 to a weaker 128. Can the currency be the catalyst for action by politicians . What the currency is telling us is that investors, particularly those who bring money into participate in the u. K. Economy and its relationship to europe, are on hold. They dont know what the future looks like; they dont know the conditions under which brexit will occur, much less what the final blueprint is like. Given that the u. K. Runs an external deficit, that by extension means an insufficient capital flowed to keep the currency at its prevailing value. Will that weakness force the end of theresa may or anyone else . You cant really force their hand. That she is looking at economic weakness and responding to a fiscal policy, not necessarily what the brexit means. Tom halfway there, and i think fireworks will go off. Larry hathaway, an important conversation on japan and on england. Pimco, the flatout best shortterm paper guy in the world. Anthony could send the on Janet Yellens twoyear yield. This is bloomberg. Tom good morning. Francine is in london; tom keene in new york. We welcome brak michael mckee. He has been on scaring america, looking for the roots of his campaign. You founded in donald trump supporters. Indeed. And i know francine knows the narrative of the brexit voter. Less educated, white workers who had been left behind by globalization, and that has been the narrative people attach to donald trump. But Jonathan Rothwell is a researcher at gallup. He has a huge database, 87,000 americans, to drill down deep and find what the real views of donald trump are. Trump supporters are more likely to work in bluecollar fields with pledge education, with less education, but across the overall population, support for trump correlated with higher not lower income,. They are less likely to be unemployed and to be still in the labor force. The individual data do not suggest those who view trump favorably are confronting a normally High Economic distressed by regular measures. Tom are they romney supporters . Are these people that have moved from rummy to trump . It doesnt appear that way. People who believe in manufacturing areas are no less likely to support trump. An influx of immigration doesnt affect their support. Where they are affected white mortality is high in their area, and intergenerational mobility is lower. They feel the effects of the economy, but in a more nuanced way. The thing that correlates most is people who live in highly segregated, white areas with few immigrants, far from the mexican border. Race does appear to play a role. Francine we were talking before, and it is the same fear that fuels trumpism as brexit, that you pointed out that the u. K. Feeling toward the eu is much more vigilant than what the trump was dealing with. I think that is right. In the case of Great Britain, you have had a love hate relationship or ambivalent relationship with europe that spans quite literally centuries, and that is what the u. K. Has prided itself on, being separate from europe. I think that intended to create a broader class of voters who could have entertained brexit, and to ultimately did. I dont see that so much of the trump phenomenon. Francine lets look at the latest polls. Its a 35 chance that donald trump gets elected . Chancet now, a 13 according to the calculations with the number of people make here, when they put all the polls together, Hillary Clinton has a 90 chance. That thesekey is findings suggest finding a solution to these peoples angst will be difficult. Tom i would go with that, and i like the idea of how people conflate popular vote with the electoral vote. The statebystate analysis he is behind all key states. Tom francine . Francine thank you. Preparing for a raft of economic data. And new reports show londons property is being hit. We go into that analysis. This is bloomberg. Tom good monday morning, everyone. Bloomberg surveillance. Right to our first word news in london. Here is nejra cehic. Nejra thomas has ratcheted up his attack against the news media. He claims up having on him. Im not running against crooked Hillary Clinton, im running against the crooked media. Nejra trump said that if the media did not put false me aning into the words, he would be beating clinton by 20 . There is the second night of unrest in the lucky, wisconsin after Police Killed a black man. Shot. St one person was there was not the widespread destruction of property. In switzerland, a man who trained passengers on the with the burning liquid has died of burns. Police say there is no indication that the suspect has ties to terrorists. , lochte was among u. S. Swimmers rocked i can point robbed at come point. Gunpoint. Bloomberg. Francine a number of u. K. Property trusts remain frozen in the wake of the u. K. Referendum. Aberdeen Asset Management has reopened its property fund. Ceo joins us. There was so much concerned post brexit that some of these frozeny funds had to be and was subject of something very ugly out there. Was it just lack of liquidity . It was a big surprise, i guess, the referendum vote. I think there was an automatic reader across and concerns about london, occupiers, and how that might affect real estate. The reality is they hold very little in the London Central market. Fundine you reopened the fairly quickly. A lot of you competitors to not require . Did not. Why . For a week. Ded we put as evolution on the fun. It is a slightly different profile of what we have done to some others. Be opened up after week, gain some liquidity in the fund. Tom bring up the future. Bring it up. This is what we are looking at cranes in the sky at our headquarters in london. They brought down the scaffolding. It is gorgeous. Aght around the corner is building that wells fargo just put 400 billion into. I assume that is currency driven. Do you have, in your head, a level on Sterling Ruby have a feeding frenzy of purchase. We are seeing people come into the u. K. Market because of weakness of currency. Actually, a lot of money has been coming in already. Tom agreed. A lot of money from overseas buyers. That has been happening for 23 years. Actually, if you look at the last 23 years, the peak of the market was 20142015. I think we will continue to see some softness in the market. Ones of 120eet sterling. I get that. Halfway there. Maybe it is 124. Onyou print a 125 handle sterling, what do animals like you do . For us, we are in the slightly different position. Funde managing pension money, essentially. If we look to sell into the market, this is not a particularly bad time to sell. We went to get liquidity a few weeks ago, it was how much money is available. The market has softened slightly. Tom to me this is doom and as governor king said on bloomberg surveillance, if you have a onetime adjustment in sterling, it will be like the golf courses 30 years ago. Francine it could be. These dusty golf from 20 years ago. What is land value like in Central London . It has gone through the floor. Im not sure that is the case. Sharp a very quick and reaction to what happened postreferendum. I think what is happening now is. Eople are calming down a bit a concern you might have is shorttermreact to signals and overreact to the longterm. There are concerns that they postpone triggering article 50 until late next year. Does that cause more problems for property . Certainly people continue to be uncertain in the Property Market. The appraisers are looking for evidence over time. Softened as well postreferendum vote. You get into the lack of evidence, depreciation uncertainty. That starts to build its own cycle. The key thing for us is the Property Market is here to stay. It is delivering a very healthy income return. Francine that is fair to some extent. We had concerns about property hits. Does it help you understand the microenvironment that london is . There is an attractive yield proposition. A placethe heels like like london some parts are going under significant change. It will be interesting to see whether parts of Northern England may benefit at some point. I think Political Uncertainty will be a factor for corporate decisions domestically as well as those looking at the u. K. As a platform for europe. Tom what is the actual assumption on real estate . Is 4 ,earing the new 6 bb 5 . U. K. Is the healed on you real estate . Is it 7 . No, lower. T is around 5 on average pretty much the same level you would find in the u. S. Tom 5 looks awfully good. Francine it does look awfully good. The demand is coming from where . Emerging markets . Institutional investors . Investors with a large appetite . I think demand is coming from anywhere seeking yields, whether that is overseas or the u. K. The Central London offices, more than 50 has been owned by nondomestic investors for a long time. It is a very open market. Demand comes from anywhere across the globe. What were seeing now is a little bit of a pause. We will see if that plays out longterm as something weaker. We will see a renewed relationship with the eu eventually and what that means for Central London. Francine thank you so much for all the insights. Crude come back. Pervti pushes above 40 barrel. This is bloomberg. Francine bloomberg surveillance. Lets talk about oil and commodities. Oil trading higher this morning after capping its biggest weekly gain since april. The move comes amid speculation that producers will talk to prices. E saudi arabia is prepared to discuss the issue informal discussions next month. , when you look at the price of oil, about 4445, at se same time, Venezuelan Oil ministers saying that they want a price increase. Per barrel. 45 venezuela is saying the price should be at least 70 per barrel. The saudis also think the price should be higher. Obviously they want prices high. What is important is this , it is scaringec the shares from the market. Francine right. In blue, crude futures. White, the long position. Is this just on the back of hoping something happens at this opec meeting . I think a lot of it is on the back of saudi arabia and also. Ussia making positive comments every two years, consumers and gather atof oil will the end of september, and in informal opec meeting will be alongside that meeting and they will discuss if any measure is needed. It is not coincidence that the last time we heard about potential coordination among all opec and nonopec was when prices were weak. They may be taking a cue from to try to shape the direction of the market. So far it is working. Is the distinction to me are they jawboning the price up or is it going because of legitimate micromacro issues or downstreamupstream issues . Background a bit of a micro from the oil industry. Demand remains good. If you look at the macro situation of the oil market, it is one. The Global Market is weakening. The price has no particular reason to cope much higher than where it is currently. Really giving incentive to the downside of the market. Here with this. Give me the broad macro view. If the cartel broken . The cartel has been structurally undermined by innovation. Americanin north. Roduction there have always been divisions as well. Also, also at the reasons that have to do with production. I think the talks of higher , venezuela being chief among them. Therell isper fanciful. Francine where are stocks headed . I would point out that highyield bond indices have not. Risks. Not default ame stock markets are taking cue that growth expectations are better than they thought. Thank you so much. Our chief Energy Correspondent wti hasrough what done. Emerging markets, currencies wti is certainly, what doing, it is growing. Watch out for dollaryen. This is bloomberg. Tom sterling weaker this morning. Francine the quad in london. Im tom keene in new york. Right now lets get to a Bloomberg Business flash. Nejra there is a report that midamerica apartment communities are nearing a deal to buy properties for 4 million. Demand for rental properties has been booming. Real estate is the second tor for m a. China may list restrictions on cell phones on airplanes. If it is approved they may shop online and chat at 3500 feet. Grew less than grew less than forecast. Gross domestic product expanded 2 10 of 1 . Meanwhile, spending unexpectedly declined. That is the Bloomberg Business flash. Francine . Francine thank you so much. Heres what we are looking for for the rest of the week. On thursday. Any, look of course for moves. The yen close to 100, or close to 100. We will be watching closely for any guidance on policy decisions. Have the minutes on wednesday and one week and half later we janet yellen speaking at jackson hole. What clues could she give us . Of course anonymize last december. It positive initially because of concerns for the global economy. That is code for china. Ofn it passed again because brexit. Surearkets are still not if the fed will tighten at all this year. Employment report has distanced since then. Strong,nd number is especially in Consumer Spending. You really have to think that the minutes and her speech have to come back to address the pa t th. The past is now obvious. Francine will the fed go ahead are. Ike even though they expecting a . The fed predates janet yellen that they should communicate, not surprise. They could be prepared for a sunday move. I think some of the foundation has to be laid now. Obviously there are other issues. They cannot talk about the november elections the way they talk about brexit. That would be a little too close to home to talk about uncertainty around that outcome. I think they now have to pursue a policy that is more domestically oriented towards , and the labors market. If they communicate that they will not tighten it must be a lowerthey maintain than longer. Tom im looking at a trend on a lazy monday in august, but it is not a lazy trend. Let me ask you a pregnant question. That is a 10 day chart, brexit is way off to the left. If janet yellen the central banker to minister may . Shake instantly have some influence on decisionmaking and in the bank of england Monetary Policy. It changes the dynamic somewhat. Put more pressure, it seems to me, to find ways to ameliorate what seem to be the consequences of the brexit outcome. I think what she knows, and what most economists know is sterling weakness will not be the salvation of the economy. There is little evidence that a boosts investment. From that perspective it leads to higher inflation and an erosion of purchasing power. Tom we did a great thing last the economy. Ics in the summary is simple. You have to link monetary and fiscal policy together. You see any evidence that that will occur . The u. K. Government has already indicated that they will use the fiscal lever. Ofy scrapped the idea pushing back. More recently the chancellor has been speaking of pushing for , agriculture,ze and fiscal easing. In all these sorts of ways, i think fiscal policy will be part of the growth response which otherwise will be a downturn related to price it. Tom really interesting here, some of the cross currents going gone. In the next hour, Carl Weinberg way out front on japan. We will have make and mercy megan murphy. Tom this morning, central acres consider stagnant economy. Can they replayed their economies . To the vigilantes controlled the twoyear yield this hour . Well, mr. Trump, he spent the whole weekend running against the media, not mrs. Clinton. This is bloomberg surveillance. Were live from our World Headquarters in new york. It is the eyes of august ides of august. Does such things exist . Good morning. Francine good morning. It is a National Holiday in italy. Interesting day. Tom National Holiday in italy . You are working . Francine this is what surveillance does to you. Addicted to the markets. A lift up as well. Wisdom indy previous hour. Now we need wisdom on the first word news. Nejra the uks exit from the European Union could he delayed until late 2019. That is according to the sunday times. The new c new department set up for the transition may not. Ready to negotiate as early as expected. Because of that it could be next year before they invoke article 50. Authorizations operations have resumed at new yorks john f. Kennedy airport. Scrambleavelers through the airport and flights were halted. No shots were actually fired. Fighting in aleppo, syria has citizens. Ens of syrian and russian bombers hit rebel held areas in the city killing at least 46 people. Meanwhile, rebel shelling killed nine. Three students protest leaders in hong kong have avoided prison sentences. A judge sentenced them to community service. At the summer olympics, jamaican bolt ran his way into the history books. Time, nine. 81 seconds p checking the metal scoreboard, the u. S. Is on top with 64 medals. Global news 24 hours a day powered by more than 120 journalists and analysts, this is bloomberg. Tom thank you so much. Futures are up three. The euro, going nowhere. Lift. Th the i dont want to make a big deal about the yen. Im watching sterling which has simply eroded over the last 10 days. Francine . Francine overall i think youre right. It is a currency type of day. Overall, it is emerging markets rising the most. This is oil, just below 45. For debbie t 44 traders in general are pushing back on best of a higher Interest Rate anytime soon. That is why were seeing the shanghai raising. Tom i did this chart in my head and it looked even better when i didnt on the bloomberg. The red line is real japan gdp. The white line is nominal. The red line is above the white line for most of the chart. That is inflation. The white line, notice how they flip. The white line on the right side is above the red line. Abenomics has worked. U. S. ,4 nominal, in the minimal. To me, it is the counterfactual of abenomics. The reality is if he had not done what he did different line with still be over the white line. Did i confuse you that . Francine no, i got it. Any centrals from bank are under fire. This is what im looking at. There is a linkage between what you were saying. This is inflation. White. Ou have futures in basically what it tells us is Money Managers increase on crude prices the most from january. What is the reversal of catch22 . Catch 44. Tom i think it is a very useful chart this morning. Oil. Onder the why of there is no why of Interest Rates. Of pimco, comes by to talk. O us about the twoyear yield coming up, Carl Weinberg will join us. Where janetony on yellen is. Bring up the lollipop chart. These are all of the central meetings. There is a trend, higher yields. Im sorry, tony. Off of the trend from one year ago the trend is three and the low twoyear yield. What does janet yellen need to do to get the lollipop acted the green circle . The fed gave us a roadmap. Tom the vigilantes are not reading the roadmap. Ultimately the rate hike has played out. Let med has decided put it differently. Think gps versus paper of roadmaps, back in the day, so to speak. With the paper roadmap, you could go anyway to get to your destination. Verythe gps, it is precise. The fed seems to have chosen the paper roadmap. Market store really trust the of and what it says in terms a rate hike. We do not know precisely because they are not provided much information. France in bring in the quad in london. Francine when you look at all the reasons why the fed should not hike, have they disappeared . Ofwe have numerous sets factors that the of factors that the fed gave us that would ultimately be to a hike but they have not given us one. China may have been an influence, of course, it was last january. Moves and the Dow Jones Industrial average. It tightened financial conditions. Looking at the Bloomberg Financial index in looks like it is back to the old highs which is to say Interest Rates have fallen, stock architect increased, etc. Etc. The fed should not worry so much about Global Financial conditions. Needine overall, do we fiscal policy . It seems that there is a massive shift. We feeling fiscal policy to get us out of this mess. There is no question. Fiscal banks can regulate only one thing. That is inflation. There are three sources of productivity. ,eople, human capital, stock and how we use it all. Bring up this chart again. You talking about of said that shift . Ermanent what we have globally if monetary fiscal policy. I was trying to mention, we have these three sources of productivity. In the government we have capital intensity. Until there is more investment they will not be a lot of productivity, or growth. Tom lets come back. With us. Ynski coming up, Carl Weinberg. E will dive into japan this is bloomberg. Francine it is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. Nejra there is a report that midamerica apartment communities are close to a deal to buy properties for about 4 billion. The acquisition could be announced today. Demand for rental properties has been booming. Real estate is this your second m a. Usiest sector for Entertainment One owns the character peppermint take. Last week, they rejected an offer. Houses in london are taking longer to sell than they did before the brexit float. A property website says homes are staying on the market five days more than in may. Homeowners in london have been tried to encourage buyers by cutting the asking price to just about 1 million. That is the Bloomberg Business flash. Tom what a pleasure. Tony kaczynski of timko is with us pimco is with us. Carl weinberg joins us. What did you get up to yesterday . We got to 93. Worse than new york did we had tornadoes, all kinds of stuff you dont get. In japan. D a tornado call weinberg serious with me over my chart from earlier. Dont show it again. Tom i want to get you upset. This is the success of abenomics. Come on, you have to give him some credit. I admit, it goes up. Look what they are doing. The population is shrinking. Theyre lucky they did not contract. Econ 101, fewer people, the economy shrinks. Dam smith, the tin factory you take people out of the tin factory, you get fewer tents. Hello. Every indicator told us the economy would contract. Investment, i heard guy talking about investment this morning. Tom ari going to go after guy johnson . Im. The economy shrinking, why would buyone want to build or in a shrinking economy . Tom you go after francine. Francine lets do this. Tom lets bring up another chart. This is nominal gdp. The rambling, you can see the success of abenomics. Can we import their failure to europe and the u. S. . Is the tepid animal spirit going to be the japan of vocation japanification of the u. S. . Only if we start dying. If the population goes down, the economy will shrink rate since not any signs of the population going down and we are not going to build the ball against mexico or cut off immigration, we will continue to grow. Maybe not as fast as before, but we will grow. Japan needs people. It does not need more fiscal policy or Monetary Policy. It needs people. Francine i will push back up it against not what you said now, i agree with that, but what you said previously. The blue line is employment. This is for employment, 3. 3 . Other western economies would love and kill for this kind of. Hing this is the clear demographic problem. Even as you see gdp not rising, they are just not how do you get out of this . In needs to be open borders, to come through immigration. They need integration, they need more people. When you have a contracting economy, the Unemployment Rate statistic inant the contracted economy. When population is coming down, it does not matter what the Unemployment Rate is anymore. There is no tightness of capacity. There is plenty of slack because you have more of everything. With all that said, we know the bank of japan will try anyway to provide more monetary accommodation. It said it will conduct a. Omprehensive assessment it seems theyre worried about the impact on Financial Institutions of very longbow term Interest Rates. What you expect of this competence of assessment that will be done on september 21 . Their itf comprehensive and your and my idea of competence of are very different. Their itf comprehensive if they will publish a document. There will not be an open discussion. Strategy to exit get out of it and no process to go forward. I do not think were going to see anything in september. Francine you need businesses and consumers to start spending. Negative rates backfired. What will it take for people to start spending in japan . People are spending in japan, just are not as many to spend as there were before. This is what everyone is missing on japan. They say they need more productivity because they have fewer people. Francine hold on. Business spending actually declined. Consumer spending, increasing, barely spending. Thats right. The people who are there, there are one quarter less people in japan this quarter than last quarter. Spendingthat consumer to not go down at all, that is great. Meanwhile, the population is going down, debt is not. That the population is rising. Inevitably Consumer Expenditures will have to fall. They will have less money to spend on blurays, dvds, sushi, and Everything Else they buy in japan. How will you get out of it . They have an enormous amount of debt relative to gdp. Their problems and there are facts. If you look at a problem enough different ways, it is not a problem anymore, it is a fact. They will fail. It is the question of how long they can put it off. And Tony Weinberg kaczynski with us. Coming up, there are two important articles this morning. On in the New York Times donald trump. This is bloomberg. Tom good morning, everyone. Bloomberg surveillance. Im tom keene in new york. Megan murphy here. I want to get this out of the way. There are two new stories that discussion. The former governor of carolina of the south. It is about americas ability to see the returns i love this the real issue is not even about president ial, rather, about the hundreds of down ballot races in states and localities and the transparency voters deserve. This is not going away, is it . This is not going away. Tom she made a lot of money. So did a rod. Absolutely. She is able to flip it on its head to put it out there. The pressure is back on him. Real reporter, im not pure. You know how much time it takes to do real investigative reporting. They are finally putting together the russian linkages and nonlinkages, to be fair to mr. Trump, this idea that he has a relationship with putins russia. How big of a deal is this . I think that New York Times ,iece will be a very big deal the ukraine one. Been very openas that he advised that campaign for several years. What we see now is the trickling out of payments. Whether they were secret, whether they were not secret, whether there was an air of corruption over this investigators are looking at it. Is 12e trickling million, alleged. Francine yes, alleged. Does he know putin, or not . I think he is confused himself is he has met putin or not. Themnk he feels it helps to be associated with this strong man of europe that he did not realize the political backlash that would come with these kinds of statements. It is different when you are primary candidate and when you are in the general election. Tom on the Time Magazine trumplast week, it is meltdown. With a have donald trump or Hillary Clinton on the cover of time this week looking like john snow . It is mid august. The thing about a campaign meltdown at this point is it right write itself itself. Tom you have to look at the articles today. Coming up later today on bloomberg markets, eric shafter sits down with Colony Capital ceo. He was at the Republican Convention as well. 5 00 this afternoon, with all due respect, they will not have a meltdown. Mel country, 5 00 p. M. Meltdown free, 5 00 p. M. Lets look at washington. Tom good morning, everyone. Bloomberg surveillance. Stronger yen this morning. Francine lacqua in london. In new the heat wave york. It will be below 90 degrees in new york today. Not bad. Francine, it is hot. Calm get to a cool and first word news with nejra cehic. Nejra donald trump is going to declare an end to nation building. In a speech in ohio today, he will say that if elected he will give up nationbuilding in favor of a Foreign Policy that focuses on destroying Islamic State and other terrorists organizations. He is also expected to propose a new ideological test for admission to the u. S. In switzerland, a man who attacked passengers on a train with a knife and burning liquid has died. One of his victims also died. Police say there is no evidence that he has been tied to extremist groups. There is a second night of unrest in milwaukee, wisconsin, after Police Killed a man. Police say the man who was killed had fled from a traffic stop and then turned toward an officer while holding a gun. A dramatic scene in southern louisiana, where rescuers broke the window of a sinking car to pull out the driver. Record flooding has killed at least five people and forced 20,000 from their homes. Some rivers are still rising. In rio de janeiro, 12time medalist ryan lochte was among four Swim Team Members from the u. S. Robbed at gunpoint. Armed men posing as Police Stopped the taxi they were in. No one was hurt. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am nejrauntries, cehic. This is bloomberg. Tom toni kroos enzi here. Scenzi is tony cre here. Lets go to a single best chart with dr. Weinberg. This is a chart that i did with the bernanke chart 12 years ago. Gdpbasic idea here is deflator in japan, up with the inflation. They get to the peak in the 90s, and they flatout rollover. Theo to jackson hole, dynamics of deflation, can you exported . Export it, but that is not what japan is about right now. In the United States we are looking at very little of what we buy imported from japan. Very little of what is in the cpi is important. At the end of the day. At the end of the day, japans inflation is a local phenomenon. But it is a natural consequence of the domestic economy. When an economy depopulate, demand falls as well. Tom i will go with the depopulation angle, but understand maybe it does not affect us. But the adjacencies to asia have to be extraordinary. Carl china has its power structure, and that is domestically determined also. The variability in chinas price structure, that is mostly food prices. You look at ppi, nonfood prices in china, and they are steady as a rock. If there is any risk in japan, it is deflation. Not see that itd is occurring, and we should not be worried about it. Why do Central Banks even worry about deflation if they cannot impact that . Should they change mandates . Carl mentioned china. I am headed to australia. I will be reminded when i head to the city of perth, the city of one Million People that is most isolated from the rest of the world it is a mining town. In australia, they export enough iron ore to build 100 golden gate bridges, 70 of that going to china. It is the marginal price setter, the goliath price setter, so it is what matters most in terms of the price picture right now. Some imbalances are being fixed. One of those is in oil. Recently there is a crossing over of the supply and demand curve. Finally there is more demand than supply. Supply has come down about a Million Barrels a day. Demand has been increasing 1. 3 Million Barrels, a little over 90 million. That should begin to correct itself and pushed oil above 50 at some time in the next year, probably in the nude 50s. In the mid50s. Carl, do you think that helicopter money can help across the world . Carl helicopter money . This is in my mind one of the silliest ideas that journalists have come up with. Tom whoa, whoa. Carl sorry, there are no central bankers in the world it is a fact that no central bank are in the world is talking about it. When they asked mario draghi about it in the press conference, he said we have never talked about it. They keep asking him because but he has said they have never talked about it. Francine when governor kuroda, three days before he went to negative territory, he said, negative rates . We are not looking and negative rates. The problem is that the more central bankers say, the less efficient it is when they start using it. Carl i agree that we can blame the central bankers for miscommunication, but the practicality of helicopter money is zero, absolutely dead zero. olivier von chart Olivier Blanchard said it is a scam. Tony i mentioned it earlier in , which is a form of helicopter money. The central bank, their inflation is toxic. Where do they go . Money needs to seep out for it to be toxic. Unless there is a seeping out and there is more bank lending. In europe, there were three years of negative growth in private credit, only recently growing at 1 . Without more credit growth, we will not get the growth that they are not going to make carl we had a conversation on this at High Frequency economics. Germany is now selling a zerocoupon bond. , raised it at lunch i said how should we think about a zerocoupon bond . I was told, isnt it like money . It is not like money, it is a little bit like script. Between fiscal policy in Monetary Policy, now the government can borrow at zero. Tony what are they doing with the money . Stuff and how it all gets used, the stuff part shows the lack of investment. Eisenhower, the president in the 1950s. The interstate highway system was put in place, 50,000 miles of roadway. We still ride those rows and gain benefit from that investment. In the United States, what have we done in terms of investing in ourselves . Very little. So we cannot get more gdp until we get more investment. Than im a little older you, closer to the great depression, but this is what the liquidity trap is all about. People would rather hold cash than take risks. There is no risktaking in terms of financial, business investment. People want to be safe, and that means the economy cannot grow. Francine i want to go out for a beer. What would it take for people to start spending . Against anything that the Central Banks could or couldnt do, isnt it up to kick started . To carl i think you are right, almost. Fiscal policy has got to be the way to go. This is what John Maynard Keynes taught us in the great depression. The comes a time when Monetary Policy does not work anymore, and central bankers are talking about this more and more. If Monetary Policy is not working, then you have to have fiscal policy or you stay in a state of stagnation, slow growth, or i will call the global recession. Tony very low Interest Rates are harming Financial Institutions. Tom they have to normalize. Tony the effort is too steep and the yield curve in japan. Tom Tony Crescenzi and Carl Weinberg with us today. Breaking news, real estate i 4ieve the statistic is billion. Midamerica apartment to buy post properties. Widely touted, and there it is. The transaction this morning. We are looking at currency. Yensterling as well. Futures up 4. 1. 1172. Lar, up from london and new york, this is bloomberg. Francine i am Francine Lacqua in london. Tom keene is in new york. This is bloomberg surveillance. Nejra authorities in china may lift restrictions on the use of mobile phones on airplanes. If legislation is approved, passengers would be able to shop atine and use popular apps 35,000 feet. Regulators in the u. S. And europe instituted similar changes about three years ago. The Worlds Largest Container Shipping Company is warning against u. S. Protectionism. Maersk says trade barriers should be reduced as much as possible, but a potential shift in u. S. Policy threatens to reduce global trade. Donald trump and Hillary Clinton oppose the transpacific trade agreement. British Bookmaker William Hill has rejected an improved takeover offer. The bid is valued at more than 4 billion. William hill chairman gary davis says the author continues to substantially undervalued the company. That is the Bloomberg Business flash. Francine weaker demand, Slower Growth the bank of england sees this in its crystal ball after the vote for brexit. Lets get more from bloomberg intelligences u. K. Economist on what we should be watching out for. In new york, we are still joined by tony and karl. By tony and carl. Do we need to figure out what the government when the government triggers article 50 . Theou have a first look at claimant count. I think on the inflation side, there might be some first hints at the Exchange Rate coming through, the Exchange Rate pushing up on inflation. You will see some items begin to get pushed up by the weak pound. There are a few highly tradable items. Francine if we believe the reports in the media over the weekend, does it mean that we are going to have protracted length of time where we will see weakness with some of the hard data that we get tomorrow. Dan that is really important. Uncertaintyeconomic part of it is Economic Uncertainty and part of it is little uncertainty. The government will do well to let us know what is going to happen, when they will bring in that article 50. Wantwant to know and they to make these decisions, but they do not know what the relationship with the European Union is going to look like. Theine in the sunday sunday times talks about Prime Minister may. List. High on her to do the country still has confidence in her ability to keep a level head. So far she has hardly put a foot wrong. She has hardly put a foot at all. We have no idea. At itill get a look will be the governments chance to respond to activity. There is a chance we will see something on the fiscal front. We have been talking about Monetary Policy and its limits. Tom dan, on an august monday morning, i need a downing street cat update. You are the expert on this. What is the communication strategy of this new government . Dan it is very difficult there. I get the feeling that they are struggling to work out their own strategy. Tom i agree. Dan in time we will know more. It is important that they send a message. Theresa may has said brexit momentrexit, but at the we are a little uncertain what brexit means. Britain, so weis have larry the cat. This is number 10. Mouser, is the chief the cat owned by the foreign office. It is right around the corner from downing street, and those two have been seen fighting. It is kind of funny. Tom in america when there is a new government, there is always a change in tone. I am trying to figure out what the Prime Minister may tone is. Francine we have not heard from her that much. The tone i would argue is one of caution. She seems to be steady, which is what we needed. She brings stability, but her real tone for negotiation we have yet to find out. Dan you have to remember that we thought we would not get a new Prime Minister until the start of september, so that has happened relatively quickly. Parliament is in recess. The big move is going to come over the autumn, into the new year. It is really important that there is clarification on what is going to happen. It is really going to weigh on business activity. It moves on Consumer Spending as well, and the u. K. Will slow very sharply. Francine dan hanson is there from bloomberg intelligence. Stocks rising around the world. They are being led by emerging markets. This is the picture for crude oil, the one we are watching out for. That board up for you, it should be around 44 a barrel. Nott of european stocks are as high as they were when they opened the session. This is bloomberg. Tom good morning, everyone. Bloomberg surveillance. Thrilled you are with us. Francine and tom. Let me do the forex report. With some real life to it today that is not the forex report, that is a data check. On the forex report, i would look at a 101 on yen, sterling coming down to 1. 29 as well. 1. 2920. Go, i would also look at yenrenminbi. That is the adjacency of japan with many other asian nations as well. Francine i bet that is what governor kuroda is looking at. Coming up shortly is bloomberg. Jonathan, i know you are focusing on japan and looking at the unstoppable ride on the tokyo rail. Jon we will be talking about to become theurse number one shareholder in 55 firms on the nikkei. I was joking with a guest on bloomberg surveillance. The big story is the reach for yield. That with rick rieder, coming up on the program. I think very much in focus is the boj and a japanese economy that is struggling to get any traction whatsoever. Have been mixed reports this morning. I wonder if you get a stronger yen out of news flow. I cannot even fathom what a 99 carl, what would a 99 yen beat for mr. What would a ¥99 be for mr. Abe . Carl his problem on exports is more than just competitiveness. He is going to get a monster competitor from china, which will be more to petted of more competitive than japan in introducing Exchange Rate. The boj at the start of the day, the fed at the beginning. Plus bets on dollaryen, that is a big day. Tom jonathan ferro, thank you so much. Tony crescenzi is with us, with Carl Weinberg. Fabulous wrote a essay. 20 years after that, the interstate highway system you have a brilliant two paragraphs on eisenhower and the courage it took for republicans to go big, broad, and build the interstate highway system. Why cant we do that today . Tony not all spending is bad. Think of the american recovery and reinvestment act of 2009. Over 60 million checks went out to americans at 250. You could say it was helicopter money at some point helicopter money of some sort. What do we do with 250 of money . May be buy appear of pants or some coffee. Eisenhower implemented the interstate highway system, 50,000 miles of roadway that we still use today that still provides benefits to america. I was in jamaica a couple of weeks ago. It took me forever to get to where i want to go because there is no highway. If there was a highway built 15 years ago, many places along the highways would have been built. We have reached a keynesian end point of some sort. Nations really do not have the money to spend on it. Francine what about wage growth . If you pay people a little bit people are i know relatively better off because there is no inflation but if there was a little bit of wage growth, people would buy that extra cup of coffee youre talking about. Tony we need more income for companies first. And for the nation as a whole to provide that income. Educational attainment overtime has proved to be a big source of economic growth. And also investment stuff. And also investment in stuff. We are not doing that now, so we do not have things in place. Shapiro ownstt this idea of sending out ittybitty checks to people. They do not work, do that . Tony right now carl right now i do not think that is the right thing. I will go one step further than tony. We need a project. You raise the interstate highway system. The russians were going to invade california, we had to move troops out there. That was followed by the race to spawn in digital technology. We need a new project to spawn technology. This is something economists cannot predict. Tom this has been wonderful. Tony crescenzi with pimco, Carl Weinberg with High Frequency economics. We will continue this discussion on bloomberg radio. Tomorrow, ricky leavy of berenberg capital. Jon the bank of japan considers a stagnant economy. Can corrode up can governor kuroda david London Properties are taking longer to sell this month as the Brexit Effect spreads to housing. Alix and retails big on court. Target and walmart try to regain confidence in the consumer. Jon i am jonathan ferro, alongside david westin and alix steel from new york city. The bank of japan throws trillions at it. David japan with a weak start. Gdp down. 2 growth when they are respected to have. 7. Alix you had qe, quantitative tightening, and now you have qs. We have another a lot of other data points. Fomc is coming out wednesday, and u. K. Data is starting to trickle out to get a full effect of how it will be affected by the economy. Jon