Shutdown statement and shes done that. But Global Markets are shrugging off the shutdown with european bourses edging higher after modest gains in asia. Now, this amid the ongoing uncertainty in rome where Sylvia Berlusconi faces dissent amid withdraw from the government. Shinzo abe is able to raise japans sales tax with a fresh stimulus package. Hi, everyone. Good morning. Really glad that youre with us for the next two hours here on Worldwide Exchange. Weve got lots to talk about. Of course, were going to be heavily dominated here on the show on this u. S. Partial Government Shutdown. Were just seeing the eurozone pmi manufacturing data coming through on the wires. 51. 1. That means weve seen a little bit of a fall. This is down from around 51. 4 that we saw the last time around, but bang in line with the flash estimates. Again, 1 51. 1. By and large, it does look like were seeing stabilization to the folds that we were previously seeing a couple months back. Lets grab the german jobless data while were at it, as well. Here were seeing a german september unadjusted jobless total falling to 95,000, falling by 97,000, excuse me, to just over 2. 8 million. So were looking at a jobless rate, a seasonal jobless rate of 6. 9 , which means that weve risen from what we saw back in august. 6. 8 is what we saw in august. 6. 9 is the september seasonally adjusted jobless rate. So thats been moving in the wrong direction by the looks of things. But, of course, back to our main story today. The u. S. Government has begun a partial shutdown for the first time in 17 years as congress has failed to break a stalemate over a stopgap spending bill. Federal agencies, theyve been directed to cut slack, meaning that 800,000 workers face furlough. On monday, the House Republicans repeatedly tossed measures linking the spending bill to delays in president obamas Health Care Law, which then the democrats rejected. Now, after one final attempt, the house adjourned just after 1 00 a. M. Eastern time. We were hoping we could go to congress and let us resolve our differences. The house has voted to keep the government open. But we also want basic fairness for all americans under obama care. Now the senate is in recess until 9 30 a. M. Eastern when lawmakers are expected to reject the latest house bill. House republicans have asked for a special committee. We like to resolve issues, but we will not go to conference with a gun to our head. Now, president obama spoke with House Speaker boehner on phone by monday saying, again, he wouldnt negotiate over raising the u. S. Debt ceiling. Addressing the American People later, he says an american shutdown would throw a wrench into the gears of the u. S. Economy. One faction of one party in one house of congress in one branch of government doesnt get the shutdown the entire government just to refight the results of an election. Keeping the peoples government open is not a concession to me. The president later issued a video message for u. S. Troops stationed around the world. He noted he signed a bill into congress to ensure active duty military personnel would get their paychecks on time. Steve sedgwick joins us live from london where Global Business leaders, steve, they must be react to go this u. S. Shutdown in this morning. Yeah, louise, it reminds me of a couple of weeks ago, syria was not on the agenda. This time around, we havent got the shot youp, the debt ceiling on the agenda. But that seems to be one of the most pressing issues. Im going to speak to scott, the cio, you have, what, 180 million under debt management. How long does this last . They have no incentives, the democrats or the republicans to get a deal done before the 17th of october. So i think this is going to go on for a long time. What do you do with it . Look, in my mind, weakness is an opportunity to buy. If you look at the last time we did this or any number of times weve done this, text market rallies after we get the uncertainty out of the way and it should be good for bonds. As each week goes by, were going to lose about a quarter of a point of gdp for the quarter. If were shut down for thee weeks, that will be 75 basis points or 0. 75 against gdp. Thats a lot of headwind into the fourth quarter. It gives rates room to come down. Now, you mentioned other times this happened. I think 17 times since 1976 before this current shutdown, as well. But then we didnt have a debt ceiling we were bumping up against, as well. And im not sure if we had as polarized of a deal. So this is just a little bit different this time. Well, i think so. I think thats what makes this more fun because we have the debt ceiling hanging out there, its going to give the republicans another lever to pull to try to keep the pressure up against the administration. And so, you know, i think were going to have a bit more of a dramatic ride. But i think at the end of the day, we all know the United States government is not going to default. There will eventually be enough pressure from the citizens in the United States to get the government to function again. And at some point, everything will come back online and any weakness we get as a result of this will give us a chance to get an excess return. Weve been asking is wall street broken . Is wall street now thinking that capitol hill and congress is broken . Absolutely. Wall street believes washington has been broken for years. And this one perpetual impasse to another is lead to go austerity in the United States. And youre seeing it. Youre seeing it in the size of the deficit. The deficit keeps shrinking. The drag on the economy is is whats forcing the Federal Reserve to keep rates low on hopes of getting unemployment down. So wall street looks at washington as being completely dysfunctional. So wall street, despite the shenanigans weve seen about the sequester, we knew pretty much this was coming about the debt ceiling and the markets. Yet the markets are down the last seven or eight sessions. But yeartodate, the nasdaq has had an even better return, nasdaq had a good return. Weve been bullish on u. S. Equities for quite a while. Given that valuations are starting to get back to something that looks a little rich, we see a lot more opportunity in europe and the emerging markets. Valuations in europe are still very depressed. It seems while we havent made much progress on the structural side, draghi has changed a lot in europe, so i think european equities are a much better play. And when you look at valuations region like on china, for instance, the market cap of china is right where we were at the height of crisis. Valuations in emerging markets and europe are much more interesting. Let me pick up on that china debate, as well. Weve had that fantastic growth that is slowing, yet a lot of people have lost their shirt involved in equities in asia and china, as well. It got back to this valuation argument and you can say that there are things in the world that the question is will it happen, its when will it happen. And theres mean reversion. We know that china even growing at a rate of 6 or 7 is much faster than the rest of the world per were ultimately going to see the emergence of a middle class in china. The reforms being put in place, these are the kind of things. You may not get instant gratification, but when you look at the world the way we do, whats going to work for the next three to five years . China looks like an interesting place. Hasnt this manifested itself in terms of allocation . Weve got rates low for a long, long time. Is that still exciting . I think so. As long as rates state stay down, it gives room for the multiples to expand. All the equities over the last 12 months have come out of multiple expansion. And were still not back to what the historical norm should be. The number we should be looking at is an earnings rashto of 18. We have some room. It will allow equity prices to keep going up. Thank you so much for your time. Dee, im going to hand it back to you in the studio. Thank you so much. Were going to have more with first on interview ones from david serbos. You dont want to miss that one. Hes going to join us at 10 30 cet. Well speak to tom finke from babson capital at 10 45. Louisa, ross has abandon me and im still here and i have the pleasure of bapterring with you. This is all part of the grabbeder plan. Ross goes off and we get to have some fun fort next two hours. Perfect. And youll come over to singapore at some point, too. As long as itsing not really humid. Because there once when it was extremely humid and you were changing tshirts every three minutes. Always going to be like that. Lets get back to asia. Li sixuan is in singapore. Sixuan, how is it going . Thank you, deidre. China markets are out of action today, but we have official september pmi data. Washingtons political standoff is weighing on sentiment. On the other hand, asian markets were slightly higher after yesterdays steep drop. The nikkei 225 finished imaginally in the green. But the topics ended just a tad lower. South korean shares gained a modest 0. 1 . Even with the countrys september exports seeing their biggest drop in seven months, consumer fell to a historic low. Toyotas domestic sales were up with its high end lexus jumping 20 on the year. But shares ended on a flat note today. Nissan shares fell 1 . And honda sales surged 50 thanks to its latest compact model and the stocks gained nearly 1 in todays trade. Thats a look at asia markets. Back to you girls in london. Thanks, sish juan. Its remarkable how stocks are taking the partial shutdown in the u. S. Government in stride. Lets get to louisa now for whats going on in this side of the world. Yeah, it is. But remember, weve had plenty of time to prepare for this. But right now what were seeing on the stoxx europe 600, the vast majority of Equities Trading in positive tear. Were higher by some 0. 3 Percentage Points or so. When we spoke yesterday, we were looking at an allred screen. So were just buying a little bit into the mornings trades. Xetra dax higher by 0. 6 . Some gains coming from french and italian markets. The ftse 100 behind me a couple of points off. Thats where were seeing our on main european markets. In terms of stock specifics, union l unilever has downgraded expectations for the Third Quarter sales growth. And theyre now saying that they see a Third Quarter underlying sales growth between 3 and 3. 5 . So theyre bringing that down a little bit because of weakness in emerging markets in particular. With regard to what were seeing on the currency markets, well, here the euro dollar is higher by 0. 3 . Were seeing the yen off against the dollar. Ite interesting now with this sales hike coming through from japan. Weve got analysis of that coming through later on the show, too. The aussie dollar higher against the dollar and the pound is higher against the dollar, too. We are seeing the dollar sold back a little bit on the back of this partial u. S. Government shutdown. When it comes to the bond markets yesterday, we were very busy talking about how italian yields are heading higher. Although we are looking at yields somewhere in the region of 4. 5 , give or take a bit, were still very, very far off from the alltime highs of more than 7 that we hit just a couple of months ago at the height of the crisis. So were still a ways off despite the fact that were seeing a lot of Political Uncertainty in italy. Looking at whats taking place in treasuries, a yield of 2. 6 . Yields going a little higher. We were seeing some buying into this safe haven trade off the back of the news of this u. S. Partial Government Shutdown. Now were seeing a reversal from that. But just coming back to the italian story, and before we get into the politics, i want to mention that the italian youth unemployment has jumped to 40. 1 . So, again, pmi data, the september manufacturing pmi data out of italy coming through weaker than anticipated. 50 point date as opposed to an expectation of a number close to 52. But Sylvia Berlusconis attempts to bring down the eitalian government seem to have run into trouble. Last night, members of his own party played down the rebellion with one senator calling the crisis a distant prospect. Berlusconi needs 19 votes tomorrow to remain in power. Claudia, things have heated up heading into this week with regard to italian politics. Do we think now that letta is going to get that confidence vote that he needs tomorrow . Well, its still too early to tell. Today is crucial for him. A phone call that was aired last night in which Sylvia Berlusconi accuses the president of having intervened in an appeal escort by calling them and forcing them to reconvene and come out with a harsher verdict for Sylvia Berlusconi certainly is playing a role here today. That is one more storm in which berlusconi finds himself, including the fact as you were mentioning yesterday it seemed as though his own party saying maybe the support to go forward is there. What that means is that the idea that Sylvia Berlusconi has worked hard at saving himself. Its prevailed to the interest of the party and of the italians. So it looks as though he is start to go lose this historic support. Hes always been so tenacious and so capable of getting support from voters of his own party. Some of his closest followers seem to be teetering. That is looking a little more likely. On this sunny day in rome, right behind me, there is a storm behind those walls as they try to grapple for those 19 votes. We dont know that for tomorrow and today. Who knows, there could be news coming anytime about people moving away from Sylvia Berlusconi. Its not official, but its starting to look like some of his own Party Members willing to let go and berlusconi might find himself lonelier than usual. I have a feeling this story isnt over. No, its not over. You probably noticed with trend this morning, but from rome to washington, d. C. , politicians seem to be metaling in the recovery. We happen to hear from you with the likes of berlusconi, senator reid, which house has the least Effective Organization . I would hate to be a politician. I think it must be extremely difficult to be a good or bad politician these days. No. I think this bickering back and forth, i think politicians are made for that. And theres also that knowing, when do you give up . I step down and i think that the effort to stop obamas Health Care Reforms is not worth it, for example. But if you believe that it is worth it, how far do you take it . Whats going on in italy is almost laughable. Tell us, who do you think are the most, lets say, interested . Email us and im on fwiter. Were all on there. Send your comments. We would love to hear from you and what you have to say about the various politicians. I wont reveal any responses to you now, but we have some interesting ones. Moving on, steve spoke to the chief economist at citi and his comments on washington politics. Here is what he had to say. Yes, it really is scandalous that the Worlds Largest economy looks like the land of oz run by the munchkins. Fortunately it need not be too serious if they wake up and declare victory on both sides and get on with the job of running the country. That was the voice of the chief economist at citi speaking there. Still to come, todays show with taper watch, septaper. And ted and its enormous Balance Sheet will be taking place in london. Well hear from jeffreys head of on Global Market strategy in around 20 memberships the. And washingtons nightmare becomes a reality. The government shutting down for the first time in 17 years. We look here from the professional services council, the voice of Government Contractors at 11 30 cet. Its interesting to hear exactly what happened. Also the blame game over the dead lock as it intensifies. Well hear from strategies on both sides of the political aisle. And we cant forget about asia. Shinzo abe gives the groan light to a controversial hike in the countrys sales tax. Although 8 doesnt sound like a whole lot, does it . Welcome back. After months of debate, shinzo abe says he will push the sales tax up. Abe is set to reveal a stimulus package to offset the hike. Its worth about 50 billion u. S. And includes public spending for Infrastructure Projects and tax breaks for corporate spending. Lets get out to kaori enjoji. This is an interesting situation the japanese government has put itself in. One wheel of the economy is trying to stimulate the economy. Yet the other arm is trying to reign in on the debt situation. These two seemingly contradictory elements are going to be part of this package that shinzo abe is set to announce to the nation in about half an hours time. The tax hike was a done deal for a long time. Most economists were saying it was now or never. But having said that, this will be the first time in 15 years that any politician will embark on a consumption tax hike from 5 to 8 . But you have to look at the back drop. Sentiment is strong because the government said if sentiment improves, well give you a bit of a tax break. Thats what theyre going to announce later on tonight. But as we saw on the daytoday, Household Spending remains extremely weak. Youre getting imported cost push inflation which is the wrong kind of inflation at a time when theyre trying to infer domestic driven inflation. So youre not really seeing corporate profits lance late into salary increases. And i think this is the missing link that the government is going to try and address by limiting some of the taxes and giving tax breaks on certain investmenttypes of investments. Probably r d investment in specific areas, but theyve tried this before. And i have yet to speak to a major ceo of a corporation who says theyre going to raise wages. So i think were still in a fairly delicate situation, but the fact that theyre going ahead with the stimulus package should come as no surprise to investors and maybe buy some time. Because theyre still giving the government the benefit of the doubt, tenyear paper at 0. 7 . Absolutely, kaori, thank you so much. Obviously a topic that we talk about all the time out in asia and singapore. Louisa. Still to come here on the show, well be talking a lot more about whats taking place in the u. S. , as well, and the impact on the broader markets. In the meantime, though, listen to the japan discussion. Ken jiobi is with citigroup Global Markets japan. Thank you for being with us today. What do you think the impact is going to be, the broad based impact from this hike in sales tax . Actually, we expect the economy to slowdown significantly. We expect around 3 growth for this fiscal year. However, we expect the economy to slow down, but we do not expect the economy to fall into recession and negative growth. So the stimulus package is going to prevent the economy from falling into recession. So japanese equity have room to rise Going Forward. Do you think abenomics is working properly in terms of slowing deflation . I think theyre making Good Progress in getting japan out of deflation. However, its true that now we see increase in prices because of the cost. And that is the stage we have to go through in order to get demand oriented growth because we need the yen depreciation to stimulate the economy and the yen depreciation camp cost driven inflation. Then we have a better economy then. Companies can raise earnings and wages. And so that will produce the demand driven inflation. So that we are at the stage that we have to go through. Thats input cost driven inflation. Its going to lead to the demanddriven inflation. But we have to take care of the risk that the rate hike is going to cause the japanese economy to throw down. So i think that if the economy slows down and then we see risk that the inflation slows down, i expect the boj to act in order to stimulate the economy and push up the cpi inflation. Right. Now, kenji, for europeans and canadians and myself, an 8 sales tax sounds like nothing. I think in toronto we pay about 15 . And theres been so much debate and so much consternation about raising it or not, yet japan has huge debt. And an aging population. Now, this may just be a first step, but considering how difficult it has been to push through, what else needs to be done and how realistic that these hard reforms are going to be put in place . In order to risk japanese conditions, in my view, the most interesting thing is japan to have high gdp growth. Thats going to generate the top serving so that most important thing is to improve its condition is to get japan out of deflation. So investments in boj is doing a good job to getting japan out of deflation. In addition to that, we have to make some changes in fiscal policy side of, like, raising the age at which people can start to receive pensions and also that i think we need to cut the retention. I think just raising the task wouldnt be enough to risk or improve the fiscal conditions. Yet even this piece has been debated whether the economy is Strong Enough to hang it, yet the Economic Data has been very mixed. The government is certainly making strides on inflation or deflation. But even earlier today, we saw that wages are falling. Even though the tankan was very reassuring. How do you judge the state of the japanese recovery . We in my view, the japanese economy is still recovering and the Tankan Survey underpins or suggests that this means corporate is improving. And then its true that we see weak wages, but first we have to have strong earnings and then companies can raise wages. So the wages are kind of a indicator. I expect we see improvement in the earnings from wages next fiscal year after we have good earnings this year. So i do not have very much concern about the economic conditions, especially for this fiscal year. Now corporate earnings are improving and we are likely to see increasing hikes for cap ex. But next year is of more concern because of the cost of these tax rate hikes. Thank you so much, kenji abe at city group globe markets, japan. And speaking of japan, were just seeing on the wires that the japanese government is stating theyre compiling an economic package worth backside 5 trillion yen. Theres speculation about how big that package can be p. According to dow jones, the japanese government is considering withdrawing corporate reconstruction tax one year early, as well. Again, the economic package is to offset the tax hike to a total of 5 trillion yen. Were just getting those details now. Kind of a cushion. Even though the economy is Strong Enough to go ahead, you still have to cushion it a little bit. Definitely. You dont want to do everything at once. Anyway, we are 1 1 2 hours into trade here in europe and these are the headlines this morning. The u. S. Government going into shutdown mode for the first time in 17 years after Congress Fails to break a stalemate over a stopgap spending bill. We like to resolve issues. But we will not go to conference with a gun to our head. But you know what . Global markets are shrugging off the shutdown with european bourses edging higher after modest gains in asia. Now, this is all taking place amid ongoing uncertainty in rome while Sylvia Berlusconi is facing a to topple the government. And shinzo abe is unveiling a tax hike in april. But stopping the blow with a fresh stem ewe husband package. Hi, everybody. Welcome back. Youre still watching Worldwide Exchange here on cnbc. A lot of you tweeting in this morning. For some reason, theres a lot of hockey discussion going on. That may have something to do with having a canadian on the set. Im rooting for the leafs, at least for the next hour. How about that . Lets talk about european markets. This morning, we saw a bit of a bounce on the open. Not much, but a slight bounce. Could have been worse, right . Yesterday on the close, we were seeing a lot of red across the boards as we were anticipating that we could be looking at a stalemate from the u. S. Government. Indeed, thats exactly the case. This morning, hanging on to slight gains. The ftse 100 is a little lower, not quite managing to make it there. Lets take a look at the bond space, the tenyear bund, 1. 8 . So youre seeing in this space to not a whole lot of reaction to the partial government shut yoin in the u. S. Tenyear treasuries have inched up a little bit. The irony is that is much more serious policy points. Treasuries are seen as a risk haven. You have the tenyear spanish bond, yield edging down a little bit. Same for the tenyear italian yield edging down as it looks a little more optimistic. And glancing at the urinatesy markets, weve been saying weakness on the back of this partial shutdown. But Market Reaction has been relatively muted to this u. S. News with investors now keeping an eye on the looming debt ceiling and the Federal Reserve, as well. Steve rejoins us from london. Also interesting to see whether or not the fed is going to hold its powder dry for the rest of year, given whats taking place in governments. I think it all becomes a power. They were worried about this showdown in washington, as well. Lets speak to david from jeffries. Hello, sir. How are you . Good morning. Lets talk about why the fed held their power on tapering. I think more importantly, the models at the Federal Reserve were showing based on the forecast that they put in that there was still quite a lot of slack. This is a very model focused fed. They look at their optimal control exerciseds, the janet yellen ben bernanke, ivory tower is a very ivory tower. I think the numbers crunched and it came out and said were not supposed to do anything. Even though sigh psychologically prepared the market for it, i think theyre not as concerned as the market should be. Theres a number of people that have been fighting this for a long time. Theyve been marginalized. Anyone that voted away from the committee has been pushed to the sides. You see their comments come out, people dont react. What about those brain boxes . Look, i think we have a 250 billion price on that wednesday. Everybody moved from september taper to december taper. What is that 250 billion bias . It goes us 25 points in the s p or a 1. 5 . Took tenyear rates down and back zero basis points. David, its a big move. Weve had seven or eight sessions down on the s p. Thats the fiscal side coming down to taper you. Youve got many different shocks hitting the system. Data comes out and fiscal comes out and europe comes out. Youve got the italians falling apart, youve got the creeks falling apart. But the point is, on the day when it came out, when we tapered, it was a massive rally and a massive move in both the forward rates in the fixed income markets and the s ps. So i think the idea that were pushing on a string with qe, you look at the data and say thats just not right. David, ive had two big ceos, one from a massive European Company and one from a u. S. Company, as well. They said this is great, we get to come in here with equities again. Still buying new . Absolutely. You ad the bank of japan, the boj, we are going to be awash in dollars, yen, euros, sterling. Theres a lot of money out there chasing a few amount of fixed real assets. Our favorite fixed assets are equity capital. Central banks cant print those. Why is the American Housing market going up because of the fund, the private equity guys . Why is it only 10 of mortgages going through are new mortgages coming through with americans paying with a mortgage rather than the cash buyes from wall street . Were here and, you know, mike has always said were overhoused in the u. S. Weve sussy diesed housing for a long time and i think hes right. Whether it was just from the existence of fannie and freddie, i think were going back to a more natural rate of Home Ownership. David, very nice to see you. Well be back in a very short while, dee. Got another special guest for you. Thank you very much. Lets turn again to japan. Corporate japan is getting ready for rising sales taxes in april. Hi, dee. Japanese companies are bracing themselves for the impact of a tax hike. Retailer shares plummeted today. Retailers are doing their best to bushon the blow. So their customers dont think that the price of products themselves have gone up. The construction and car industry will see a boost from lastminute purchase of homes and cars before the tax hike. Many analysts predict the drop in home sales will be milder. Theres hope for an economic recovery or higher and Interest Rates are climbing. Back to you guys. Thank you so much. Lets give you a look at whats on the agenda in asia for tomorrow. There will be fewer data rele e releases, but both australia and thailand will post august trade numbers. Japan retail sales will be in focus after shinzo abes announcement. September sales while 7eleven parent seven and i releases interim earnings. And im just looking up some more hockey facts. Now you have me interesting. Ill work with you every day if we can just talk hockey and we can look up facts. You know the diameter of a hockey puck, 3 inches long. Did you know that . I didnt know that. Apparently they freeze them before games to prevent them from bouncing during play. Did you know that . Rules of the trade. Ive played a little hockey in my life. Ive played hockey, but out on the frozen ponds in copen hugen. But it was different. You borrowed your fathers ice skates. Our director, rod, plays hockey, too. I hear hes pretty good. Yes. Steve rejoins us. Do you play hockey . Do i play what, hockey . No, no, ice hockey or normal hockey, i dont do either of those. But i look at these markets and i speak to some of the biggest players out there, as well, including mr. Michael milken. Thank you very much indeed for joining us. Im going to go straight in. You and the Milken Institute believe Capital Markets have the power to address economic and social issues. Given what the Capital Markets have done to the social fabric of the Global Economy over the last five years, do you still hold true that Capital Markets can they do. And if properly applied, they create jobs, create opportunities. You know, i chose to go into finance. First i wanted to be an astronaut and lead the Space Program until the riots occurred in los angeles in 1965. And my feeling was that one of the rights is access to capital based on your ability. Not who your father is, where you went to school, your religion, your rights, but based on your ability. And i think Capital Markets particularly in the United States have provided that opportunity. So i was listening to some of your comments last night. And i know some of those are off the record. But you were talking about inequalities that exist in the United States and globally, as well. Im going to address that with the initial points again. Do you think the Capital Markets are failing average americans when we look at median salaries stagnant in many cases, housing, ownership not providing the boom for americans. Doing very, very well despite this financial crisis. Well, theres great inequities that need to be addressed. But if you provide capital people with ability, new businesses are growing, created, household names, whether they be yahoo or google or facebook didnt exist before and theres been dramatic changes. When people with ability had access to capital. The housing issue is a little more complicated. In asia, the number one expenditure for the middle class is on food. Number two is the tutoring of their children. In the United States, the number one expenditure is on a house. Number two on transportation. I dont believe you can build a society when you determine a house is more important than the education or health care of your children. And so part of finance is to reallocate. Financial assets are those things that are more important to society. Whereas weve made financing for housing easy, affordable, low cost. It has also brought a great deal of difficulty to the middle and lower middle class. Because of that, the United States has one of the lowest median incomes in the world of any developed country. And i think the key to growth in any developed society is the education of your citizens. And i think we need to find ways to provide more opportunities to educate and also lep the middle class and lower middle class on how they can help their children with education. Do you think that allocation of capital issue in the United States has been exacerbated by the political wranglings in washington, the fact that they cant come forward with any form of cohesive policy to sort out their own budget, let alone look at forward looking laws that will lessen that dependance on the Housing Market and have other priorities . Well, i think its difficult. This enormous commitment the United States has made in housing. If we go back 30 some odd years and the government was involved in 7 of mortgages versus 90 today, we see over this 33year period of time ee nornlgus challenges, decrease in the net worth of the middle class, but also the fact that we havent increased Home Ownership and the only thing thats really occurred is weve increase today size of the middle class family home. We have to decide is that really our objective . I think we have to work with people to reassure the future of the family lies in the education of their children and opportunities. And so the future for compensation in a developed society is the latest of skill sets. And when we talk about labor, we have a great Entrepreneurial Society in the United States, maybe the greatest. And those that have gone into that society have benefited financially. And i think we have to find a way to educate our population to the level of other countries today. So that is a challenge. The political issues, theres obviously strong differences on all sides, because solution of some side will be resolved at some point in time. And i think, really, you have to start at the family unit level and the education of our society. For china, india, singapore, taiwan, korea, education is the future. And thats played out and that education is a consumer product, not just a government product. The differences between the priorities of the west of the United States and indeed those emerging market of china and india will become less as they industrialize, as well, as they become a larger middle Class Society in china and india, as well. Is it possible that they will go more towards the american priorities rather than america looking at emerging markets and saying, those are the priorities we will need . Obviously, theres movement in both parts. And if we look at american priorities, america is the heaviest country in the world. And our work on and research in this area has shown that it costs the United States almost 1 trillion a year just the change in weight over the past two decades. Absenteeism, out of pocket costs. If we could get americans to weigh the same level they did 20 years ago, we would free up maybe 1 trillion and many of these debates in our government would not exist. But we have allocated and so many resources to the fact that people are heavier and an increase of probability of getting cancer, diabetes and other diseases. We have to leave it there. Thank you very much indeed for coming. Im sorry it didnt work out being an astronaut, but things have worked out well. Michael milken, the chairman of the Milken Institute. Back to you guys in the studio. Still to come here on the show, u. S. Prospects are brightening. Could it be derailed by the ongoing battle in washington . Stay tuned. We head back out to steve to talk Market Reaction to everything going on with tom finke, the ceo of babbson capital. At farmers, we make you smarter about insurance. Because what you dont know, can hurt you. What if you didnt know that posting your travel plans online may attract burglars . [woman] off to hawaii what if you didnt know that as the price of gold rises, so should the coverage on your jewelry . [prospector] ahh what if you didnt know that kitty litter can help you out of a slippery situation . The more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum welcome back. Youre still watching Worldwide Exchange. For the first time in 17 years, the u. S. Government will go into a shutdown. Steve handelsman has been watching the latest from washington and he files this report. Its not a complete Government Shutdown. Its a partial shutdown and its only partially begun. But its significant, number one, in terms of roughly 800,000 to 1 million u. S. Federal employees who wont be paid and wont have work to do. Its significant in terms of what they wont be able to do in terms of work for the american public. Passports and visas and federal mortgages arranged, etcetera, etcetera. And its intoticily important. Both parties know that. Thats why john boehner is keeping his lawmakers here tonight. Hes still trying to figure out a way to force the senate controlled by democrats to enter into the kind of arrangement they do in ordinary times, on ordinary bills, to put together what they call here in washington a Conference Committee. But he wants that committee to negotiate a rollback in obama care. Senate democrats still say no to that. Well, a slowdown in emerging markets have prompted unilever to its expectations for Third Quarter sales growth. Now they see underlying sales growth between 3 and 3. 5 . The ceo says he expects the figure to improve in the fourth quarter. Shares in the company are up just 3 this year. And take a look, down 4 in the session today. Ouch. Now, earlier in an exclusive interview, steve asked for thoughts on chinas growth outlook. Have a listen. Emerging markets are half of the Global Economy now and twothirds of global growth. And, you know, there has been a slowdown. Things seem to have leveled out a bit. But china still has the triple challenge, right . They have to somehow get out of the credit bubble without creating a credit crunch. And letting the air out of the balloon slowly if and after youve done that, you can count on the fingers with no hands, and, of course, then they have to switch their production towards sectors that have an Economic Future as opposed to the current excess capacity rules already. And then they have to get their whole body politics to move to the new domestic demand led growth model. Well, still to come here on the show as president obamas worst fears are realized with the first u. S. Government shutdown in 17 years, find out why our next guest thinks that todays news could have serious consequences for the u. S. Economy. Hi, everybody. Welcome back. Youre still watching Worldwide Exchange. Im louisa bojesen. And im deidre wang morris. The u. S. Government goes into shutdown for the first time in 17 years after Congress Fails to break a stalemate over a stopgap spending bill. So we like to resolve issues, but we will not go to conference with a gun to our head. But Global Markets shrug off the shutdown with european bourses edging higher after modest gains in asia. And this, of course with in the middle of uncertainty in rome Sylvia Berlusconi is facing dissent. And shinzo abe is unveiling a sales tax hike in april, but softening the blow with a fresh stimulus package. Hi, everybody. Welcome back to the second hour of Worldwide Exchange. As said, the u. S. Government has started a partial shutdown for the first time in 17 years. As Congress Fails to break a stalemate over a stopgap spending bill. Federal agencies, theyve been directed to cutback, meaning that 800,000 workers, they face furlough, although Critical Services will remain open. On monday, the House Republicans repeatedly passed measures linking the spending bills to delays in president obamas Health Care Law which Senate Democrats have rejected. After one final attempt, the house adjourned just after 1 00 a. M. Eastern time. We were hoping that they will take our offer and go to conference and let us resolve our differences. The house has voted to keep the government open. But we also want basic fairness for all americans under obama care. Global Business Leaders have been reacting to the shutdown in the Milken Institute in london. Tom joins us from there now. Tom, good to see you. Let me get your reaction to the partial Government Shutdown. How broadly do you think it will be felt . Do you think it will be lasting . Do you think theyll figure something out in the near term future . Foifirst of all, thanks for having me on. Clearly, you know, theres going to be a lot of speculation the next few weeks. On how this gets resolved. Ultimately, you do resolve these things. The u. S. Government isnt going to be shut down permanently. I think the difference this time is were going to see this run up against the debt ceiling issue. I think that is more worrisome for most people at the at the end of the day, whether you predicted this or not is irrelevant. I think the markets were ready for it and you kind of saw that in the muted reaction. My hope is that they work through this ultimately and both sides come to some agreement ahead of the debt ceiling. Its interesting, someone from the Milken Institute earlier this morning was saying before the october the 17th date, theres no real reason why they should try to stop anything. Looking further, into the fomc, it might be a buying opportunity to buy into the slight softness these days. Yeah, i think definitely when you have times like this and youre investing in markets like credit markets and equities, if you see this exterior noise causing the markets to trade off, theres some longer term investors that will use that as an opportunity to enter. And those are investors like ourselves who are looking at the fundamentals of companies, for instance, and saying, you know, ultimately, political noise and political issues get resolved. Does this company have value at the current price . So, you know, i think thats why the markets, you know, right now have not moved a lot. If they do trade up more like they did in the u. S. , there will be opportunistic buying and in the credit markets, in particular. Tom, you see the markets taking this in stride or maybe it was priced in. But we havent seen a huge selloff in the last few weeks leading up to this Government Shutdown. How does this bode Going Forward . What are they going to be able to come to a deal if they lets say republicans, they take a look at the markets and they say the markets arent blaming us for this. Theres no big selloff. How is that going to bode for the battle over the debt ceiling ahead . And just the way politics is going to work and affect the markets Going Forward . Well, i dont know that the republicans will necessarily say look at this in the context of the markets. I think the markets were prepared for this event. I think washington was prepared. For a long time now, theres been a line in the sand over obama care. I dont think that they should take that as a vote of confidence. You have to look at the polls, too. This is very unfavorable. The confidence in congress is very low right now. So, you know, while they may take a peek at the market, i think theyre going to look at those polling numbers. And where the blame tends to reside the most. And right now, that seems to be, you know, more the issue that i think the republicans will look at in determining how hard to fight for this position. Tom, youre a Global Investment management organization. You manage over 182 billion. Whats your strategy these days . Were investing in Global Fixed Income markets, real estate and fixed assets. A lot of our investors are longterm investors, institutional investors. We tend to look at foundational markets, commercial mortgage markets, Real Estate Equity markets. And, really, buy value for the longterm. That is not to say in a given selloff in, say, the european high yield bond market or the u. S. High yield bond market we arent opportunistic. We are. But were, in the en, buying where we believe theres value in the underlying assets over the longterm. You know, we like the story in the u. S. We like the story in europe in terms of corporates these days. Theres a lot of strength to corporate Balance Sheets. You know, you have to worry about the risks in terms of bonds and things like leveraged loans. You mitigate that risk and we find that the Balance Sheets and earnings of companies were investing in today relative to precrisis are attractive. Tom, many thanks for that. Thank you very much. Now were going to get to some flashes because, of course, the japanese Prime Minister abe is speaking. Shinzo abe, hes speaking in japan about hesitate sales tax. Theres been a lot of debate over this the last few months whether or not the japanese economy and abe has been Strong Enough to put the japanese economy on the right footing so consumers are able to expand this hike. He is speaking right now and saying there is no time to waste in seeking funds to rebuild the fiscal state. He says the fiscal they can be reached at the same time. Theyre raising the sales hike for april and cushioning with a 50 billion package in terms of Corporate Tax cuts and such to sort of ease the month of that sales hike. The dollar yen, take a look. 98. 11. And looking at how were shaping up for a u. S. Market open, were a couple of hours away, but were looking slightly positive at the moment. Were across the board, called a couple of points higher. The partial shutdowns weve seen in the past, the markets have handled the issues okay. If we see a click solution, it might do anything to unsettle the broader Economic Trends that otherwise has been on course for a slight stabilization. So were looking at higher markets across the board being called in the u. S. By a couple of points to the upside. Our european markets this morning, its been a similar story here. Weve been hanging on to slight gains, all except the ftse 100. The xet ra dax in germany off by just under 75 . Cac 40 is higher by 0. 75 . And the ftse mib is up 0. 9 . Bond markets, weve been seeing some safe haven buying into the u. S. Treasury. Just a little bit of ae versal on that. Were yielding somewhere in the region of 276 . I want to, again, draw your attention to the tenyear italian bond yielding 4. 5 . Many cries of, oh, were heading higher on this yield heading into this week. But keep in mind, were far away from the 7 plus thefls we were looking at a can you feel open months ago. In the currency markets, briefly, weve seen in general dollar weakness on the back of this partial shutdown. Dee. Thanks very much for that, louisa. Lets take a check on markets in asia. Li sixuan filed this wrong from singapore. Disappointing official china september pmi data in washingtons political standoff both weighing on sentiment. On the other hand, asian markets were higher after yesterdays steep drop. In japan, the nikkei 225 finished marginally in the green higher by 0. 2 . Despite abes sales tax hike to 8 next april. Of course, there is going to be a 50 billion stimulus plan to cushion the tax hikes impact. Lending support to exporter stocks is the dollar yen trading above the 98 handle. For the topix ended just a tad lower. South korean shares gained a modest 1. 0 even with the countrys september exports seeing their biggest annual drop in seven months. Consumer unflagz fell to a 14month low. In south korea, a historic low of 2. 5 , but resources weighed on the index, ending down by 0. 2 . And now for a look at japanese automakers. September domestic auto sales drove higher for the First Time Since april to 12. 4 on the year. And toyotas sales were up with the lex why you jumping 20 year. Nissan sales fell 1 , but shares managed in the green higher by 0. 8 . And honda sales surged 50 , thanks to its latest compact model. And the stock gained nearly 1 in todays trade. And thats a look at asian markets. Back to you girls in london. Joining us now, zane brown. Thanks for being with us. I know its very early where you are. Past the deadline last night. A lot of folks are wondering what is it going to take to get both sides back to the table. Weve seen the market take it in stride. And bank of america said it might require either a major popular outcry or a major stock market correction. What do you think its going to take to get a dooel deal on the budget pushed through . Certainly the population has been very upset with congress for a very long time. So im not sure what it takes to get congress to come to a compromise. The elements of compromise dont seem to be there. Right now, the stock market is saying, hey, weve been through this before. This is the 18th time theyve shut down the market. Generally, it lasts one to five days. But if this one, where there are no elements for compromise, where the republicans knew they were going to get blamed for this and they entered with glee knowing they were going to get blamed, you wonder is it actually going to go to the 17th . So next week, after the first four or five days, is when we think you will say a strong reaction in the stock market. But doesnt this mean loose Monetary Policy for everybody and that will continue for the time being at least until the end of the year and, therefore, we should buy equities . Well, certainly that is what was one of the considerations in the no taper decisions on september the 18th. Bernanke expressed concern that there could be Something Like a Government Shutdown and that that could slow the economy. Word is that its worth 300 million a day. 300 billion a day. And that translates into, say, 0. 2 of gdp a week. So once you get in from now until the 17th, you are talking about 0. 5 of gdp and thats likely to have an impact. So im not sure you want to jump into equities right now. But youre right. Maybe a buying opportunity next week. Equities will fall and this will likely be a temporary situation. That may be your buying opportunity. Lets talk about the october 17th date. It seems unthinkable that the u. S. Could default on its debt payment. As youve mentioned, compromise hasnt been working. Do you think that the tea party is going to stick to their really hard line and prevent anything, the real risk that theres no agreement to raise the debt ceiling and that the u. S. Could potentially default . Well, its one thing to stop the government. Weve slowed down the government for a week or two weeks. But to push us to the 17th and fail to make payments on some of our debt, that probably would be unforgiveable. And you might have the entire tea party booted out of congress the next time around were they to test that particular line in the sand. Zane, stay with us. Your headlines this morning include it is official, the u. S. Government going into shutdown mode as weve been talking about for the first time in 17 years. But guess what . Markets are shrugging off the stalemate with modest gains in europe and asia. And japanese Prime Minister shinzo abe unveiled a tax hike with a 50 billion stim auto you husband package. We will be live in tokyo right after the break. Stay with us. At farmers we make you smarter about insurance, because what you dont know can hurt you. What if you didnt know that its smart to replace washingmachine hoses every five years . What if you didnt know that you might need extra coverage for more expensive items . And what if you didnt know that teen drivers are four times more likely to get into an accident . sup the more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum welcome back. After months of debate, japanese Prime Minister shinzo abe says he will push the sales tax up to 8 in april from 5 . Abes cabinet says it will put out a 50 billion stimulus package to soften the blow. The Prime Minister, speaking just moments ago, says its time to seriously review japans high Corporate Tax rates to learn more investments. Kaori enjoji is live from tokyo. This is the third arrow. Is all of this expected and does it go far enough . Well, i think its pretty much in line with expectations. Because, dee, for so many weeks, people had been expecting this consumption tax hike to go through. And this economic stimulus package incorporates some kind of measure to lower Corporate Taxes so that profitability, which has been increased dramatically over the last couple of months of a weekening yen can be translated into higher wages. But its that missing link thats not really addressed in this economic stimulus plan thats being currently outlined by the Prime Minister shinzo abe. You mentioned an interesting point, dee, in that he mentioned that he is considering lowering the Corporate Tax rate. These considerations have been going on for quite some time. So if you were expecting any kind of concrete decision, you certainly did not get it today. Hes considering a special tax levied on the disaster. So if you were expecting a detailed plan, youre fought getting that today in this press conference. The difficulty in this approach being taken by the government is on one hand, they are trying to stimulate the economy. But on the other hand, theyre trying to address the debt situation. This is a major paradox, not only for the japanese government, but for many industrialized nations. And hes trying both of these things at the same time. The problem Going Forward is its cost push spending in japan and housing continues to be weak. So if you were expecting a little bit more details from this economic stim usely package, perhaps youre going to be a little bit disappointed. Dee. There are a lot of factors in play there. Thanks, kaori, for breaking it all down for us. Zane brown is still with us. What are your thoughts on japan and also what are your thoughts on some of the currency crosses that could be affected by this move . I know weve had a lot of calls for yen weakening heading into this. Certainly yen weakening continues to be a key component of abenomics. It needs to continue to be pursued and 105 a year from now is i would imagine is something that has to be targeted from japans perspective. Because unlike the United States, they are an exporting nation. Very little of our gdp comes from exporting. Most on of our gdp comes from internal consumption. Thats the opposite case. So a lowered value currency benefits japan. But the third there that youre referring to is elusive. Its not just whats announced today in terms of an offsetting attack. But most investors would like to see structural changes. And elimination or a shift from the mom and pop intensive costs, expensive Distribution System that exists there. And favoring hillary clinton, perhaps better use of the women workforce in japan. And things along those lines where there really are labor structural changes that have been elusive in japan for so long. But a lot of jitters over what happened back in the late 90s in gentleman pap. They tried to raise that sales tax and it derailed the economic recovery there. I think thats what a lot of folks are worried about. Do you think that the japanese economy is Strong Enough to with stand the sort of hit to consumers . Well, it remains to be seen. So it sounds like youre hitting consumers, youre hitting tourists, youre hitting people who go there to visit and stay in hotels and spend money. But the release, that stimulus package doesnt really offset that directly. It seems more directed to companies. And im not sure that that is really going to be the right offset. It could stall growth more than whats expected when you look at the nebs on a piece of paper. Okay. Thank you very much. We will see you again soon. Berlusconis attempts to bring down the government could face another hurdle. We will discuss that next. Lyrics take on me. take me home. ill be gone. in a day or. man twooooooooooooooooo is that me, was i singing . Vo not paying for scheduled maintenance feels pretty good. Nocharge scheduled maintenance now on every new volkswagen. Thats the power of german engineering [ dings ] [ male announcer ] every thought. Every movement. Carefully planned, coordinated and synchronized. Performing together with a single, united purpose. Thats what makes the worlds leading airline. Flyer friendly. Bny mellon combines Investment Management investment giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Hi, everybody. Welcome back. We were just reading through a lot of your comments this morning. Really interesting to see what you have to say on the u. S. Debt ceiling, on italy, as well, on hockey. Keep your tweets coming on twitter. deecnbc. Or louisa bojesen. We were talking about currency here a couple of moments ago. A viewer writes in and says please highlight the stronger pound and how its helping the cost of living in the uk, lowering import prices, which is a very good point made. We will pose that to our guests here coming up. Last night after a meeting, members of berlusconis own party played down the rebillion with one senator calling the crisis a instant prospect. He needs 19 members to back him in tomorrows vote in order to keep him in power. Still with us, zane, thanks for remaining on the line. I want to ask you about the reaction were seeing in italian debt markets in particular and some of the periphery european debt markets and why it is that we havent seen more of a blowout, for lack of a better word, of these yields heading higher where 4. 5 give or take a bit on the italian ten year, nowhere near the 7 bubble that we were at the height of the crisis. Well, i guess perhaps who will have thought that the United States might take a lesson in terms of how to govern from the italians. They really do seem to want to get back together despite berlusconis efforts to, you know, pull the government apart. Here were missing that here in the United States. They are still trying to get together. And i think its that hope that, you know, at some point they can come together. They can come together with the right budget and keep the budget deficit within the 3 target. And, you know, thats really got to be the only reason why you end up with yields contained at around the 4. 5 level and not headed higher because rating agencies have warned that if there isnt some progress towards kind of a better budget and an opportunity to make some structural changes, then there could be another downgrade and that would be devastating to italy. But right now, that seems to be seems to have been avoided and with part of berlusconis party saying, hey, maybe we wont go with you, maybe we will remain united. Maybe we can get something done in government. Certainly that speaks more highly of their government today than it does of the United States. Okay. Zane, i want to jump across the atlantic and ask you about u. S. Treasuries. Where are they going . We havent seen much of a reaction. Were sitting at the tenyear, around 2. 65 in terms of the treasuries, at 2. 65 and where are they going . Especially as we approach the debt ceiling and its is taper talk going to be rearing its head again later this year . Well, certainly when bullard mentioned perhaps they might taper as soon as october, i think thats really off the table. Even if it was only a 5 billion number that they would start to taper, its probably not going to happen any sooner than december. And even in december, youre likely to see bernanke say, hey, im really a lame duck here. Janet yellen will likely be the person to succeed him. As chairman of the fed, i can see that he might just defer to her in disease and say, janet, what do you want to do . I dont want to start the tapering process if youd rather delay it. And so it could be december, it could be march, but we do have this kind of window of opportunity here where you could continue to see prices improve somewhat. Now, if we bake in the idea that, okay, we may end up with a Government Shutdown, there is likely to be a flight to quality, kind of odd that as we approach the 17th and we run the risk that the United States may not actually be able to pay their debt or pay the interest on their debt, we would still likely see a flight to quality, the u. S. Would still be perceived as the ultimate quality you would likely see yields decline and prices rise in that coming twoweek period if it heads in that direction. Absolutely. And thats the irony of it. Zane, thank you so much. Zane brown, fixed income strategist at lloyd abbott. Apparently curved blades when you play hockey were invented in the 1960s. They had been very straight before that. I didnt even know that. Im learning from you. This is the best show ever, we get to talk about hockey and politics. Youre from toronto where hockey is a big thing. Its not really a big thing in comparison. Very, very true. And politicians battling heads, maybe if we put it all on a hockey rink and let them fight it out, it would solve everything. I would pay to watch that. Who would be the goalkeepers . Oh, i would pay to watch that. We need to get them on a hockey rink. Coming up on the show, as the markets slug off the u. S. Shutdown, our next guest tells you house federal contractors and employees are bracing for major disruptions as the government dollars dry up. We went out and asked people a simple question how old is the oldest person youve known . We gave people a sticker and had them show us. We learned a lot of us have known someone whos lived well into their 90s. And thats a great thing. But even though were living longer, one thing that hasnt changed much is the official retirement age. The question is how do you make sure you have the money you need to enjoy all of these years. Hi, everybody. Welcome back. Youre watching Worldwide Exchange. Im louisa bojesen. And im deidre whang morris. The u. S. Government has gone into a partial shutdown. We like to resolve issues, but we will not go to conference with a gun to our head. Gu Global Markets are shrugging off the shutdown. This amid all the ongoing uncertainty in rome where sill so he via berlusconi is facing dissent in a bid to topple the government there the. And shinzo abe prepares to soften the blow with a fresh 50 billion stimulus package. Hi, everybody. If youre just joining us, thank you very much for tuning in. Two dominant themes this morning, one being the partial u. S. Government shutdown and the other being the italian political scenario which increasingly has become harry over the last couple of days. Just looking at how the u. S. Markets are shaping up for the open, weve got a couple of hours to go. But still an early indication is that we might be looking at some mottest increases on the open as a lot of this probably has been baked into the pie so far, right . And also in the past, and i know some of you were writing in, one viewer in particular saying, look, you cannot let history dictate the future. And thats very true. But sometimes we look at the past and we think, well, the government has been shut down in the past and we didnt see the markets falling off a cliff. We didnt die. European markets still continued to move on as did the u. S. The cac, ibex, xetra dax trading higher. The ftse 100 off by a couple of points in the current. Thats wa were looking at by and large here this morning. Our top story, the u. S. Government has begun a partial shutdown for the first time in 17 years. This is as Congress Fails to break a stalemate over its stopgap spending bill. Federal agencies have been directed to cut back, meaning 800,000 workers face furloughs, although Critical Services will remain open. On monday, House Republicans repeatedly passed measures linking the spending bills to delay in president obamas Health Care Law. Known as obama care, which Senate Democrats rejected. After one final attempt, the house adjourned just after 1 00 a. M. Eastern time. We were hoping that they will take our offer and let us go to conference. The house has voted to keep the government open. But we also want basic fairness for all americans under obama care. Now, the senate is in recess until 9 30 a. M. Eastern time, a few hours from now when lawmaker res expected to reject the latest house bill. House republicans have asked for a special Conference Committee to work on breaking the logjam. Senate majority leader harry reid is firmly against that idea. We like to resolve issues. But we will not go to conference with a gun to our head. Cnbcs john harwood is joining us from washington with the latest. John, what is it going to take to break the stalemate and get a deal . Its going to take increasing heat on this. Democrats are winning the fight. How can you tell . Because democrats are united, theyve been holding the line, rejecting the republican proposals. Republicans are divided. Youve got splits within both the Senate Caucus and the house caucus. The leadership of the party itself, john boehner, was not for this strategy. But he was forced into it by members of the tea party. And the real question is, when does it heat get to great that the tea Party Members themselves realize they need to back up or when john boehner says im not going to let you control the agenda any more. Theres risk for john boehner in that because that could imperil his speakership. But at some point, everyone expects him to do that. The only question is how much time it takes. Thank you, john harwood at cnbc in washington. As many as 800,000 employes s prevent them from undertaking any business. Al b, good to see you. Thank you for being with us. Talk to us, first of all, about what exactly takes place. What can we expect from this shutdown . There will be a large number of federal employees who are told today whether theyre is essential or not and whether theyll come to work. The federal government will notify contractors of the next kervel days whether they should continue working or theyll have to furlough their own employees. How have they been preparing for this . I was looking back in history and looking at how the last partial shutdown started in 1995. Lasted for 21 days, if im not mistaken. And at that point, there were full blown contingency plans that were put together. At least as august 2011 we saw these contingency plans being in place. Youre correct. But there are certain significant differences between 1995 and today. In 1995, the federal got was a lot smaller. There were a lot fewer federal contractors being hired by the federal government in 1995. In is the whole government. We have a significantly larger number of federal contractors who are potentially at risk because of this shutdown. You focused on the contractors. You said in the past federal reimbursements have been reimbursed. However, federal contractors have never been reimbursed. How damaging could that be for the Economic Growth and productivity . Its harder to know exact numbers. We dont have exact numbers as to how many employees. But if the shutdown continues for several days and longer, the risk goes up exponentially. And ive been asking, i just asked john harwood, what do you think its going to take to get the parties back to the table and hammer out some kind of agreement, some kind of deal here to address the budget . Well, there isnt theres no disagreement over the budget numbers. Most of the disagreement all of the disagreement has been around the Affordable Care act and the scopes of coverage for that. Thats not an area that i know very much about, although i have extensive work experience. I spent 13 years as an employee on capitol hill. This is one of the worst differences between the house and the senate that ive seen. I dont know where the difference comes on the Affordable Care act, but theres actually an agreement between the house and the senate on the budget numbers. Both the house and the senate have agreed to a spending level for whatever period of interim time at 987 billion. So im hoping that there can be an agreement on other elements of it because theres now no disagreement about the budget. Allen, as i understand it, theres a delays over the nonfarm payrolls being released because of the on partial shutdown that theyre impacting. I dont know many of the details. There will have to be further guidance. Well wait to see that. Thats a new development. So well watch and see what happens. Allen, thank you very much and thanks for getting up so early to be with us. I know its very early on your side of the pond. We appreciate it. My pleasure. Coming up, one u. S. Bank closes the book on mortgage issues while another runs into what could be a big hurdle as it looks to reach a multibillion Dollar Settlement with u. S. Regulators. The latest on the mortgage mess, coming up. Well read out some of your comments and questions later on here on the show. Keep them coming through on twitter. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The cadillac ats 2013 north american car of the year. Lease this cadillac ats for around 299 per month with premium Care Maintenance included. Its lots of things. All waking up. Connecting to the global phenomenon we call the internet of everything. Its going to be amazing. And exciting. And maybe, most remarkably, not that far away. Were going to wake the world up. And watch, with eyes wide, as it gets to work. Cisco. Tomorrow starts here. [ passenger ] airport, please. What airline . United. [ indian accent ] which airline, sir . [ passenger ] united. Whoa taxi [ british accent ] what airline, then . [ passenger ] united. All right. [ spanish ] what airline . [ passenger ] united. [ mandarin ] which airline . [ passenger ] united. [ arabic ] which airline . [ passenger ] united. [ italian ] where are we going . [ passenger ] united. [ male announcer ] more destinations than any other airline. [ thai ] which airline do you fly . [ passenger ] united. [ male announcer ] thats great, big world friendly. Welcome back. These are your headlines today. Its official, the u. S. Goes into shutdown for the first time in 17 years. But markets shrug it off the stalemate. And japan offers a 50 billion stimulus package to off set the sales tax. Jpmorgans impossible 11 billion settlement of on u. S. State and mortgage probes has reportedly hit a snag. Seema mody joins us with more from the cnbc headquarters. This is getting even more interesting. Absolutely, dee. Jpmorgan is locked in a dispute with the fdic over responsibility for losses at the former Washington Mutual. Jpmorgan bought the sales bank and Mortgage Lender from the fdic for 1. 9 billion at the height of the financial crisis. Jpmorgan has said in s. E. C. Filings and Court Proceedings that its liability is limited when it comes to reimbursing investors who lost money on Washington Mutual mortgagebadged securities. The wall street journal reports the jpmorgan insider is helping the Justice Department with its probe of the bank sales of mortgagebacked securities. Its unclear whether this person is still working p morgan, but he or she has supplied documents, emails, suggesting the bank vastly overstated the quality of mortgages bundled into investments. Jpmorgan shares were trading lower. Now were up about 0. 8 . In other news, wells fargo will pay freddie mac 780 million to resolve all claims about mortgages. It sold the lending giant prior to 2009. The settlement comes about a week after citigroup agreed to pay freddie nearly 4 must know million over similar mortgage issues. Freddie and fannie mae, which were both bailed out in 2008, have pushed banks to buy back mortgages that soured during the u. S. Housing slump. Lastly, Warren Buffett and Berkshire Hathway are set to receive more than 2 billion of Goldman Sachs stocks today. Buffett received the warrants five years ago when his investment was seen as a vote of confidence for goldman, which was reeling from the turmoil in the credit markets. But exercising the warrants, berkshire is entitled to about 13 million Goldman Sachs sha s shares, making it the companys sixth largest outside investor. Back over to you. Thanks for that, seema, up bright and early from the headquarters in the u. S. Still to come on the show, they actually did it. President obamas sponsd on tweter to that Government Shutdown. But who was to blame and who has the solution . Who knows, but we are joined by both a democrat and republican strategist after the break. Well see what happens when we bring those two together. The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Welcome back. The blame game is certainly under way as the u. S. Government has begun a partial shutdown for the first time in 17 years. This is after congress failed to break a stale may mate over a stopgap spending bill. Joining us now from new york, we have boris epstein, founder of strategy international. And keith boikin. We have an allstar lineup with you right now. Boris, i want to start with you on the republican side. And you believe that shutting down the government over obama care is a mistake. And i believe a lot of republicans thought this. Yet still nothing was able to be agreed on. What are your thoughts on the tea party and do you think that what theyre doing is damage to the Republican Party and also getting through legislation . Its shortsided. If you look at ted cruz and rand paul who has aspirations for 2016, in potential for running for president , this is not going to help them at all. It is grossly unfavorably viewed to shut down the government. There is no rope for one party of the party to ruin 2016 for us. Is this going to have a long lasting effect . Not as of right now. Once the voters start feeling it, then so will the voters. Steve, what do you think . How do you come to an agreement . I dont know whether its going to last for three days, like boris suggested. I think thats ultimately up to one person, House Speaker john boehner. This shutdown can end in 15 minutes. All jane boehner has to do is call a vote on the senate bill, the clean bill that doesnt have any riders or amendments attached to it just asking for congress to pass the continuing resolution to fund the government. If theyre willing to do that, theres enough republican and democratic votes in the house to pass it and theres clearly enough democratic votes in the senate to pass it. It could pass right now. But john boehner will not bring it to a vote. This is clear obstructionism because hes afraid of the Tea Party Wing of his party. Unfortunately, that small faction that president obama mentioned yesterday in his press conference is running the government because john boehner is afraid to speak up against them. Boris, do you think thats the case . Are we seeing fractions from within . Well, those people all are representing their constituency. They got elected with a certain mandate and they got electeded. Is it conducing to getting things done in washington . No. President obama did go on tv, but theres no leadership felt right new in washington from president obama. You look back to the 95, 96 shutdown. Bill clinton did step in and he led the resolution there. President obama is not doing that because hes not able. He hasnt gotten the respect from either the house or the senate, in his own party or the Republican Party to be able to come to sort of an agreement and moderate the two sides. So right now, it is just left to Speaker Boehner and Senate Majority harry reid. Is that going to happen . Sooner or later, i hope so. But boehner is not afraid. He is just letting their own parties make their own statements be heard. It is a problem as far as a challenge of leadership in washington, d. C. Can i just say that the only compromise first of all, theres nothing to negotiate here. The president hasnt asked for anything. The democrats in congress havent asking for anything. All that needs to be done is for congress to do its job and fund the government. Theyre not asking for concessions. Theyre not asking for it to go back and repeal laws that president obama signed. Theyre not asking to raise taxes on the wealthy. Theyre not asking to repeal anything thats happened before. But republicans are making unreasonable demand here. Its completely undemocratic demand. In order just to continue the basic operations of government, we demand that you go back and undo a law that was passed by the congress, signed by the the, upheld by the Supreme Court and essentially ratified by the elections. Trying to change the law because of one faction of congress in one branch of government decides this is unacceptable makes no sense. Keith, we have to leave it there. Thank you very much to you both. Thanks a lot. Thank you, dee. That was fun. And we would love to see the tea party in the hockey ring, definitely. That would be something. Maybe at some point, like the winter classics. Exactly. Bye for now. Ay attract burglars . [woman] off to hawaii what if you didnt know that as the price of gold rises, so should the coverage on your jewelry . [prospector] ahh what if you didnt know that kitty litter can help you out of a slippery situation . The more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum good morning. Foourchs are higher after mondays triple selloff. And jamie dimon along with other executives will meet with president obama to talk debt ceiling. T october 1st, a new month, 2013. Squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernen and andrew ross sorkin. The government has shut down for the first time in 17 years. Democrats and republicans on the hill remain deeply divided over the budget, obama care, the debt ceiling and they failed to reach a compromise before midnight last night. That was the deadline. The budget impasse on capitol hill means nearly 800,000 of the governments 3. 3 million belowees are on unpaid leave and are deemed nonessential personnel, including half of the defense department, most of the irs and park rangers. The departments that will continue to work are the federal aviation administration, including air traffic controllers, the military and the postal service. President obama commented on the shutdown in a message to the military. Im going to keep fighting to get rid of those across the board budget cuts, the sequester, which are hurting our military and our economy. We need a responsible approach that deals with our fiscal challenges and keeps our military and our economies strong. And were going to mak s