Karen lee, as well as in france, maria tadeo, and in jackson, karen hole, wyoming, Michael Mckee. First, we want to start in asia. China willorts that soon unveil retaliatory tariffs. Karen . Reporter based on what we know, china will take further retaliatory measures on billions of dollars of chinese goods measures in retaliation to tariffs on billions of dollars of chinese goods. At the same time, we have unrest in hong kong. We will be looking to see what those tariffs are. No details were revealed. Alix and hong kong, political turmoil potentially triggering a world recession. That was the conversation yesterday at jackson hole. These are not segmented regional effects. These have really global consequences. Pointould be a tipping that could trigger a very significant global slowdown, even a recession. Alix what is the talk over there . Thats Harvard University economist Carmen Reinhart saying it could be a detriment for the world economy. There are mobile shocks that could rattle the economy. It is also a concern for the Business Community here, whether or not this will continue to be a safe haven for business as it has been for a long time, whether we see potential designation it has with the mainland, and whether people will be able to operate here in the way they have been. Alix thank you so much for joining us. Now we move over to france, where World Leaders are gathered for a two day summit. Maria, what is set for the g7 . Maria there so much happening here. There are many concerns about trade, and also concerns about a global recession. They also worry a lot about President Trump. They see political instability, they see someone who is unpredictable, and there is trades tension between the United States and china, but also europe. There could be a tariff on technologyuse of the the bar is so low we are being told there is no communique by the end of the session monday, just a good debate will be enough for everyone to save face. Alix thank you. Bloombergs maria tadeo joining us from france. In jackson hole, fed chair jay powell will speak into three hours. Michael mckee is on the ground. Michael the stakes are high for the fed chairman here today. In his News Conference after the july 31 meeting, jay powell characterized that rate cut as a midcourse correction, which is not how global wall street sees it. Theyve been pricing in what maria just called a possibility of a recession. Its jay powells job today to bridge those two views. How does the fed chairman see the economic prospects ahead, and how and why with his fed react . How bad are the trade wars that seem now to be permanent . How bad are slowdowns in asia and europe . How strong really is the u. S. Economy . For jay powell, its a tight rope walk. Hes had trouble communicating with investors in the past. Today he wants to let them know the fed stands ready to act without, as they say here in wyoming, scaring the horses in his assessment of the economy. We will get the headline at 10 00 wall street time. Alix mike mckee, thanks a lot. We will bring you the latest from jackson hole, including interviews with james bullard, st. Louis fed president , Robert Kaplan, dallas fed president , and others. Joining us for bloomberg first take, carl riccadonna, rachel evans, and damian sassower. The main event is going to be powell. Theres so many questions going around. What is the right question to be asking this morning . Carl i think theres a bit of a misunderstanding that there is this renegade hawkish contingent building against the fed central line of thinking. E heard from known dissenters when you are hearing Esther George speak, you know it is going to be hawkish commentary. Adont think there is resistance building against the feds policymaking. Powell ist think jay going to put all the cards on the table today. Ishink the message from him going to be this is still a midcycle adjustment. We didnt say how big that adjustment was going to be, and today hes going to suggest that that adjustment could be a little bit bigger. We are not in a fullblown easing cycle. Recession risks are lower than a lot of folks believe at the moment. So the midcycle adjustment might mean a handful of rate cuts. My team earlier this week changed our fed call. We are now looking for the fed to move in september, october, and again in december. This is basically the fed pursuing an uninverted yield curve ill economic fundamentals look relatively decent. Alix i feel like youre telling me today is going to be a snoozer. That markets are basically just extrapolating. [laughter] carl i wouldnt necessarily say snoozer, but moving in the direction of less trauma and fireworks ash less drama less drama and fireworks. The question i dont think he will address today is the scenario are the fed moves into a fullblown easing cycle and potentially another round of quantitative easing. I dont think we get there today. Rachel its been very interesting looking at markets today. Markets definitely been on vacation. Was looking at volume figures everyone is often the hamptons, having a lovely time by the look of it. To your point about volatility, i think we could see something if we see a big enough surprise, just given the volumes are so low. That does tend to translate into bigger spikes, bigger falls, if we see something to move markets. We do see a bigger action, i think we come back into the office in september. Onian i think what is going thehe short end of curve, i think three rate cuts would go a long way. Widening. Bor spreads this is still trending out in the broader credit markets. These are all things we are keeping a close eye on. Alix im glad you brought that up. Can we break it down a little bit for those not in the know . Basically, it is very expensive if you are a foreigner to buy treasuries, which means banks have to hold more. That means a stronger dollar. Why does that mean the fed has to cut . Really, you have basically foreign Central Banks depositing dollars with the reserve bank of new york, basically collecting overnight rates, not investing, which they have historically done. It basically has this inversion at the ultra short end of the curve. With all of the issuance and the debt, the cbo just upped its budget deficit estimate to 1 trillion for next year, two years ahead of time, they are renting in the overnight space. Thats going to weigh on inventories and make it more costly for them to fund fx swap rates. Thats one of the things driving cross currency basis and all of the negative yields abroad. Alix that brings up another question for me. How much preventative cuts do they need to do . How much is that going to be to fix the technical plumbing and also alleviate distress . Theres a broader issue, which is net interest margins for banks. If the curve is flat or inverted, that is not a profitable environment for banks , or at the least, they are not passing along the full extent of monetary accommodation to their customers, be it households or businesses. So the fed has to move so that the overnight rate is lower than the 10 year yield if they want to have a healthy banking environment, and he wont have a healthy banking environment a healthy economy without a healthy banking environment. Alix if you pair this event with the next 72 hours, you have Monetary Policy over the next 12 hours, then fiscal policy. Thats what the g7 is really going to be about. Is this where we are at, where it is really going to be about fiscal . Damian i think the one thing we have heard a little bit of is germany and france talking about maybe aligning their fiscal needs and aligning ecb stimulus with fiscal stimulus. If they have a coordinated approach, i think the ecb stimulus will have a lot more weight. That will be discussed, but g7 is going to be a lot more about trade, about iran, and about brexit. Carl and as the reported earlier this morning, the per dissidents are watching their twitter feeds to see what is happening in the background the participants are watching their twitter feeds to see what is happening in the background from President Trump. Underscoresely whats happening here, and i think the expectations of maybe not even getting to a communique by the end of the weekend is very indicative of where things currently stand. Rachel i think thats kind of unusual for a g7 meeting. These were created to be about unity. To beere created about everyone getting on the same page, to end standing united. We look to the g7 to really show leadership and reassurance. Here, we are already talking about the divide. Macron arguing with bolsonaro about the amazon, weve got brexit. Theres all kinds of things to discuss. Theres all kinds of risk out there. Damian youve got trump froming about the defense nato being too low. U. S. , three point sent the u. S. , 3. 2 of gdp goes to nato defense, and other places are lila us and that bashar a lot less than that. Other places are a lot less than that. Times editor just came out with possible china tariffs. What does that do for the g7 . Carl the fed gets the messaging down pat, clearly communicates to the markets, and then betrayed tweets and headlines derail everything. Potentially, we could be looking at that scenario later this afternoon or whatnot if they are antagonizing President Trump. He will be happy to tweet back at them that there will be additional tariffs in the u. S. Not necessarily that there will be followed through that, but he will sabr radel with the best of them he will sabre radel with the best of them he will sabre rattle with the best of them. And we got the cable rate overnight that was actually up 3 . South korea has a rates meeting, and some expectations may have been cut there as well. Alix thanks a lot. Really appreciate it. Good to see you. Ask for helping us analyze the day ahead. Coming up, we speak to Larry Summers, four masked Larry Summers, former u. S. Treasury secretary. This is bloomberg. Alix former treasury secretary Larry Summers blew up twitter yesterday, warning that there is a black hole in can my policy. One of them really stood out. At zero, rates stuck was no real prospect of escape. Expectation in europe and japan with a sexually zero or negative yields with essentially zero or negative yields over a generation. The u. S. Is one recession away from joining them. Larry summers is with me on the phone. This generated a lot of buzz over twitter. How did you get to this conclusion . What is black hole economics . Whole the black hole, loosely, and monetary economics is when the interest zero and absorbs the and the Economic Energy cant get out. The difficulty is it doesnt seem to be much that central bank in japan has been able to do for a long time now to get inflation going. Europe is heading into recession starting at zero Interest Rates. In america, when we have a recession, the Interest Rate usually is reduced by 500 basis points. It has to be 300 below the neutral rate in order to get the economy going. Given where we are starting, there seems to be no real room to get anything close to that. That weveusion is got to think much harder about Economic Stabilization directly. Those mechanisms might involve the government deciding to run a budget deficit. They might involve some kind of change in transfer programs or expansion of social security. They might involve efforts to mobilize more infrastructure funding. There are a variety of possibilities, but i think we have to think outside the box. When i see Central Banks debating how often they are going to have their press conferences or in what form they are going to offer their shorttions, it just seems of the potential problem that we face. Smallt need to plan for contingencies. We need to plan for big contingencies. Alix to that point, on twitter you had one chart that really echoed what you were saying. Of easingher periods and just how much the fed was able to cut. As you mentioned, upwards of 500 to 800 basis points, and how we dont have that kind of room now. It seems like what you are saying is the answer is, in essence, modern monetary theory, where you borrow a lot of money to have a lot of stimulus. Is that true . Larry things very much in that direction are going to be necessary if we are in a recession or if we get too close to a recession. Where i part company with modern monetary theory is in believing that it would somehow be good to never change Interest Rates, to believe that somehow we can do it all always with zero interest that nothing about budget sustainability matters in any circumstances. So i think there are some real problems with the breadth of applicable of the that the modern monetary theorists take theres ado think core of validity. By the way, it goes back before modern monetary theory to i know an idea calledto focused finance. Monetary policy cant always achieve stabilization, even of what we think of as monetary quantities like the total dollar values in gdp or the rate of inflation. I think that is an important lesson that we are going to have to take going forth. I think another traditional in myne that i had thinking until fairly recently given lots of weight to, the old isa of Monetary Policy sometimes pushing on a string is something we will need to think on. [indiscernible] or on the side of dovishness. Thats what ive been arguing for a long time. I think thats right, and i still believe it. We need to beh, directing more focus towards that canry policies stimulate demand. Unfortunately, Central Banks, understandably enough, are reluctant to acknowledge the limitations of what they are able to do, and that peaks the debate that takes the debate further from the fiscal policies that are necessary. Alix larry, i really appreciate it. It was a viviana this is bloomberg daybreak. Hasbro is becoming a fullfledged entertainment company. The toy company agreed to spend 4 billion to buy canadian studio entertainment one. Brands thehasbros ability to spread into foreign markets such as china. New tariffs that President Donald Trump is threatening could drag chinas growth to the lowest since 1990, according to a Bloomberg Survey of economists. If tariffs on 300 billion of chinese goods are imposed, gdp expansion could be cut by half a percentage point. That would push growth below 6 . That is your Bloomberg Business flash. Alix thanks so much. Those tariffs are also disproportionately hurting women. And analyst of pipeline equities came fromurden apparel, and women shoulder 65 of that load. On average, Mens Clothing has a border tax of 40 . The interesting part is how this could play into the election. Polls show the president is hurting when it comes to female voters. If there is some pushback, women might actually have this way. Have the sway. Coming up, how jackson hole could guilty markets. Duessel,peak to linda federated investors senior equity strategist. Markets Still Holding onto the gains. S p up 3 10 of 1 . This is bloomberg. 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Youre looking at a weekly gain here of the best week since about 2017 for the dollar index. How long will that last . At what point does it wind up tightening financial conditions and put more stress on the fed . Fed chair jay powell is set to take the stage in jackson hole eastern time. You have some on the fed saying it is not time to cut. Dallas fed president Robert Kaplan said he would like to take said he would like to wait to take further action. Michael mckee is with us in jackson hole. Its a random selection of those who i was able to do interviews with ahead of time. We will hear more from the devilish side this morning the dovish side this morning. We will hear from jim bullard at the top of the hour. Its a situation where probably not a lot has changed in terms of who will go which direction. Its also important to remember who is voting. Pat harker not voting this time. Is. Er i feel like we want to walk this question forward. How many ounces of prevention are necessary to sufficiently give an accommodative boost to the economy . What is that conversation now . Michael you hit the nail on the head there, alix. If the fed is going to be cutting rates, jay powell in july characterized it as a midcourse correction. Wall street sees a recession ahead. How much accommodation to the various fed officials think we even even if we think if they think we do need a rate cut . Is this a correction, or the beginning of a rate cut cycle . This is an important conversation throughout the day and a question we will be asking. Alix looking forward to it. Thanks so much. He will be back with us in the next hour with interviews from jim bullard and Robert Kaplan. Now lets take a look at how markets are positioned ahead of powells speech in jackson. I want to go right to bloombergs taylor riggs. Taylor interestingly, we are starting to see major outperformance by momentum strategies overvalue strateg