i am not sure what monday will bring. haasadam posen and richard . let's get you to bloomberg first word news. >> there is a report that boris johnson will launch his bid to succeed cameron. they are gathering names of lawmakers who will block them. meanwhile, the brexit vote led to widespread turmoil in labour party. the revolt was prompted by decision to fire the party spokesman. some have criticized him for leading a week campaign in the u.k. referendum. its outlook to negative for britain. of brexit, they less growth. gets show no single party close to the majority in spain. ausallia, shaabat claimed credit for an attack. global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus this ishe world. bloomberg. tom: let's look at the data. australia later this evening. a huge divide between what is called regular stocks and banking stocks. one-daystocks had a bear market yield, a higher yield over the last six hours of 21.46g friday from 1.49 -- to 1.46. like 2008, look 2007. a mystery on monday. for those of you on radio, i put this on bloomberg radio plus. the to send spread did not flatten. this is a huge deal of what did not happen on friday. francine, what do you see? francine: i want to pick out a chart that shows the brutality in the pound. poorly made to the chart for me. this is a 10 sigma deviation. they peter doff a little bit. i do not know what monday will bring. i don't know. i won't speculate. but watch out. let's head to westminster. half the labour party senior team will resign. this is a coup with them labour party. >> good morning. we spoke to a member of parliament within the labour party and he was also calling on corbyn to resign. we also saw there is people with of the friend bench of the opposition labor party calling on their leader to go. he has been much criticized for failing to reach voters in the industrial heart lines of bringing them to the remain side and leaving them vulnerable. a few days ago, we had jamie dimon. i guess this morning he is within conference calls with his leadership in jpmorgan. where in the world is joe osborne? you are not the only person asking that question. if you type his name into google, the fifth thing you get is joe osborne missing. talking about this. one person wrote, we're not angry, we are just concerned. there has been a petition signed nearly 3n the country, million people signing this petition for a second referendum. it probably will not get anywhere but it is illustrating .he concerns the liberal democrats once in another general election and would campaign and a platform to keep britain in the eu. tom: thank you. he is the one person we want to speak to. richard haas will join us. but first, adam posen. he is truly one of america's experts on the political economics of germany. my question is confederation versus nation. are we heading towards a europe that is more a confederation then the dream of a nation? adam: for the time being that is what we have to look at. we have to look at practical state to state interactions. if anything, the difference is you had germany and france in the drivers seat for the last couple of decades who share that vision of deeper integration. even though the european treaties give a lot of room for nationstates to matter, they can ignore other nationstates. at this point, that is not likely. exorbitant privilege, that is the strength of the dollar. this chancellor merkel have is a -- haveolitical exorbitant political privilege? adam: she is the voice of calm and safe haven. has aelps her is germany weakness. it is undervalued, it gives them surpluses and money and pushed. she is behaving like the grown up in the room, but they are buttressed by the benefits of a weaker currency. francine: is britain racist? are we becoming racist? that would have implications for future referendums. is.: the climate there was a terrible report in the times about the young children being threatened in their schools. these are eu members, some are british citizens. it is like in the u.s. with donald trump. this is a legitimation within the idea that you can play with racism and appeal to racists in party. even if everybody else does not necessarily go full on racist. francine: do you think of briggs it vote gives -- do you think a trump a boost? -- mussolini came to power in the 20's, in democratically means. runelped to make hitler's legitimate in germany. racism like a fair part of politics, it legitimizes it. seeingat are we not coming? we are the thing that not seeing coming right now? adam: three things. there will be some big initiative out of the and in the next couple of months. he is not going to sit back and watch the west. , tryll take an initiative to take full advantage. you have to watch eastern europe, not just because of the pressure from europe. we have seen the nasty twin in poland. they are going anti-neoliberal, they are going populist. because everybody continues to be focused on europe, we are the fact that there are terrible things happening in latin america when you look at brazil and venezuela. that is where we are losing attention. they are going to have to wake up to that. conversationp, a with adam is an and richard -- adam pozen and richard haass. ♪ tom: special edition of "bloomberg surveillance." we welcome all of you on bloomberg radio and television worldwide. adam posen is with us. by telephone, from the council on foreign relations, richard haass. have an interesting history with northern ireland. with the bush administration dealing with ireland. scotland is the more likely entity to use this as an opportunity to spin off and take the high road, if you will, saying they preferred to stay in europe rather than the u.k. what is already happening party isblic nationals calling for a border poll, whether this should be unity with ireland. what this will do is bring final status issues to the floor in northern ireland. you could have everything from tremendous pressure to join with ireland, to stay in the eu, you can also have learned friction or violence in northern ireland tween the principal communities. what this does is undermine the status quo. tom: i thought neil ferguson in the times this morning was alien -- brilliant. friday was also the day after led zeppelin won a copyright case over their iconic stairway to heaven. coming soon, stairway to hell, congratulations then to the dead and to the aging working-class. this was a revolt against brussels yes, perhaps also a revolt against austerity and stagnant real wages. i believe it is the disunion of the united kingdom, a real tragedy for the u.k., it is bad for europe, it is bad for the united states, i do not believe anybody benefits. i do not think that anyone who any idea,this had they were protest voting. they are going to get a lot more than they bargained for. there will be voters remorse or the equivalent of a political hangover. they are setting into motion historical dynamics which i believe will be harmful and europeally dangerous for and conceivably beyond. inncine: we had adam posen studio saying it would play into the hands of russia. what will be the next move? is not amr. putin strategist. ofd try steak advantage situations. it is not inconceivable he will use this to launch a diplomatic move. i think he has to be a little bit mindful of the possibility that nato could try to pick up some of the slack. you have the summit coming up in two weeks. to be careful or mindful of just that possibility that the eu is facing an essential crisis and nato might --ve a new reason t are: i loved your brexit humans for the lions and why we had to worry about this. if you were advising the current should the u.s. do? is it waiting to see what shakes out in the u.k.? how should the u.s. react or should they back off? richard: i do not believe we will have a whole lot of influence. -- you not going to have are now going to have the reality of exit. this,is no script for there is no defined final outcome. what we ought to be looking for is as much of the substance as can be retained, even if the symbolism is gone. that means asking for flexibility out of chancellor merkel and brussels and moving a1 sized fits all. president obama, i would take this has a message to the united states and use the classroom that is the oval office to begin a conversation with it american people about their relationship to a globalized world, to talk about trade and immigration, to talk about lifelong education and training. this is something of a warning shot. what happened there is already happening here in the united states. affect the election and whoever wins the election. tom: look at the bloomberg headline of another resignation by the shadow cabinet. she was with the bbc for years. i will not call her a major member, but the body is falling for jamie corbyn this morning. francine: there is a conspiracy theory, a rumor that some people from the labour party actually becausevote for brexit they were hoping for a general election. the infighting is so bad that you wonder if any point the british people were at stake. up, blistering notes on the future of europe. .arl weinberg will join us this is a special edition of "bloomberg surveillance." ♪ ♪ tom: our special edition of "bloomberg surveillance." francine, here is my morning must-read. on what went wrong, the real lunacy of the vote to leave the eu was not that british leaders asked their populist way the benefits of number ship against immigration pressures, it was the absurdly low bar for exit. onlyeave campaign one with 36% of eligible voters backing it. you and i noticed this and it was about democracy run amok versus republic and liberty, isn't it? adam: absolutely. ken for going out there with that. you need both the senate and the people. this is as you said about republicanism versus democracy. think of edmund burke. they said, the duty of elected were presented as is to serve the people, not the follow -- not to follow the people. this is another technocratic fix. if we had gotten the rules right, it would have been ok. you need an assertion of principle. people in the labour party are breakaway saying that this referendum is not binding, we had to have the political guts to mount a general election. very quickly, we will come back to this theme in coming days. can other nations learn from of a percent to point? tipping point? adam: yes, they have to say that points of view are not acceptable that are racist or lies. tom: this is what we like to do, any days of the week, bring you the conversation. on radio and television worldwide, "bloomberg surveillance." ♪ >> at a national bank holiday. we will: independence day. freshs company requires leadership. >> britain will continue to be a great european power. >> i'm francine look quite. this is a bloomberg surveillance special. questions i would like to answer in the next 20 minutes. is there a timetable question mark what happens to the markets on monday? thes get straight to bloomberg reviews with taylor. >> hello. saidish first minister once to talk with european leaders about continuing the relationship with the eu. they voted to stay in the eu with england. and the uk's business secretary has called for a summit of business leaders to discuss concerns. thehe sunday times, said today -- the eu would have create a more friendly and environment. commander says the city of falluja has been fully liberated from an islamic state versus. the islamic state has controlled falluja for almost two years. the city is about 40 miles from baghdad. global news 24 hours a day journalists and analysts of more than 120 journalists. institute,terson carl weinberg joining us in a bid. what about the monday markets? what are we going to do? risk with macro advisors. good morning. this is quite has stored. let's go over it and say, this is lehman's, bear stearns, we have these other emotions. i looked at the economist james buffett and he said, come monday it'll be all right. jimmy buffett, legendary songwriter. goingonday, is everything to be all right or are we going to get this? >> it does not look all that dad even relative to the sovereign debt crisis in 2011. but if you look at all of the asset classes, commodities, all asset classes spiked dramatically. specifically for 2008 for the fx market. this is dramatic. radio plus.t out on this is incredibly important, this weighting of the assets. i would call it the litmus paper to test the depth of the market and stocks as an afterthought. >> i would agree. the equity markets are would trade with most liquidity. the other as set classes, mostly credit. those markets tend to shut down when liquidity dries up. you did not see a big selloff in theit assets mostly because price discovery process becomes impaired on days like friday. we should look at friday from a monday perspective. whatould you worried about is going to happen. francine: let me take you to the bloomberg terminal. it shows some currency moves like you are talking about. hobbled put this on the radio plus up shortly. thanwas much more volatile black wednesday in 1992. how much is because of positioning and how much it will we see the convulsions like friday's market. will it get worse come next week as we figure out the outflows? >> it is interesting. to devoteeading up were interesting. it is shocking to see how the market leaned against the wagering sites they had me polling sites which were close to 50-50. it was leaning long. metrics.ome of the inside volatility started to ease off in the days before the brexit vote. lessioning turned to be defensive. the shock more substantial. the reality is the brexit vote decision is self is a seismic shift from a rift standpoint uncertainty or certainty standpoint this is what the market has to rabble with. deal with the future. francine: given the volatility didn't we see lehman, didn't they know central banks were there. how did we figure out the outflows or collateral damages? featureere right to this. the vicks is nothing like it was in the crisis. generally for all of the problems, the banking systems in the u k and west are much better monitored then they were 10 years ago. so there is a real reason for full until the tea to be less. to think about ongoing political risk. a few weeks ago, they said, why facing more risk? i think you have to start doing that. it is different from volatility. there is panic, there is selloff, you do not know what the assets are. has notyear spread changed. the monetary policy cannot change very much. tom: here is the money question from 10:38 a.m. on friday. you remember, 1987, we all learned about portfolio shares. --es gorman had to come out james corbin had to make announcement. i get all of that as leadership s.d executive going to happen monday? >> we tend to study this quite a bit. tom: that is why i am asking. >> in other words, are they amplifying? will selling beget more selling? tom: you get recurrent functions back and on we go. >> self reinforcing, potentially self were reinforcing volatility of self driving. rises, you sot one arises. tom: francine, i promised you know math on sunday. francine: on the plane you are doing some. quick question. on the research you do, we do not need to understand it in depth but it is the bottom line tomorrow will be more volatile for friday or is it impossible to guess? dean: the big move was probably friday. i think the question, has the amplified over the weekend? the u.s. markets closed on their lows and that was not a good sign. tom: what is the short statistic you look at on the bloomberg that shows you liquidity in the market, particularly in the european markets? dean: one of the concerns was that the european banking market fell 18%. i think it is the biggest fall in the history of that index. i agree with that on the safety of the banking system globally it is not where once was. but 18% and one day is something to keep your eyes on for effects. contagion tom: we will call on you again. thank you. coming up on bloomberg markets, we will do this on monday. the secretary of state of the united states, madeleine albright will join us in conversation on radio and television worldwide. good morning. ♪ edition ofa special bloomberg surveillance. spain, italy, united kingdom, it has become circuitous. ?hat about the american economy michael has been gaining frequent-flier miles over the last few days. or we going to go into recession? look liket does not it. there will be an effect on the u.s. economy but it will be small. jp morgan and goldman sachs have taken down there forecast from 2% to about 2.25%. the u.k. as our biggest greatest partner. it wille three ways affect the economy. three possible general global slowdown. we see less demand around the world for anything, including american roddick's. you can see the contribution net exports have made to u.s. gdp. second, concerns about confidence in general. ceos made pullback. not street and ceo's do like uncertainty and that is what will have for a long time. the dollar will probably be the biggest impact because as the dollar gets stronger, we see inflation though down. we will import the inflation. prices havemport fallen, we are only beginning to recover. our products will be less competitive overseas. unique united kingdom experience versus the dollar in asia one of the examples? the asian dx why? discrete worlds, aren't they? michael: the exports are going different directions. tom: a great. michael: it will have an impact of china or japan devalues but for the most part we are seeing the dollar strengthened against. francine: for tv and radio listeners, do they take a whole new meaning? michael: we are in an air pocket. we do not know what the fed will do. the general consensus is that the fed is on hold through 2016. maybe a december move if we see things recover. that if this point, they will want to wait and see what happens. you look at the fed fund index trading. we get a cut. then in increase. not much of a chance but it is ironic at this point. francine: i am looking at the w rp function. everybody is trying to re-figure. tom will put it out on the bloomberg cap. overall, are we going to finally understand what janet yellen will say to the world? will brexit mean she is right? >> no, definitely not. i agree with the people michael is citing. the primary effect of the united states is the strength of the u.s. dollar, partially upset because of pushing down rates. hike.ning a rate on balance, it will be a drag of a couple tenths but it is not a game changer. the way they are the central bank it to the world, the u.s. let's the dollar rise when other people are in trouble. please.hael, jump in michael: because interest rates are lower because of capital flows, we may see a benefit in housing. mortgage rates make a down. they problem we've had is there is not much housing stock for sale. but it could help. me clarifyne, let this. he stopped in chelsea, london, jimlook at three- six-fireplaces. >> chelsea is on sale. does this mean, francine? >> chelsea is having a fire sale. francine: overall, what does that mean? >> overall what that means is -- dean and tom were talking about their functions of feedback from people selling on volatility. a major view that as threat. francine: does mark carney have to decrease interest rates or do something bigger this week? adam posen: i think he is trying to decrease but i don't think we should kid ourselves. of oure are downgrades ability to pay debts. if it is a context of feeding a further pound decline, there may be limits to how far they can go. if they are going into recession in the u.k. and i'm not going into contents is they are, then a kind and interest rates will be enough. personified in the free speech of the peterson institute, are people more concern versus a group of economists who say this will work out. gentle taken a more path, where is the debate as we go into monday? think there is much debate on the u.k. side. anybody paying attention to the so-called experts that are reality-based know it will not go well. those like roger baldwin are out there saying the eurozone is more resilient than people give for.edit this is not an attack on the euro as an entity and there are things the technocrats can do to make it stronger. i am less sanguine as they are but you can do things in practical terms that don't require a referendum that shows you can add up. tom: we will continue with adam pozen. mike and i will continue with an important conversation in that our on the radio with dartmouth college. of the bank of england. this special edition of bloomberg surveillance continues. ♪ francine: welcome back. special edition of bloomberg surveillance on this sunday. continuing to look at the fallout from this it exit vote and what happens come monday morning. >> we will get a view on the markets into how we are set for monday morning. for the last couple hours, a question on timing and whether or not it will trickle article 50. let's look at the game. they have. got a coach. why do they put the players on the field if it does not exist yet? we will talk to the former ambassador to the u.s. from the u.k.. how many civil servants do they need to start these negotiations? 200? they do not even have the logistics in place to begin the conversation. europeans wanted here now immediately but it ain't can happen for months and months and months. tom: our chart of the year until said otherwise, it is simple. the current account deficit of the united kingdom is interesting. if you take out investment income, you get the idea of goods and services ready flat. r weinberg has written about this and immediately a few days ago. carl weinberg, would you explain to our audience worldwide how a current account deficit can tip carlinto a free fall? weinberg: we were worried at during brexit, before brexit, and it persisted until after exit. it is about 7% of gdp and impact -- imports are so much bigger than exports. on a trade basis, and applied to exports and imports, imports take off by a much greater amount than exports. it widens the current deficit to 7% or 8% of gdp for the next quarter witches unsustainable. capital flows will be hard to attract with the current turmoil and separation from europe. stuck looking at a widening of business accounts and day possible sterling crisis. tom: you have lived these crises. what happens to fdi investment flows in the middle east? big money, sovereign money evenwide, will it stop or start flowing more into london? for a weinberg: what money? the saudis borrow in u.s. dollars. the world commodity has crashed and cost britain a pretty penny because so much of what they counted on as far as foreign inflows that cap there a economy going, if it drops and these oil-producing countries have less. those capital flows are coming down and that is part of the overall rise of sterling. carl weinberg, congratulations on your research over the last couple days. we will be talking to them in the next couple days. francine, your with adam pozen. francine: iam. , we doetable or a time not even have a plan to deal with brussels. looking at the nuances. whether angela merkel really once the u.k. out. >> francine, again, chancellor merkel is always doing the best to have a long-term view, be the a donald the room. i give for credit. for me, timetable specifically, how much is under people's control? there are people who keep saying the europeans have to understand. it will maybe take to october. the fact is, this is a huge externality of uncertainty on europe. a huge uncertainty disrupting their agenda and politics. about, ohp talking well, the britons do not want to be bullied. well, the europeans do not want to be bullied either. i am not saying it is not fast, i am just not saying it is not sustainable as is. you need to be clear about the process in saying at some point when the u.k. is ready, we will pull the article 50 a court. i think that is wrong. i think we have to be feeling -- thinking about calling a general election in the u.k. and fighting the issue of remain or stay with scotland or ireland. once you have that, you have a mandate. tom: thank you so much. at imposing with the peterson institute. coming up, michael mckeon and myself and some esteemed guest. coming up on monday, a conversation in washington with alan it greenspan. good morning. european leaders want formal leaders -- conversations to begin now. where is france when it comes to brussels. the u.k. opposition party turns on jeremy corbyn. as he fires the foreign secretary. tom: we look ahead for the morning open. convulsions or capitulation? >> a warm welcome to a special edition. bloombergin back at in new york city. we are setting up for monday. are we in for another volatile week? >> is no question about it. before we look at the market, let's look at where we stand right now. in