We have strong figures out of the u. K. Is deceptive to say that it is a sleepy august day, it is not. What i would suggest is that the various shops are staking out their autumn calls. There calls into 2017. Francine i think you are right. A lot of people are on holiday, but august is not sleepy. I agree 100 , we are never on holiday. Taylor japans exports have not fallen this much since 2009. 14 from july from a year ago. One reason is slowing Global Demand and the stronger japanese yen, its gained 20 making japanese products more expensive. Turkey has revealed how broad the crackdown was after last months attempted coup. The Prime Minister says 40,000 people were detained and 5000 are in custody. 80,000 turkish Government Employees were removed from duty. Germany says that the u. K. s future relationship with the European Union requires a custommade solution. Deputy foreign minister says that they will not be able to cherry pick the economic advantages. What is clear is the u. K. Can expect access to the Common Market that allows the Free Movement of workers. More details coming out about the north korean diplomat that has defected to south korea. The number two official at the north Korean Embassy in london arrived in seoul with his family. He defected because of his solution met with kim jonguns regime. North korea has not said anything so far. A historic night for american hurdlers. 3 in thewere 1, 2, 100meter hurdles, the first time any country swept the event. With 54, rated bridge and has 50 medals. Great britain has 50 medals. Tom equities, bonds, currencies, commodities, the yield, 155, a little bit of a grind. Interview, we are grinding oil higher out of an extreme, the vix showing a pretty good equity market. 12. 22. On brent crude sterling, 99 when i walked in. 01. 7 abenomics, sterling crisis over. 131. 60. Francine you stole my board. I forgot to bring you the inflation figure from the eurozone. This is important, because it indicates if we will become like japan are not. I know we dont have the same unemployment rate. 0. 6 year on year, as expected, 0. 29. I went to show you the yen movement to the pound. I dont know if we are in a false sense of security because datae only getting that is good, but it is related to the weather. Make an outtime to of consensus call. Hsbc with us yesterday, hsbc has been on fire with getting things right. There is their call, sterling has dropped down as the brexit, a weaker sterling, then we eb b along. They would suggest that the end of 2017 we have a stunning, weaker sterling, 1. 10. The bloomberg call is 134, the blue circle. That might come down. The zeitgeist is a 120 sterling one year outcome of the yellow circle. Hsbc goes further on current account deficits issues. This has massive ramifications if we approximate a 110 sterling. Economistwe had an that was outstanding on pound, with the figures mean. How she is the economy. I picked out oil. I thought it would be nice to talk a little bit about some of the trends. I know we dont always see all her to i bull and bear markets, eye we dont always see to eye on bull and bear markets, but i wanted to show you the trends. It is thely, definition of a bull market if it rises against 20 . On brent, it would be seen as a bull market. I was interested in this chart because it is on talk. We went through yesterday, we are expecting an opec gathering. Saudi arabia says we would like to stabilize and then the market gains for five days and adds 13. A crazy time in oil charts. Bank of America Merrill lynch , gillest is with us moec. Is it eurozone inflation, is it how the fed sees world instability . No game changer in both cases. If i look at european inflation and quarter, which is with the ecb is looking at, it has been evolving between 1. 7 and 1 since just before the ecb started qe. It doesnt change anything with actual inflation. We are in a very slow inflation situation. Moving and it seems to be repressed. There is no change. You can expect after everything the ecb has done we would start to see change. It is not happening. That makes us come both our call. We were not expecting move in september. We expect a move in december. The problem in the u. S. Right now is that hawks and doves. You could make anything you want on the data set you have. It is the dovish members that have the voting rights. Dont forget. Years f had for about one is the sense any time the balance of risk as to the onnside the fed will focus this glass halfempty situation, which makes sense in this situation where you dont have that much ammo if things turn sour, which makes sense if you dont know where fiscal policy will go in the next year. From that point of view, they are following the textbook. At the same time look at the data. We have seen wobbles, but inflation is back. It has been normalizing for a while. Theyll have to react. They have time. It was the clear. If anything was clear in the minutes, it was not feeling pressure or any emergency. Compared to where we were a year ago, every time i was in the u. S. They kept talking that debt inflation. Inflation is still not within the feds preferred region, but it has started to normalize. Tom i want to congratulate you on your latest paper. I hate it. I hate it because im forced to read it because it is so smart and interesting. You talk about flows, current account deficits, and you state in europe it is about the businesses and big money like the u. K. Account deficit. There is the u. K. Current account deficit. One call is it stays lower and wider for longer. Janet yellen doesnt have this problem . The United States is not too much worried about flows . Gilles no. Exactly. Last 10 yearsthe is that we moved to a situation where everyone in my profession was talking about global imbalances. About the u. S. Gigantic current account deficit at the time. With the u. S. Is demonstrating, and it is important, is that it can grow at close to full employment, if you accept the idea this is where we are now in the u. S. , without generating much of a currency account deficit. It is still a deficit, but a very manageable one. The source of an balance has shifted. The big source of imbalance right now is in a new area. The u. K. Presents too big of a current deficit. The u. S. , in itself, is in a fairly normal situation right now. Tom with u. S. Being in a normal situation, that implies Currency Movement by other nations. Strongat end up being a u. S. Dollar, or is the dollar removed from the discussion over the next year . Gilles it is hard to say. , what we have normally is consistent with a stronger dollar. We may discuss forever the timing of the next moves by the fed, but we cannot know the direction of the moves. Whether or not they strike this year or next year, but they will continue to normalize. It is normally consistent with a stronger dollar. In europe, we are doing the opposite. The ecb does more. All this is normally consistent with the dollar that is stronger. Tom fascinating. Gilles moec with us through the hour. Ofthe next hour, 326 pages Joseph Stiglitz. Oseph stiglitz on the euro he goes after olivier blanchard. What else would you expect from Joseph Stiglitz . This is bloomberg. Francine it is bloomberg surveillance. On Francine Lacqua in london. Tom keene in new york. Lets talk about corporates, lets get to the Bloomberg Business flash. Taylor nestle, sales grew in the first half in the slowest pace since 2009. The Worlds Largest food Company Reported a 3. 5 increase in revenue, slightly less than estimates. It is tough for nestle to raise prices because of little inflation in europe. Home prices in china are rising, cities as as many before. 55 in july versus 55 51 in july versus 55 in june. Slowing down real estate price hikes, some cities have raised down payment requirements for buyers of second homes. Brexit having an uneven impact on the housing market. Remain areas like london have seen a drop in the number of properties put up for sale and an increase in canceled transactions. Areas that voted to leave saw property listings increase, and little change in cancellation. Businessour bloomberg flash. Keeping the focus on the u. K. And the economy . Francine we certainly are. We have the brexit, we spoke to one of the german ministers. The town jumped after retail sales were unexpectedly much stronger than we thought they would be. They surged after britain voted to quit the European Union. Sterling also encouraged taurus to spend. The head on brexit coverage. On the job for 25 years as we try to figure out what brexit is trigger they will article 50. On the serious note, how much would it have to do with the u. K. Finally being stronger than we think, and how much does it have to do with it being a difficult point of data to predict . If retail sales have collapsed, we would say that is the brexit affect. It went up in july, but it is a very volatile theory. The pointmaking earlier that you have to be careful with retail sales data. Also in july in britain, we saw the sun. That pushed up barbecues. Closing did well. You have to break that out a little. You talk to economists, and they say it is better than expected, but the pain is still to come. Ro brexit will say that everything was blown up after the referendum, and things are much better. Francine when does the pain come . Do not know when article 50 will be triggered, but are we going to see a drop in the u. K. Economy, or will be on trend will we be on trend until blue until people move out . Do not see recessions, they see stagnancy, other seat recessions, a very shallow one. It is just one month since the referendum. The question for employers, do you let workers go, that would be a bigger drive for a name ointment and would for unemployment and would affect retail sales. Some time for them to make their retain his they will employees, if they will take on more staff. They will want to see the data xit, or aexit schme bigger effect on the economy. Chmexit. Ike brexit s that really defines the moment. The outlier call of 110, talking about net implied and inflation. The three or even 4 inflation from a weak sterling, how does that affect the british people . Obviously, some people are suggesting the inflation forecasted, the bank of england is already stale a couple of weeks after they have a the chart, showing that any are forecasting a 3 inflation next year. The bank of england does not see 2018. Lation until that dilemma for the central bank come they want inflation at 2 , but how do they get it . Import rice is going up will affect consumers and workers. And movement,ncy the weaker sterling goes, they require in points for money facture goods. Tom within bloomberg reporting seven ramification of brexit, do you assume a higher inflation for the length of the brexit . If brexit is two years, four years, six years, you get an aggregate 3 each year . Is that how this works . Simon it depends of the pound the kleins also. Under terms. One year is stripped out to the next year. You see that with declining oil prices. Inflation took on a different meaning when you strip out the effect. Stackeding is a inflationary environment that could last through the brexit. To those whoe fair think the brexit will have a shortterm effect, and longterm when we strike trade deals we will have a much better the bank of england thinks that is reason to worry about the outlook. Tom i like the idea of a new definition of stagflation. Simon kennedy with Brexit Schmexit coverage. Important research groups. Ryan meijer has been dead on with the linkage of Advertising Media brian wieser has been dead on with the linkage of Advertising Media. Hitting the message out. Francine i am Francine Lacqua in london, tom keene in new york. Time for the morning mustread. I picked up Something Different because i know that you like algebra. Gilbert, he wrote, the world is braced for the discovery of a fifth Central Force of nature. The 4 are electromagnetism, gravity, and strong and weak forces for the socalled standard model of particle physics. E leading the revolution purity which had a he will try to shock the system i raising rates without giving the market a heads up. Tom mark has touched upon a huge issue. I think it speaks about the exhaustion of the presentday theory. I love how british this is. When you talk about electromagnetism it has to be Michael Faraday with the statue on the river thames on the causeway. You go back to the idea, will we go back to 19th century economics, or at least preworld war ii. That means we go back to more newtonian physics in a sim bhullar, almost tree shea type analysis. The article by mark gilbert is exceptionally smart. I agree. I like that you get the feeling by reading the article that may be we are looking at the wrong things. A little bit like research, instead of looking at how you debate the best way forward, what if we were only measuring wrong . Joseph stiglitz talks about this in his own book. Inventing modern physics of dynamics equilibrium theory. To go back toing a more simpler analysis, which mark gilbert alludes to. A great essay on the need to respect the old physics. Francine physics class with professor keene. We were are so where also a professor discussing the book rethinking capitalism. This is bloomberg. [ clock ticking ] time. You only have so much. Thats why we want to make sure you wont have to wait on hold. And you wont have to guess when well turn up. Because after all we should fit into your life. Not the other way around. Everything is cool when youre watching a screen everything is awesome, when youre sharing a meme a voice remote, show me angry kings you know whats awesome . Everything apps that please, more selfies, endless hours of the best tvs brand new apps, shows to go, awesome internet thats super whoa. Everything is awesome xfinity. The future of awesome. Tom it is a beautiful hong kong extraordinary view. Years,mazing over 200 250 years, how the land as reclaimed the harbor. The land pushing out from hong kong. I believe that is the Mandarin Hotel in the left corner. I believe i said where the horizontal windows are and had a few beverages of my choice. Francine i believe you flew to hong kong just to make sure that places you are talking about are in the right places. Tom it is a spiritual bar on top of the mandarin. Spiritual. I am tom keene. Francine lacqua in london as we reminisce. With first word news, here is taylor raikes. Taylor donald trump overhauled roundtablend held a in new york. They were discussing ways to defeat radical islamic terrorism. Donald trump named steve bannon tend run his campaign. Hillary clinton said this by shakeup there is no new donald trump. In louisiana the death toll from the flooding is 13. Floodwaters damaged 30,000 homes and thousands of people are living in shelters. The British Government wants to use a sugar tax on soft drinks to fight Childhood Obesity to pay for School Sports and Healthy Breakfast clubs. Call for food and beverages to redo sugar in products most eaten by children. Arriving in beijing for her first overseas trip. The Nobel Peace Prize winner is signaling her Foreign Policy will be more friendly to china. The Obama Administration considers the changes and myanmar its biggest victory and might not be happy with the move to the chinese. For american swimmers who say point, 2 robbed at gun athletes were pulled off of their flight to the u. S. By brazilian authorities. They were released after promising to speak with investigators today. Resilient police are skeptical about their change. Another swimmer, ryan lochte, is in the u. S. He changed some of the details of his original story. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Riggs. Ylor this is bloomberg. Francine thank you. Western capitalism in crisis. Economic policy has neither reformed the Financial System or restored stable growth. We have mariana mazzucato. Gilles moec is also still with us. Your book is getting a lot of traction. A lot of the thinking which was overlooked two to three years ago is getting traction because it folds into the political arena with the brexit, with donald trump. What is wrong with what we are doing and how we are distributing . Mariana a key problem is what we are focusing on, around inflation. That we should focus on the long run. One of the problems worldwide is around Business Investment. We have not understood the role of policy in terms of creating and dodge and nestle animal spirits of creating animal spirits. Periphery wern have low Business Investment and a low level of vision in terms of where the public and private should be investing. One of should be coinvesting. One of the points in the book, and we coauthored chapters with wonderful people is we should get out of the framework or policy is fixing problems and about failures, and shaping and creating markets. Economic growth doesnt only have a rate, it has a direction. Francine the problem is you need someone who is a radical thinker and has been in a position of power as a politician or central banker that is brave enough to do it. Could it backfire . Mariana you can look at the data. Wide record. Close to 2 trillion euros in europe. We have record level financial of asian. Did notder steve jobs engage in a buyback program, but tim cook,. Companies focus on shortterm Stock Options rather than reinvesting back into areas like Human Capital formation. If you think about one of the big debates around secular stagnation and the relationship between technology and unemployment, none should be inn as inevitable problems advanced capitalism. When w