fromeak to richard haas the council on foreign relations. janet yellen rounds up the usual suspects at the fomc meeting. there will be no slack in the heated debate. good morning, everyone. this is "bloomberg surveillance." i'm tom keene. joining me, tom keene and brendan greeley. -- scarlet fu and friends in greeley. -- brendan greeley. russia across central bank bankssia's central increased its interest rates to 17%, gained, and also the game. of its gains.ll

the yen keeps strengthening. the yield on the japanese five-year fell to a record low. the yield on the 10 year rose. oil sprintedof past another milestone today. west texas intermediate fell below $55 per barrel for the first time in five years. brent crude fell below $60. oil is now down 45% this year. it may fall further. opec should not be expected to cut output while other producers cut more. -- pump more. policymakers at the federal reserve a two-day meeting. the fed's open market committee

is seeking a way out of the loosest monetary policy in a century. it is another commodity in challenge. how about orange juice? it is still the most popular fruit beverage in america. we just nondrinking at the way anita bryant told us to. tropicana has lost a third of its sales in the last decade. stunning. the popularity of diet sports drinks -- diet soda, sports drinks, and guinness. [laughter] ok. orange juice. we are going to do an extended data check. stay with us on bloomberg television and radio. u.s. equities are resilient. futures are up eight. we have seen that fading day after day.

euro turns. nymex is stunning. on to the next screen. 20.42 -- vix, 20.42. yields are lower, note prices are higher. 69.01 honorable. when they ago, applied makeup to me, i did not think we would see that. there it is. brendan greeley, help me out here. back to 2012, here is a normal 10 year. this is the mother of all flights. curve, nice tension, down we go once, down we go twice, there is the low. >> this has not caused panic in

germany the way it would in any other country. >> why not? see flight to quality, they are proud that they have the quality that one can flee to. j hear germans going ja, a, ja all the way down. [laughter] is rosetta stone. [laughter] what do you see, richard haas? >> it is stunning. it is lower oil prices, geopolitics, loss of confidence across the board and it has come together in a most interesting question. what does russia do? >> let's look at a trend based chart. this is the russian ruble weaker . this is elegant. here is the russian bank coming in. the little white line goes right

on the moving average almost perfectly. this is the failure that scarlet mentioned. this is the weaker wrubel. -- rubel. we need to go to moscow. we need to go to berlin. expect the unexpected. expect the massive intervention. that is never unexpected. todimir putin intervened protect the ruble. the people of russia will suffer. the oligarchs will survive. they will pick up and move. berlin.nichols' forget about the kremlin, forget about the oligarchs, what is it mean to the people? >> there is a sense of panic. outside ofe queues exchange booths. for most people, this brings back memories of 1998, when you

had huge devaluations and default on russia's debt. they don't see the policy actually doing anything about it. >> this is very sensitive and they don't want to put you in an uncomfortable position. what about the fragility and future of the russian banks? can you give us any reporting on what they are doing right now as they respond to a 17% yield? sectoran, the banking has been experiencing difficulties for some time now. this is one of the things that people were predicting. risking things in the banking sector. it is a bit early to say what the impact of that rate hike will be. if you talk about the economy as a whole, it is going to push the economy even deeper into recession next year. >> constant calls, -- hans nichols, what are germans

thinking about this morning? are they thinking about the loss of the russian market or geopolitically? >> pmi disappointed. it is down a little bit. perhaps more importantly, the zoo survey came in much higher than expected. it was expected to come in around 20. it came in around 34. this is a forward-looking survey. pmi is more real time. i see two stories in germany right now. when is the actual data, which is soft. but there is a bit of optimism starting to inject into the economy and i'm not sure from where that springs. >> this is important. this is governor carney trying to maintain. he is strong linkages in the core of the financial system and inis a very different place

1998. i believe the governor of the bank of england is supposed to say that. >> you have central banks in the emerging markets with a lot more currency reserves than they did in 1998. what kind of comfort is the russian leadership offering their people? what is the level of rhetoric taking place right now? >> the government has basically said that they are taking all the measures to halt the ruble declines. putin attacked speculators for driving the ruble down. he is going to beginning his annual press conference in .oday's time we expect more words of reassurance from him. >> i feel a kiam in the movie "casablanca." 101?is out of haas >> what is he doing?

does he think about playing the geopolitical card to read he could try to do the "wag the dog" scenario and a kind of distraction. will he signal some reasonableness and buildup expectation that sanctions might be eased. you begin to run out of things to do domestically. >> you said russia no longer represents anyone -- anything that appeals to anyone except ethnic russians. this putin realize this? slightlyk he has a grandiose version of what russia is and what it can do. but we are not heading for a new cold war. russia can be a spoiler. .t can be a spoiler in europe they can make things difficult in iran and north korea.

a country that is shrinking. pakistan has 50 million or 60 million more people than russia. this is not a great power, this is not a cold war redux. aboutry meyer, we talk this being divorced from reality. is that something that the russian people see through? are they aware of what is happening? they basically for the moment except his version of events. as aes the whole situation result of outside interference. he thinks the u.s. and its outside allies are deliberately targeting him and this has nothing to do with ukraine and the ultimate objective is to overthrow him. you will find that a lot of people in russia by that. , they situations worsens will start understanding that the situation is more homegrown. >> thank you so much.

hans nichols, we will speak to you in our next hour. henry mentioned that vladimir putin will be holding a state of the nation address in the next two days. can we expect any kind of movement before then? >> his instincts are to hang tough. was recently in brisbane, he went to the g 20 meeting and supposedly he was stunned by how isolated he was. this guy lives in a cocoon. approval is so important to him. expression shoot the messenger in russia is not just an expression. i think he is really isolated. tenure,eadership, his his whatever you want to call it , is that threatened by these financial moves? >> at the moment, no. his numbers are stunningly high. he is still up in the 80's.

does this begin to take its toll. we have not seen that yet. beginning tore embrace reality and a small way. shopkeepers are denominated in purchases in nominal units, which is a euphemism for the dollar. they are starting to adjust. >> it is going to cause massive inflation. it will make it impossible for them to raise money. this will have its toll, gradually. when does putin begin to adjust? >> we look at some putin market data. the oil blowing through 66 dollars, 60 seven dollars. the ramifications are stunning. >> u.s. futures are higher. coming up, boeing is the latest company to put cash on its markets. what does it say about the health of the underlying airline

business? we will discuss on "bloomberg surveillance." we are on bloomberg television. ♪

>> we welcome all of you worldwide amid the global turmoil. it is a good day to speak to howard marks. look for that at 10:00 a.m. this morning on "market makers." this is "bloomberg surveillance." i'm tom keene. major market moves on the ruble. oil is to reckless tying into the american transportation business. in the but all is well united states. after yesterday's close, boeing announced plans to buy back $12.5 billion of shares over the next few years.

they raise dividends more than what analysts anticipated. to he'ss trying investors after stocks fell 11% this year. appease investors after stocks fell 11% this year. boeing, time and again during the recovery new -- airbus and boeing are perfect bellwethers for what we are trying to figure out with the global economy. the price of oil dropping is a good thing. it affects the way people think about the future. boeing, does boeing's

, boeingr foreign policy is the iconic american exporter. >> it is one of them along with caterpillar and a few others and the question is how they will be affected by a higher dollar and by reality. >> and a new mediocre. i think we get the wrong idea sometimes when we look at how difficult it is to get a plane ticket in the united states. u.s., go outside of the there is a lot of competition in southeast asia between low-cost carriers and the legacy carriers. you are seeing a lot more price pressures on airlines. both manufacturers spend time developing huge, wide-body jumbo jets. there are only a few carriers that are willing to sustain them and think they can make money on them, emirates is one. there is a market plan for it

that is not quite there. >> there is a concern about cash outlet for a company like boeing. they delivered record margins, but they need to move it accounting wise from liability to an actual asset. that takes time. these airlines take a lot of cash to manufacture. >> tom's busy manipulating the bloomberg to figure out what is going on with the ruble. >> as we speak. i want to know why business class is so expensive. >> that is how they make money. bepeople are going to squeezed to 11 seats per row. >> it is so hard to look at the airline industry and not see airline inequality. i just did it. i drew that metaphor. >> have you been on first class where the seats completely wreak klein -- completely recline?

>> that is the only way haas travels. >> i work for a nonprofit. >> so that would be a no. [laughter] >> you wonder whether we will get under 2% in the coming days? forward toly looking the next segment. the twitter question of the day. it is an open question. mindis on janet yellen's today? i would love to be a fly on the wall at this. we are not looking at global events. mindis on janet yellen's today? futures are up six. ♪

>> we welcome all of you worldwide. breaking news on russia. level, 70n historic on dollar-ruble. it is a three-day chart. we have seen 1, 2, 3, and now for failures. -- 4 failures. we have blown through my target 10 minutes ago. this forications of the russian financial system can barely be measured. >> vladimir putin aged seven years in the last 10 minutes. >> does he impose capital controls? >> it makes me wonder whether the move by the russian central bank, if it had the opposite of its intended effect, it signals

panic. >> the knock it goes to the global economy. >> have western democracies lost their self confidence in their ability to deliver a better life for their citizens? are america and europe in and living onrd past glories? he was working off a speech saying that the only models that work are the russian and chinese models. >> you are seeing of something of what he is talking about. you are seeing right-wing parties to incredibly good. look at england. outside, angry, antiestablishment parties. there is something of a crisis of governments. >> he closes his piece with a question. what do western democracies do to prove that they are a battle

monitor -- model than a managed economy? >> we are beginning to see some signs of it in this country. we are seeing first increases in wages. we are going to have to think really hard about lifelong education. globalization. we need a new fashion definition of a safety net. >> this is according to dmitry medvedev. bloombergeyer, our moscow chief just told us, vladimir putin is scheduled to give a state of the nation address in two days to speak to the nation. now, the government will hold a meeting on financial issues. >> they will announce that the country speculators will be shot. [laughter] >> that is not funny.

they will go after anybody. which institutions help russia? which institutions helped them? this is not the job of the imf. to be theot going imf. i don't have a good answer to your question. this is such a concentrated economy. it is not clear what institution is prepared to help them. >> that is richard hoss. coming up next, the single best chart. the tone at the very top. ♪

>> good morning, everyone. breaking news. continuing linkages in the market. red box and up we go through the 70 level.

what is different now is the u.s. 10 year just gave away 2.0773. we are beginning to see linkages. the fed will be watching this. we have a single best chart. >> today is day one of the fed's today meeting. -- two day meeting. we take a look at the business survey that offers anecdotal information across the fed's many districts. there is a negative spin slow down. it has fallen to only 55 times in the last beige book report. this is the best tone we have seen since 2005. proceed withfed

bringing down inflation expectations? amateurs watch the press conference. the pros read the beige book. it is incredibly interesting. >> it shows a resilient american economy. we steal ourselves from all of these global tensions? that is the hope, right? >> that is the hope. even though the united states is less of a global economy than many others, we are less of a come a we'remy also not in. you're going to be buffeted with the energy situation. russia will have an effect. just in general, the slowing in germany, japan, china. >> the fed took enormous action in response to russian prices. it is around? -- message of the argument

domestically, the argument with it.-- would be, hold how the fed balances the domestic argument versus the international argument. timeshave said 1990 83 since the cameras turned on -- the three times since cameras turned on. are we looking at that? dothe real question is, what the russians do to regain control? they are losing control. says -- this goes back to m.i.t. -- the pendulum swings and it is swinging right now and you have to take financial losses sponsored by the government. putin has to come in and begin to bailout the financial system in order to stabilize. >> hold on. think abouting to

this as if russia is a normal country. if it were brazil, you could say things like that. a countryds to be that does not invade other countries and the state does not own the major industries. >> correction, it is not a major economy -- normal economy. what does putin do and how does he respond? >> does capital controls work? >> i don't know if they work, but very quickly, we will find out. >> i want to bring you back to the elephant in the room is that futures are up three. >> they came down a little bit. >> before the day is over, they cannot sustain it >> there is this rationalization of fear and an economy that borders on disney. >> a bad disney movie. one of the disney hall or movies.

-- horror movies. comparisons are not apt to 1998. >> russia has larger reserves, but we have not talked about venezuela, nigeria. there are a lot of countries that don't have the reserves and are so dependent on oil prices. one or another things could set things off. >> we are seeing weakness in the rupiah as well. this country is supposed to be a net winner. they are supposed to be doing everything right, but they are seeing trouble. >> this is from the royal bank of scotland saying the ruble contagion may have started in ee. we will speak to eric nielsen in our next hour. we will see what he says about the knock to the ruble. >> i wonder if congress is paying attention at all? nothing in "the

washington post." they are talking about immigration and there are articles about federal budget. >> they are patting themselves on the back for having passed something. >> the treatment of derivatives is the big conversation in washington. >> do the events we have seen in the last few days change the haass 2015 outlook? it's a fundamental for where you will be in march or july? >> it was already a crowded inbox. what we are beginning to see with falling oil prices, russia will be talking about this -- we already mentioned venezuela, china is slowing. there is a beginning sense of contagion. >> ruble is 72. we had 73, pre. there is no way to change the script. >> saudi arabia does not want to

lose market share and they want to keep the pressure on iran. said, look,om petri these are sunk costs. the midwest will continue to drill, north dakota will continue to drill, just as the english continue to drill in the north sea decades ago because they have already spent the money on the wells, they might as well keep on going. >> this is what we are seeing. we just saw the oil minister of the uae say they're going to keep producing as long as others keep producing -- of course they are talking about the american west. there is this hope we have that america is going to be fine. we are feeling the hope. >> sure, but again the idea that we can remain economically aloof from all of these issues is too good to be true. will have our full coverage of the fed meeting

tomorrow. is there a press conference? i don't even know. we have to find out. it will be the usual fed tomorrow. we will expend a considerable period. >> i will be going to read the beige book. you do what you want. [laughter] >> i have never read the beige book. why would you? mike mckee read the beige book. [laughter] >> still to come, angela stent will be joining us. this is as we look at the russian ruble collapse to a new record low. 72:31. ♪

>> breaking news, german yields. here is the red box we had earlier on the ruble. weaker ruble. a spike up. scarlet demands i move the box up. a 75.s we are not there. we are getting there. worldwide, as well. >> we are bouncing around the world. with us.ichard haass he runs the world.

he runs around the world. he has just returned from china. they are adjusting to a new economic reality. >> they follow the new norm. >> not the new normal. >> the new norm. i don't know if it is a translation problem. it is the euphemism for slower growth. even their numbers are artificial. they give massive infusions into state owned enterprises whenever they want. of the larger pattern consolidation or tightening of political power under the xi jinping. >> china has no choice but to loosen their grip in order to maintain competitiveness. on which side do you fall? >> more the former. i think they will only loosen as much as they can get away with. political authority is most

important. china has massive things that has to worry about. it cannot be export reliant nearly as much. it has tremendous questions which explains why you are seeing more flexibility on climate change and demographic challenges. china is not going to loosen up that much. certain economic benefits in order to sustain political control. china is looking more inward to inform political decisions to see a little more restraint. they agreed to park the differences to agree to disagree over the islands, that was a big deal. the rhetoric about the united states is much better. returning is doing is to the era of external restraint so they can focus on domestic challenges. we were comparing different

kinds of command economies and oligarchies. there is a huge difference between china and russia. we tend to throw them in the same pot. >> china is a diversified economy. it is a real economy. you actually have all the sectors of a modern economy. russia has a degree of concentration around energy. russia is a developing economy that has not modernized. they talked about moscow developing a high-tech area and putin would not allow it to happen, because that would mean a loss of political control. china is a much more modern, real economy. >> to what extent are they looking at the japanese yen weakening? exporter south

korea. >> you nailed it 20 minutes ago. futures turned slightly red. green down to read. -- red. just absolutely remarkable. let's look at some photos. let's diverge from market photos -- coverage and look at photos. >> this is a man paying his respects at martin place, where the siege happened yesterday. two hostages were killed. we know who it was. it is man haron monis. he had sexual assault charges, he was on bail in the murder of his ex-wife. , with that rapse sheet, how did he get access to a gun? >> a familiar conversation here, of course. >> union members clash with police in brussels.

>> is this a surprise? surprise, but it is a little bit of european reality. royale.on rue >> look at you. >> it is from a map. it is a 10 minute walk to the institution of the european union. they see what is going on as a distraction and there is very real anger in europe. this is anger at the belgian government. >> is it about the fact that they have to wait longer before they can retire? thank you scarlet fu for clearing up what they are fighting about. [laughter] here is the number one photo. this is a $30,000 iwatch. it is a watch from apple and those are diamonds. this is something we say on the

show all the time. not ais a luxury company, technology company. let's admit what is going on. >> is this available for your holiday shopping? >> do you have someone on your holiday list to wants this? [laughter] >> i totally don't get this. what do you do with an iwatch? if you start the idea that everybody has one of these, wide you need a watch? >> because you don't want to get that thing out of your pocket. i don't know. i'm not a buyer of this. >> the market is for somebody else. i are buying "frozen" this christmas. watch.ve my $90's and it is waterproof. [laughter] >> let me see that thing. >> you need a diamond bracelet to go on the swatch. [laughter] >> what is on janet yellen's

mind today? >> the 10 year is grinding down. under zero point 55. markets are on the move. stay with us. ♪

>> we welcome all of you worldwide. futures are green to red ever so slightly. ruble weakens. you know that. the german bond gives way. brendan greeley again. on the edge of japan, the german yields spikes. this is money trying to find a mattress. [laughter] under 0.60. >> germans never really freak out as a people, but at what point will they begin to freak out? i don't think we are there yet. i think a flight to quality does not bother the german mind. >> let's diverge to a stony -- stunning insider trading admission must week. an appeals court crushed a modern interpretation of what insider trading is. presidentill is the

of the cfi institute. mr. churchill is out with a global survey. first of all, what did your survey say about the economy? >> the economy is somewhat sluggish, not as strong as the world bank would say. these are not professional economies. these are economists. >> they are looking at the day-to-day tick. >> exactly. >> in your survey, do you cover ethics? >> definitely. that is the one thing that is probably the most important aspect. we are not passed the crisis. you cover the crisis with bear stearns and lehman and the concern and the restoration of trust is not there yet. 18% of the first exam is on

ethics and everybody flunks insider trading. why is it so hard to understand the squishing us of insider trading? >> i'm not sure i agree with your assessment that everybody flunks. 1, 3, 4, all of the above. tom has a habit of universalizing his own experience. [laughter] >> that may be true. [laughter] to train ethics. we try to make people comfortable with the idea of thinking about these things before they happen. insider trading, you have to make sure that people think about it now and then they realize there is a right way to do things and a not so right way to do things. we are trying to keep them on the correct side. that is what we are testing for. the reversal of the biggest on lighter trading case we saw last week, people will have to

think what constitutes insider trading. >> that is going to be a very difficult part of this. insider trading is insider trading. if you have an inappropriate amount of inciting -- inside information, it is pretty clear. it is surprising to see what the courts have done. >> thank you. thank you. the idea that you have to read insider -- the ?o we have an ethical line >> legal versus ethics. yes. >> do we have a line on the ethics of tax arbitrage? there's this idea that you can do what is legal, but should you do what is legal? focus is trying to make the that we have restoration that the investor gets a fair shake. >> thank you so much.

.e continue with richard haass we are about to get a 74 from the ruble. they have a financial meeting coming up today. >> what is that? will he go into a big room with 2000 people? that is not working. >> you will have the prime minister meet with the economic advisers. they will make some kind of announcement that the ruble is already below 74. it has gone from 69 to 74. there will be some kind of capital controls. does the government step in with the banks? >> everything is beginning to link up here. >> are we going to hear more about speculators and identify who is the one pushing the ruble weaker? >> i'm sure mr. putin will try to point to that. [laughter]

he will point to mac to nations whatchinations rather than is actually happening. >> can putin say anything that will calm the market? to fix this, he has to un-putin himself. interestought raising rates would be the strong signal to reassure the markets. that has to be something scary when you do something that dramatic and it does not gain traction. >> there is a traitor quoted that they thought the interest rate increase would give them one month of breathing room tr thatader quoted as saying they thought the interest rate increase would give them one month of breathing room. they had a couple of hours. >> we have several people we listen to. we have any number of people who

can help us on the financial side. we have three or four people. our big meeting is on the torture debate. we have a debate on that. >> very good. get over the jet lag. whether you are into international relations are not, website.ed on the cfr let me do an extended forex report. truly, it has become an historic day. the indian rupee is weaker. ruble defies any description. we do not near a 75 print with the vectors in an ugly direction. it is a 16% weakness off of the intervention news. the intervention totally fails overnight in russia. we have stronger euro in the last hour. dollar yen goes against abenomics. this is the last thing all bay

needed. the unintended consequences. you see them in the litmus paper of the global system. >> coming up in the next hour of "bloomberg surveillance," we will be joined to discuss the fed. ♪ . .

>> this is "bloomberg surveillance." >> simply -- is this 1998 again?

an historic russian intervention failed as oil cannot find a decent bed this morning. there is a fierce fight to quality. bills, bonds, as we say they are bid to perfection, you will love your negative yield. espressoping a triple in the silo known as silicon valley. good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. it is tuesday, december 16. i am tom keene. joining me scarlet fu and brendan greeley. too much to talk about with ruble $2.75. here are the top headlines. >> russia's central bank try to come to the rescue last night but it was not enough. it plunged after strengthening overnight. the bank of russia an increased to 17%. that did send the ruble up as much as 17% full stop it could

not hold on to that strength. for the first time ever, the ruble has been trading at about $75.84. i am looking at the live bloomberg quote. the ruble has lost 45% in value versus the dollar. meantime, the yen keeps strengthening. the and has gained almost a full percentage point as the yield on the japanese five-year falls to the record low. in germany, the yield rose for the first time in more than a week. than expectedher for december. another report showed emi disappointed. >> the price of oil sprinted passed another milestone today and kept going. west texas intermediate fell below $55 a barrel and for the first time in more than 5 -- is $34.

is $54.s down -- it >> oil is down. opec should not be expected to cut output while other producers pump more. the policymakers at the federal reserve began a two-day meeting today full stop congress as they will drop their pledge to keep interest rates near 04 and "considerable time." the fed's open market committee is looking for a way out of the loosest monetary policy in a century. that it willed keep its language. >> how about orange juice? we do not talk about it much, but it is our most popular fruit beverage. we are not dragging it like we used to. in an juice conjunction 18-year low. of their unit 1/3 sales. blame the increased popularity -- diet sodas, sport strings,

guinness, drambui, they are all in there. hour data check this morning. we will not. equities were resilient and till an hour ago. , dow futures -65. yield 2.03% full stop you wonder if we will breach 2% this morning as we mentioned crudes from $54 to a $53.91 as well as up i just put this out on bloomberg radio plus for our radio audience worldwide, and it is nothing more than the russian ruble 70 five dollars, 15% or so, just continued devaluation. >> you started the "surveillance " program with the box around russian ruble at $68, that have gone past the $270, $72, now $75. >> we do not talk about this in

real-time the way we are doing right now. >> for those of you on bloomberg radio plus, whether you are in boston, new york, san francisco. let's go to berlin and moscow quickly before we get to michael cloherty on these moving markets. hans nichols in berlin. hans, you studied this at lse. all of a sudden, markets are in freefall. how would you suggest chancellor merkel will adapt to such turbulence? take itill step-by-step. if there is one thing we have learned about chancellor merkel over the last 10, 11 years is that she is an incremental politician, so all of her responses will be muted. don't look for anything dramatic from her. look for her to keep up the pressure on russia. about theer to talk need to balance books in europe. >> but this turmoil -- isn't it an opportunity for the bundesbank to save face and allow mario draghi to stimulate given low rates and what the

ruble is doing? >> if you ask any member of the bundesbank, tom, they will say it is a chance to validate their approach. this is not about saving face. just a minute ago, the president of the bundesbank talked about his queasiness with quantitative easing. there has been no movement on german policy makers. governing council seems to think that they can go ahead and do qe without bringing the germans along. that is the big shift. the germans are not moving. >> henry, as we monitor the ruble weakening from six to five $70, can you5 to tell us more about what might come out of that, what is expected going into that? well, i mean, of course, as you have pointed out, the rate hike yesterday has been a total failure, and they are trying to look at their options now. the ruble is continuing to plunge further, 25% in two days,

which is producing panic among the population, so they have got to look for some other ways to try and restore confidence. gallows, is there a humor about the drop in the ruble right now among russians? i think when things get that bad, you can either just sort of laugh about it or cry. of them arelot really feeling very, very concerned about their savings just about rating. >> hans nichols in berlin, we have been watching all morning long the flight to quality for the german 10-year bund. as a bado not see that thing. they see that as -- wow, we have got quality. >> look at interest rates that are so remarkably low in germany this year, but the amount of home mortgages that were actually given out in the first 10 months of the year, it is down this year from last year. it is not like germans see all

this cheap money and want to remodel their kitchen. it is just a fundamentally different approach over here. i know tom would remodel his kitchen. he put on the deck andy jacuzzi, but the germans keep saving. . >> ons nichols, thank you so much in berlin, and henry meyer in moscow as well. nation on ours sovereign debt, on our full faith and credit date, rbcael cloherty lands at capital. you and i have seen this before. what is a sub 2% yield do to janet yellen's discussion at the fed? if we go to 2%, this is a fed that has to change its script. >> i do not think the fed will change them i think the markets will get very nervous and maybe extending move a little bit further, but the fed has been working for a long time on moving back to where they can remove some of the extreme measures they put in place. >> how can they do that we have

a german yield -- brendan, help me out here -- that looks like tokyo with .0132. you cannot tell me even a little sentence in the statement of this turmoil? remove thethey will considerable language. they will make it clear that they are going to move very gradually when we start to move toward tightening. i think they will in the minutes, we will hear a lot more about the overseas issues. >> brendan, the ruble $76, and we just had a 2.00 print on 10-year as well. >> is it fair to say that the th u.s. has the last truly diverse economy where we are actually buying our own stuff? >> as u.s. growth continues or reeling to what is going on in europe and elsewhere, we think we can continue this divergence. people look back over the past 10 years and the economies have looked very closely together. that is because we had a very big shocks in history, the two

crises. when you get a crisis of that size, yes, things move together. going forward, there will be a greater divergence will stop the u.s. will continue to not grow great but move along solidly, even though europe will remain weak. from morning must-read is bill blaine, and he talks about how oil has been a catalyst for all of this volatility that we are seeing across financial markets. he questions -- yeah, sure, it is the catalyst, but of what? fearful mode.in we hear a lot of comparisons from 1998. are those valid comparisons? 1998 is different. the leverage in the system is different. back then, behold crisis, you had russia go down, you had extreme positions, and that spilled things much further. >> what do you see in the short-term paper market in your space? we used to look at libor -- i do not even know what we look at anymore.

>> we look at the ruble. we used to these look at because central bank have added so much liquidity, they are not as useful. now we look at overall term yields, we look at what the 10-year is doing -- >> what do you see right now? >> again we are in extreme stress. >> jamie dimon knows that, brian moynihan knows that, you are going to sell me janet yellen does not know something about this?: >> the last him a talk by international issues was in the minutes, not the statement. >> michael cloherty with us for the hour. >> coming up on "bloomberg surveillance," angela sent will join us, the director for the center of eurasian studies at georgetown. ♪

>> good morning, everyone. where to start? the ruble implodes, $79 on the ruble, the u.s. 10-year comes in at 2.03% full stop eric nielsen joins us optimist and quickly right now. which institutions in europe can help vladimir putin? >> oh, that is a good question. it is for him to help himself, really, right?

it is two different problems. we have the sanctions and now we have the oil already, but it is up to europe really to push oil prices up higher. k, eastern european countries have the most problems, they sell apples to russia. >> yeah. the real story for the eastern europeans is actually western europe because their trade is so much bigger with germany and western europe and with russia, so what you saw a earlier this year with the impact of central europe came via the russians to germany for consumer confidence, business confidence, and then it hit back to central europe, right, so it is politically nerve-racking for the baltics and for poland, but in the economic impact, if western europe does ok, then they will be fine in spite of russia. x one of the things we've seen

in a stern europe is the central bank of poland is dropping, and the others feel compelled to follow. is that a trend you see continuing now? >> yes, and they were cushioned a bit this year by increasing domestic demand as exports dropped with russia and germany not doing as well as people thought, but that domestic demand cannot quite hold up, so we see central european growth drop from a little bit over 3% this year to a bit below 3% next year, so central bank's will react a bit to that. >> i want to bring you back to russia because prime minister megadeth -- because prime says what isedev going to keep it from collapsing to $80, $90, or $100? >> i do not know. it is a serious question for them. they have a fundamental distrust in their own banking system, and you see domestics leaving the

ruble for dollars was up this is what drives you weaker, not foreign speculation, the russians losing faith. >> erik nielsen, thank you so much with the markets on the move. stay with us. we will speak to one of america's true experts on the politics with vladimir putin facing domestically next. angela stent of georgetown. stay with us. it is "bloomberg surveillance." ♪

good morning, everyone. breaking news -- we continue to look at the markets. not dollar ruble, euro ruble. i just put this out on bloomberg radio plus. euro ruble one went up to $100 and hit a brick wall. >> very close, $99.56. >> maybe that is called intervention. >> michael cloherty,

psychological barriers are important. how much does psychology play mulling currency markets? >> more than anything else. currency market tends to dominate everything, so i think we will try to hold at that level, and we will see -- >> you make a stand full stop it is like a battle. futures -13, dell futures -92 now. >> do you have a beat on how long they will continue to gain? everyone is guessing how much currency in reserves they can use to play a role in this market. >> they can still intervene for a longtime. they have a massive amount of dollar reserves they can use for a long time. they will operate in swaps. that only works as long as you have a lot more reserves outstanding on a swaps. >> let's translate that as we look to the fed, scarlet. we go to the derivatives market and find derivative instruments to replace actual moving of money. some people like me think they have gold bars on wagons.

, julie christie looks good on the window when they did that. >> they moved on. five policymakers will meet today to discuss. our guest host, michael cloherty, is that rbc capital markets. will say low even as the collapse of oil rigs habit across the -- wreaks havoc across the market. >> the fed has spelled out that because of won a seat of easing, they put so many reserves in the banking system, the traditional way of tightening, which is to remove some reserves, there are just too many for them to reserve them all. now they are going to use interest on reserves, raise that rate to 25 right now, it will go up to 50, they will use the reverse rp facility to try to do the funds to help the banks. >> to try, to hope. >> right. >> there are lots of intentions. what did the fed learned from

october 15, the volatility that we saw? >> that is a reason we think the fed has to move earlier. the fed can either wait until we actually see inflation and then tighten really hard and really fast to catch up at that point, or they can move earlier and gradually. fed even talks about tightening hard in the future, you will get egg market sentiment swings. october 15 with the data we had a softer report, the 10-year moveswhich normally 45 basis points, rallied and then sold off 30 in the next hour. these markets are too fragile to handle big sentiment swings, so the fed has to be a lot more gentle. >> but brendan, this is the heart of "surveillance." cloherty and others are saying they will go earlier, the consensus is whatever, and others totally disagree with michael and say -- >> i have a third question i want to go back to. the u.s. economy seems to

levitate on its own right now. what news from abroad would cause you to change your opinion and say ok, maybe the fed will pay attention to this? >> that is the heart of the matter. >> the direct trade linkage with europe is not that strong, so europe is about 10% of our exports, our exports about 10% of our economy, so not that huge right there. the financial linkages more than anything else. those linkages -- back in the peak, in 2008, that had immediate and huge spillover. because markets are confident that central bank's will provide liquidity and funding some of these large financial institutions, you have weakened the fear spillover from europe to the u.s. > >> it has been 16 years, do you think investors are smarter among different sharing among emerging markets and they will not just do a massive selloff of everything because it is all the same at all scary? arerc indifferent -- you

seeing a different than we ever had. unfortunately, the allocation lump things together. poland and brazil are wildly different stories. >> that may be, but futures -15, dow futures net of 105. everybody rationalizes. if you are just joining, $76 euro to rounded up, $78, excuse me. >> michael cloherty, we talked about how there have been so many changes since the fed changes or straits in 2004. what can janet do besides focusing on communication? >> that will be their big problem, driving a bid blind. you have so many regulatory changes exchanging market structure. before the fed knew if we moved to troy five basis points, we knew what economic effect it would have, we knew how the

players would react. now there is a lot of uncertainty. this is one of the reasons we think they start earlier and go gradually. they try to test the new world by moving rates in a few hundredth of a percent. that is not a real task. you have got to move a few times. you will get more experience. for the first few tightening is, you will only go 25 basis points, slowly bleed your way out, then they will know a little more when they needed tool. it is 7:20,know which means jennie allen getting out of the gym and turning on "surveillance." yellen is getting out of the gym and turning on "surveillance." what do you tell her? >> i would suggest a two-year note has to get their attention, it has to. >> one of the things is market liquidity is not what it used to be, so it is a little harder for

them to look just at this market signals and know exactly what they need. >> thank you so much for tearing yourself away from the rbc capital markets desk. >> michael cloherty. outward quest of the day -- what is on janet yellen's mind today? tweet us @bsurveillance. ♪

>> we welcome all of you worldwide. markets truly on the move today. this is "bloomberg surveillance." we are looking across the bloomberg terminal at equities, bonds, currencies, commodities. let me pick on the u.s. equity markets -- up four earlier, now -17, dow futures -122.

here are top headlines. >> police and city have stepped-up security in the aftermath of a 16-hour siege that left two hostages and one man dead. {at thee, residents pedestrian mall where the deadly standoff took place. talibanfficial said a attack at a school killed 100 for a six people. many victims are students, children, and teenagers. ae violence began with about half dozen taliban gunmen entering the school. it is the worst violence in pakistan and more than a year. and a six-year prison term for a former bernie made off lieutenant. madoff lieutenant. thanentence was much less prosecutors had sought. it cost investors and $17.5 billion. downent crude in europe

two dollars >> right now. we're watching the ruble, we are watching the german bund. this is turning "bloomberg surveillance" into a tickertape. one place alone suspends the laws of economics. northern california -- of the actual happy valley. [laughter] general partner at spark capital is channeling the money to keep the valley levitated. moe, does anyone a watch what is happening in the world? does it matter at all? >> 100%. i think it is very watching -- anybody smart is watching what is happening in the world. the reality is it has effected the european and asian countries more so than the u.s.. the price of oil falling helps our country on a unique spaces and a sort of declining power, some other folks in the region

helps us as well, so i think people are cautious but still optimistic right now. i think it affects, you know, the sense that people are really looking at closely is just the sheer amount of money being spent by early-stage companies that are not yet profitable, and you have to understand when the bottom can come out, when they are doing that. >> what places are you watching specifically ech/ ? in silicon valley, are you looking at the environment in london, competitors and china -- where specifically? >> i think the environment in silicon valley is pretty immune from most things. i think the amount coming out of the u.s. will continue to pace -- i think there is a certain optimism inherent in venture capital, and technology. >> does the pace pick up when there is this much troy -- this

much turmoil, does it slow down? continue to invest in up and down cycles. obviously goes up more and goes down more during times of uncertainty. >> not that we are going to make a stop call on "surveillance," but one thing we see in your world is everything extrapolates. price minute industries comes out with a new zinger, they put in money and accept late out the value. is that a fair process? process --dangerous >> thank you! arguably fair one. we have seen skyhigh valuations for private companies, some of which will earn their way into those valuations or are earning their way, and many which will not, so i think that is where smart money has to be looking right now or where are the places you actually want to make a bet and where the place is getting swept away by market since. -- by market sense.

>> you want to excel soon after execution, but one is the cost of labor, when it is coming from abroad. coding in ukraine, coding and india. >> we do not want to necessarily sell one markets get hot. we want to invest in lasting and enduring companies that can persist and sell when the market is hot or take those companies public when the market is hot, but not as a strategy, as and ed goal. the labored side, we have not been playing the labor arbitrage game very heavily. the cost of labor has come down in the u.s. these a be some of the other economies over time, so more and more companies, the best company's being built in this country are being built with domestic. >> scarlet, we need a data check. >> i want to start with some

breaking news here because cbs help just came out with a new share buyback program. $10 billion share buyback program. it is also raising its dividend as well. if you look at futures, still negative as we head into the open. >> good morning, everyone. "bloomberg surveillance." the ruble weekends, we have in watching that. thank you for being with us on radio and television full stop angela stent joins us, the director of the center for eurasian, russian, and eastern european studies at georgetown. away from the markets, away from four-digit analysis, angela stent on putin. professor stent, what will vladimir putin do this morning and this afternoon in moscow? >> well, i think he is going to scramble to try to save the economy from going into more of a tailspin. growth rates are now projected sobe -4 by next year maybe, they need to do some a to try to

stop the ruble's slide, and there is not too much they can do about oil prices, but they have to do whatever they can because it looks like -- you know i heard your guest before -- we are looking into something mel is a little like 1998. to bailmf is not point them out. we think that is a safe assumption. do we assume that when we move back to a fixed currency rate where it is a massive regime change linking their politics to their finance? >> well, i think one of the ways that they could do something maybe to stop this implosion, if you like, is to change their stance, for instance, on issues like ukraine, to stop buzzing airplanes, you know, in the baltic. they could take some steps at least two calm the outside world's fears on what they have been doing next because they have been behaving in a pretty predictable way politically. any to do some and to assure the rest of the world that they are

willing to step down from some of these aggressive actions they have been taking. >> vladimir putin have a bad habit of doing exactly not what we think is in his best interest. [laughter] does any part of you worry that the response to this we more violent than actual war somewhere? not, but i think -- the thing is he has built up the sentiment in russia, blaming the west for everything that is happening. we are responsible for the economic catastrophe there because we want to destroy russia. are statem is if you media telling your population this all the time, then that can become a pretext to do something more aggressive. hopefully calmer heads will prevail. consolatoryade some comments about the need to come to a settlement in the ukraine, but we are in a situation where there is an element of on printed ability that makes everyone kind of hold their -- nprotect ability that

makes every one kind of hold their breath. >> professor, who or what institution within the international community has leverage over mr. putin right now? >> that is a great question, and i am not sure that there is any institution that has any leverage over mr. putin because i think russia is now moving in a much more isolationist direction. you could say the united nations, but that is not going to help with the crit issues, so i think that is one of the problems. that is the danger of pushing russian to further isolation. >> professor, thank you so much, angela stent from georgetown. you see, brendan, you wonder what the response can be from any government, germany or the united states, to assist the russian people. i think we are putting a lot on the shoulders of angela merkel. we are assuming she is a lifeline to him and she can fix this. the other thing we are not paying attention to is we see russian stock indexes also slumping.

companies are heavily indebted abroad. they took out a lot of debt in the last two years, and that is the other shoe waiting to drop today. >> they are having a bear market in russia, down 19% in one day. >> is it a bear market or a collapse? >> it is a collapse. collapse is the appropriate word to use. >> what would be the benefit of imposing capital controls right now besides stopping the bleeding? >> the historic reality that that is always the solution to move from floating exchange to fixed and working through the domestic society. the streets.in >> every new action signals not determination to fix it, but -- morning must-read. brendan, i want you to comment on this, always rude and direct, no question about this, scarlet, as you mentioned, looking towards fixed rates as well. the idea here of moving from floating again to fixed rates will step we will get that

appear in a bed. bring inme, we want to our twitter question to link what is happening overseas and russia into what the federal reserve is considering. what is on janet yellen's mind today? they kickoff day one of the two-day meeting. tweet us. ♪

>> a tumultuous day, we get a

sigh of relief with the u.s. 10-year yield bouncing up 2%. we did not break through the shilling level. we came down 2%. >> which is why we are free and gary shilling right now, joining us by phone, gary, investors seem to be in panic mode. at what point does the federal reserve technology what we are seeing, the russian to the german bund -- the rush into the german bund. >> i would think they have to their mandate is domestic price stability and full employment, but they should pay attention to what goes on and the rest of the world as it affects the u.s. i think this makes it even more clear that they will not do anything in the next two days. tote scary, we will throw the same question we have been asking everyone -- how much longer can the u.s. economy levitate on its own? >> the u.s. economy is

relatively domestic. only 13.5% exports to gdp ratio, thean, everybody else in g-7 is higher than that. it is not goods and services. it is not the financial structure. oil prices are great for consumers. that is wonderful. then why are stocks going down? because it is the financial side. this is her money me of what happened in the 1990's, the collapse in asia, another case where you had a lot of liquidity out there and then the plug got pulled. >> gary, you have written for decades about this idea of a drive to lower yields. again, it is always unexpected. the summit is russia and the collapse of oil. does that mask or obscure your theory about the deleveraging? >> it is simply a trigger mechanism. -- there reports of

course of true love is never in a straight line, these things are in fits and starts, and it triggers along the way -- in this case russia. the whole point is you are having deleveraging, we are moving 2-d flechette, we are moving to lower rates. de-leveraging, we are moving to deflation. ignore, microeconomics finances. you say finance is really important. have we had enough time since our last crisis in 2007 to figure out the linkages and allow for them? >> that is a good question. i do not think so because we had this unprecedented qe -- ironically, it started in japan, and of course the bank of england, the fact, the ecb is

creeping toward it, but it is relatively new. yes, they have not really figured it out, but the financial side, particularly when you get all of these developing countries that gorge in capital that is being pumped up by the fed and other central banks. >> gary shilling, thank you so much. the words of gary shilling -- "rallying the markets." >> we have seen futures come off their lows will stop our twitter question of the day -- what is on janet yellen's mind today? tweet us. ♪

>> good morning, everyone. 'tis the holiday season, which means in new york city, you must speak with barbara corker. -- barbara corcoran. of course getting a little sharky as well. this is "bloomberg surveillance." what a day in the markets. also important top headlines. here is scarlet fu. >> intercontinental hotels is acquiring a boutique chain with high end properties will stop it is buying kempton hotels and restaurants for $430 million. it is the biggest boutique operator and restaurant company in the u.s. this deal will allow intercontinental to expand its business at the higher end. a major purchase for spain's

biggest energy company, rexall agrees to buy an energy company, which ins a monthlong search to boost crude and production. shareholders will get eight dollars under each share that they are in. and office rental company we now valued at almost $5 billion according to the "wall street journal." the company's previous funding round generated almost $79. officeprovides a shared space largely to startups. >> sometimes you get lucky. [laughter] our guest this morning is very cool. ago, he immigrated from the soviet union to the united states, the generation that left when he leaving was good. in 1977, 3 years after that, his first son was born, mo koyfman.

russian you talk about with your family, how do they see putin? if he another in a long line of russian investments -- of russian despots? >> yes, actually, it is a horse of a different color, but it is still a horse. my dad left the soviet union because it was entirely restricting on what he could do there, and he was just yearning for more, a free and open environments, and i think what you are seeing now with putin is just a return to that kind of despotic leadership, just in a little bit of a different flavor. >> does your father ever have a moment of hope in the 80's -- in the 1980's with gorbachev, thinking ok, maybe it will become a normal country? no, my dad was 35 when he came to this country, a couple years younger than me. he did not speak a world of english, not a penny in his pocket, and he started over.

he marks left on him were so -- were so ingrained that he had a hard time believing that country could ever change will stop i believe there was a glimmer and i remember marching with a mini rallies and doing the whole thing here, but in his heart of hearts, i do not think he can see russia for anything other than -- ofwhat about the new wave russian immigrants into new york nation? across this how are they different than your father and how will they respond to the collapse of russia we see ongoing? >> i think they have more of a love of money. i think they have witnessed opulence in their country in a way that my father never really saw. he saw power, he saw strength, he saw, you know, what it meant to be on high and what it meant to be on low. >> it was a little more arthur kessler, one of the most moving books i ever read. >> yes, you did not see the opulence and all are kirk coulter that has precipitated the last decade. >> do you proceed the oligarchs

are in support of putin? >> mr. putin makes the oligarchs a lot of money, so they are as conflicted as you can get. most of them who are smarter have taken the money out of the country. >> hopefully they are investing in you and come full circle. >> many of them are investing in a text circle now. money comes to where it wants to go. >> what about russian talent? are they leaving russia intros? something like -- >> that is an interesting question. there are so many in silicon valley fighting for immigration reform in this country because there are tremendously talented engineers and other folks in russia today and other european countries, other eastern european countries and beyond, that would love an opportunity to come here and are not getting that opportunity. that i think would be something not just -- it would be terrific

for our economy and terrific for them as individuals. , russia can continue to do itself they do service. we should take their breast and their brightest while -- we should take their best and brightest while we have the opportunity. to london and buying soccer teams, drying up the cost of living in cities in really nice, livable cities all over -- can that generation of oligarchs, can they ever go back? controls areital to be imposed, can they give up the good life they had in europe? >> i do not see how that is possible. just having witnessed firsthand, i will tell you my father -- i was in my mid-20's when i went back to russia with him for the first time. he had only been one other time to try to get his nephew out of there, which he alternately did. there was just a certain -- he was done with it. it is a little bit different for folks that have made a lot of that money on the back of that country, but i think it is hard to go back once you have tasted

the good life. >> mo, this has been incredibly good to hear from you, the personal life -- >> we can talk all we want to talk about rubles, but this was a row point on it. let's get to the agenda. tom, you get us started. >> look at the market tou urmoil. i am watching for someone to blink. it always happens, we have seen this, remember bearings came out of nowhere? a world away in another time, or barclays and the british banks, rbs, and lloyd. >> i remember when everyone was trying to swing what was happening in northern iraq. >> i would watch the russian banks and eastern european banks. that is my agenda -- watch the banks. >> i am looking at the yield on the german 10-year old -- >> stunning. .575. >> at what point do german think differently

and start to see a risk to their own economy. what we heard from hans nichols today is never. >> a validation, a celebration. >> we are quality! mo is shaking his head. >> as much as you want people to change, it is very hard to get people and cultures to change. >> we look at the u.s. 10-year as a statement on our strengths. now. right >> at least this country was built on the foundations of democracy, investment, opportunity -- >> are you running for office? [laughter] >> as much as i have issues with this country, i fundamentally believe in it to my core, and i think that comes from my dad, and it is why i think we are able to persist in our own little bubble right now because we have the supply, we have the demand, we have the input, we have the output, and we have largely been resilient. >> it is amazing to hear you talk, and the best of the way

you speak like a son of an immigrant. when you come to this country, you think a different way. >> by the way, the best alternate wears -- the best bester newer's -- the entrepreneurs in silicon valley have been children of immigrants. >> the headline in the "washington post" -- dual pressure on immigrations does not go away. >> the fed will be holding a press conference tomorrow at 2:30 p.m. we will see what janet yellen has to say if anything about the volatility we are experiencing right now, the collapse in oil prices, the plunge in the ruble's value against the dollar. that brings us to our twitter quest of the day -- what is on janet yellen's mind today? >> huge response. thinking of how to manipulate long-term yield curves. >> i thought that is what she has been doing the whole time! -- i docannot do that not agree with that. next answer -- how the

economy is beginning to heal not because of the fed but because of opec's fall. opec is taking its hands await saying let the market decide. >> the glass is half full, and it is. there is really optimism here. >> there has been a lot of conversation about how the american economy was not about fund medals but about fracking. >> finally -- the words patients versus considerable time. expectr, economistz them to drop thats term -- remember, economists expect them to drop that term. >> to review through the morning, folks, when we were putting the show together this morning, thanks to our routine that really blew up the show at 3:30 and 4:00 a.m. -- this morning, green on the screen, negative 20 ond, futures, and now we are back to -14 on futures. >> it was a very volatile day yesterday, the s&p 500 had its biggest one-day swing since

october -- 36 points will stop mo koyfman, thank you so much, and thank you for the personal tale as well. "bloomberg surveillance" on radio continues, "in the loop" with betty liu on television. ♪

>> good morning. it is tuesday, december 16, and we are live from bloomberg world headquarters. i amre "in the loop" and betty liu. we seeing massive moves in the

global currency market. the fed kicks off its two-day meeting. the ruble down to 80 a dollar, record. global stocks are plunging. euro stocks down 1.5%. the nikkei was off to present. futures are also headed for another day of losses. president of the eurasia group, joining us in just a moment with why he says what is happening in russia is a geopolitical situation. it is less about the economy and the markets. interviewlusive with the wendy's ceo. it extends overseas and why it in theing mcdonald's united states. the russian ruble on a wild ride. it fell 23% against the dollar before bouncing back. the latest opponents began last night when