>> we are moments away from the closing bell. global stocks are free. the steepest drop in a month. >> what did you miss? the great devaluation. more losers than winners. what is in play? experts go head-to-head. >> who is getting a raise, who

isn't? liquidityk wil conundrum. with the financial markets. if you want to get technical, the biggest drop in five weeks. we have a pretty broad retreat here. the dow resuming its decline. that leads to questions over growth and inflation. >> this morning the story was china devaluing the you win. we saw fallout all over the place.

commodities were slammed. an ugly day for european minors. an ugly day all the way around. scarlett: we did get some news. it wasn't all an ugly day. the small business optimism survey. they asked small business people questions about the state of business. this is the businesses that say they are giving workers higher wages. it is going. not as high as it was but there is monthly noise. the averageine is hourly earnings growth. that hasn't changed. the hope is the lines will converge. >> normalization.

you have to like that. scarlet fu: i want to look at the chinese yen. going back three and a half years. one. non-deliverable , in this case a rate that is 12 years down the road, shot up. five percent for a appreciation in the weeks ahead. john: this -- mark: the story isn't over. the market views there is more to go. tool thatbe the next china uses?

you are debating on twitter last night about chinese currency. and whether china should undo the bag. peg was moved. one of the most amazing timings. >> i was about ready to call it a night. i had been concerned that china devalue. to i thought that would be a mistake. mark: you have been arguing the fed may be to blame. that is hurting the economy. can you explain this?

>> they paid to the dollar. over the past year the fed has been signaling rate hikes imminent. that has been priced into the markets already. conditions have been tightened. you see that in the trade valuations. all of that is getting exported back into china. is burning through reserves and becomes too costly to do that. is bringing in tighter monetary policy creating a drag on the domestic economy. it is trying to tinker with the interest rate. cut interests rates four times. all of those things tend to put pressure on currency. it is monetary easing. china has been committing to

protecting the pad. china is have realized burning through reserves. they have had negative growth. at some point they are going to have to do you value. over $800 million have left china. that it isstory costing china. china is trying to do a lot at once. what does it do in terms of reversing slowing real growth? patrick: they are treating china as if it were a deficit, debtor country where its output -- it's consumption was dependent on its output. example, greece, when its output falters, it can consume.

china is in the opposite position. it is a surplus country. it is a creditor country. they can afford to consume more than they produce. this burning through of the reserves is actually unlocking net demand, which is precisely what the global economy needs. this is what rebalancing looks like. it looks very contractionary on the outside of the chinese economy, but what we should care about, how the chinese economy influence the -- influences the global economy, is demand. this process other people are worried about, i see as part of the necessary adjustment to a more sustainable global economy. scarlet: how do you measure that? do you look at first and second tier cities? patrick: part of the problem is china has had a lot of inflation. it mainly went into asset inflation.

part of the corrections we are seeing in the stock market, in the housing market in china, are essentially this inflationary bubble deleveraging and collapsing. but again, this is part of an adjustment china needs to move away from investment and export driven growth, more toward consumption driven growth. joe: david, if a big problem for the chinese economy is the linkage to the dollar and being at the mercy of the fed, is this cut enough, or will we have to see more? david: i feel like we will have to see more. the real exchange rate is up 1.8%. i think there will be more to come. this is maybe a signal is happening. if i can respond to patrick, i think this is more than rebalancing. you can have rebalancing in the economy without tightening and

recession. if you look at the timing and the intensification of it, it closely matches the tightening of monetary conditions in the u.s. the pure monetary economics is a reduction of domestic demand from a tightening of monetary conditions, and it is a china -- it is a choice china is making at their own peril. joe: do you want to respond? david: i think this idea that the fed is the tale that where the china dog is overdone. china has currency be serializing that has actually made chinese monetary policy fairly independent. it only in china would 12, 13 percent year on year credit expansion be considered tight money. that is a reflection of china's dependence, overdependence, addiction to credit expansion, and that is exactly what -- that is actually what china needs to move away from. i do agree there is more to come. this move will not be sufficient

to revive the chinese economy. what it is going to do, it will cause capital outflows from china. that will put even more downward pressure on the currency and make it even harder for the poc. i think that is a bad thing for the global economy, if you see china joining this race for the bottom. betty: you can see the chart right there of the quarterly china outflows. david: ultimately, you have to move to a convertible currency. full of her double. there is no simple freebie to get you to the end game. they will have to incur costs. keep in mind, a have been playing this game.

they have been trying to do too much. they have been trying to make a pay. they have an having to pay for it. i do think though, this concern about china creating this shock around the world is overstated. first is, my sense is they will revive it again. if my sense is true that the slowdown has been tied to the fed's tightening, if you can unleash that choke -- and again, it has only been 2%, which is not that much -- if it continues on that path and there is an easing in china, maybe we will see commodity prices come back. right now there is a choke on china through its way. -- through its peg. people are concerned about deflationary plays through this move. i think there is already a deflationary play going on. this also presumes the other

central banks will not respond and i find that hard to believe. they may delay the rate cut. who knows, maybe qe4 may be in the works? joe: all right, david, patrick. scarlet: all right, which country has the worst of both worlds? the answer in hr q you can't miss, after the break. ♪

scarlet: i am scarlet fu. joe: i am joe weisenthal. "what'd you miss?" check out this chart. a declining gold and gold accounts for 70% of venezuela's reserve and it adds to the fact that some much of venezuela's income comes from oil.

in ugly problem. scarlet: and they use a six-month moving average -- joe: it has not caught up yet. scarlet: is not reflected in official stats. mcdonald's plans to shrink by 59 locations in the u.s. as it cuts costs and tries to revive sales. it plans to close 184 restaurants and open 125 new ones. they had more than 14,000 domestic locations as of last year. they have scenes game store sales -- they have seen same-store sales drop for seven straight quarters. joe: the combined airline says that traffic rose by a percent. the lower average fares are expected to her revenue. scarlet: and geno smith will be sidelined six to 10 weeks after being punched in the jaw by a teammate.

he was "sucker punched" by his teammate linebacker. this could mean that ryan fitzpatrick will assume the starting job. joe: i don't follow football that much, but i know the jets are always not doing -- yeah. all right, david beckworth and patrick are still with us. david, you set the one thing that keeps you up at night is another eurozone cries this. -- crisis. why would that happen? david: i'm not convinced they have resolved the fundamental problem with the eurozone. it is a currency union designed with a flop. a one size fits all monetary policy for different countries. you can see that they set this with the growth of the different countries and you see that in the taylor roll on your screen there.

during the boom years, the policy is way too easy. i do not see how that will be resolved. it will continue to have monetary policy that is simply not appropriate, that will fuel boom-bust cycles. there are not the transfers, the shock absorbent it means. i lie awake at night waiting for the next eurozone breakout to occur. scarlet: are you looking at the eurozone as the next nightmare? patrick: david and i share a lot of the same nightmares. it is not appropriate to have the same currency for these different countries that need different medications. germany needs a stronger economy, much like china, i would add. you have other countries along the periphery that need a weaker currency, and because they are locked in this currency embrace,

there is no other way, other than fiscal policy, to resolve these internal imbalances. so, the only possible alternative is for them to try to export this imbalance. the way they export this imbalances by engaging in qe, devaluing the euro, and essentially exporting that imbalance to the united states to read and we have seen a growing trade deficit with europe as one of the major headwinds to u.s. growth. joe: all right, david, patrick, thank you so much for being here. scarlet: everyone is counting on the u.s. consumer at the end. which of the world's richest men has lost $7 billion just because of the collapse in gold prices? that coming up. ♪

scarlet: i am scarlet fu. joe: i am joe weisenthal. "what'd you miss?" scarlet: one of the world's richest men has lost money because of the drop in gold. joe: it is carlos slim. the miners have gotten obliterated. if you have a lot of money in a minor, you did not do well. scarlet: right. joe: at one point he was the richest man. i don't know. it's not good. scarlet: let's move to liquidity. it is a buzzword across fixed income. some investors such as an oppenheimer analyst are warning that it is a myth. we are joined by the goldman sachs global head of investment research. stephen, what do you think? is it just a myth?

guest: no, it's not a myth. we have seen changes in the way the market behaves. strategies of gone away. the ones that are able to trade in and out quickly depend on leverage. anything that has the ability to move large volumes quickly, those have simply disappeared. joe: how much does the rise of algorithmic training play into the liquidity story? steven: the big problem typically being talked about, when you are trying to move one large position in one security, that is tougher than it used to be and asset managers have to change their strategies, so they do not do it that quickly. scarlet: that is anecdotal. how do you measure that question mark there is not a way to measure it and there's a lot of argument. steven: the problem is, there are too many ways to measure it.

what has expended -- expanded a lot is the time to trade. the way managers have responded to lower liquidity is demanding less of it. where they would have traded over two hours and one trade, now they will trade over a couple days or a week. that change in the way they invest has radically changed markets. it is one of the reasons for instance in the bond market you see people talking about etf's. that allows you to move more risk quickly. the problem is, it is macro risk and not individual names. joe: a lot of the gripe about liquidity comes from investors. you do not hear much concern from regulators. should they be more concerned than they are expressing publicly? steven: oh, i think the regulators are showing some concern. i think you see a split on whether this is a natural

trade-off for the safety and soundness we have seen versus a new problem. the answer is a little bit of both. if you go back before the crisis, funding was too cheap, leverage was too easy to come by, and there is a certain amount of false liquidity. value has become very expensive. the ability of banks to flex their balance sheets. so when you see the market stressed, liquidity disappears. we would say you introduce brittleness in to the market. we saw that with the swiss franc, the treasury event. where the concern is, you can introduce more economic volatility and something really needs to move in the market. can the markets handle that? there is a lot of concern that the answer to that question is no. scarlet: because of regulations, banks have to hold more capital than before the financial crisis and they are committing less capital to trading, with the

exception of fx. so they are working with limited talents sheets. doesn't that lead to less risky trades? isn't that what regulators wanted? steven: in terms of the banks, yes. so, the banks are far safer. where the problem is, it is harder for the clients to get lower services for banks that are stressed. even deposits on account at the fed or loan secured against very liquid securities now count against things like the supplementary leverage ratio, and as a result, it is a lot harder for clients to quickly adjust. joe: all right, last thing. the view that oil is headed lower, the 30's. what is that all about? steven: it is fairly straightforward. shell oil is a lot cheaper. it is the major supplier in the

market and that has changed the equilibrium for opec. opec used to be marginal supply. their optimal answer was to raise revenue by restraining supply. today, shale is the marginal supply, which means a petrol best solution is to supply the rest oil. they have more rigs in the ground than any time during my professional career. so the between low-priced shale and the new production of opec, we will see lower oil prices for a very long time. scarlet: all right, steven strongin, thank you very much. joe: and we will be right back. ♪ scarlet: -- i'm scarlet fu and

scarlet: -- i'm scarlet fu and -- joe: i'm joe weisenthal. scarlet: macy's earnings fell 7/10 of 1% in the first quarter and that has put pressure on macy's. because it did not revise its forecast. joe: lots of data coming out of china tonight, retail sales and industrial sales. it's a perfect snapshot of the economy. scarlet: that is all for "what'd you miss?"

thanks for watching. ♪

>> from our studios in new york, this is "charlie rose." charlie: we continue with our conversation of the 2016 presidential election. donald trump continues to lead the field. hillary clinton proposed a 10 thatcollege tuition plan has come under criticism from some contenders including marco rubio and jeb bush. coming. caucus is