joe: we are moments when the closing bell. i am joe weisenthal. scarlet: and i'm scarlet fu in for alix steel. we're moments away from the closing bell. ♪ [closing bell ringing] scarlet: stocks flipping days before the fed's key policy decision. emerging-market assets gaining ground. joe: the question is "what'd you miss?" it is fed week and we are doing the countdown.

is there still a real chance of a rate hike? we have the charts that lay out the stakes. scarlet: plus, a summer commodities selloff. is there anything that is not oversupplied? joe: brazil's debt hangover. the government announcing an austerity plan admit a cell up of assets, and all eyes are now on if it spreads. scarlet: we begin with u.s. markets. u.s. stocks falling ahead of the fed decision. light trading overall about 25% , over the 20 day average. nine out of 10 industry groups are down. the exception there were utilities, which, again goes , back to the idea that it has shifted when the fed would shift rates. joe: overall, this was a really quiet day. the market was lower. just not very dramatic. people have been talking about

the pre-fed lull in the action and there was nothing you could point to that was particularly exciting. scarlet: it felt like in august trading day. joe: it felt like the days when we are on vacation. scarlet: this is the pe of did -- of big caps. whether or not you believe that high,rward p/e's were too they have started tumbling down. stocks have recovered a little bit but that is not a very nice line. let's get rid of that line and show you what happens if we max it out over the longer term, back to early stocks are not 2008. cheap by historical standards but the debate is still is the secular bull market for stocks still in place? joe: that is exactly right. stocks still appeared to be expensive by historical standards but they have come closer to a people think might be there fair value. i want to go into my bloomberg all right, terminal because over the weekend, we got some data

from china that confirmed the same story we have been hearing for a long time -- slow down. this is fixed assets and building stuff. the growth rate is down to 10.9%. you can see the red line -- we have not seen a number this week since the beginning of 2001. so almost 15 years ago was the last time the pace of growth and soed asset investment was slow, and it's part of the story of the slowdown stop stocks in and this is perhaps related to that week economic data. shanghai fell over 2%. scarlet: i love the fact that you pick this economic data point rather than industrial production. digging buddy the surface. joe: this one was just so ugly and goes back so long, and i like the red line. scarlet: it is the decision week and with us to look at the thursday meeting of the fomc, the chief u.s. economist from barclays. >> thank you for having me. joe: is the fed going to go this week? michael: we thought they were ready to go on the august 11

decision by the pboc. it did rattle markets and we think it led to a tightening of financial conditions within the u.s. we use that opportunity to say that we do not think the fed will go, partially related to the concerns you just mentioned. is there downside risk to china? downside risk to global growth? you do not want to be tightening rates into that, so we think they will skip this meeting and not raise rates. scarlet: when you look at the economic conditions in the u.s., the bloomberg survey found that economists on average believe we are ok, that we are not due for a recession until 2018, and that would mean the current expansion would last 19 years. give us your take between the start market and others? can they create exceptions? michael: yes, and there is real estate valuations that support consumption, so, yes, a sharp

glide equities, it could create recessionary conditions, and you are right. we have been in a very long expansion. it is a reflection of how far we fell and how gradual recovery is, and we think equities are fairly valued at this point. they are having challenges, partly because growth in the u.s. is so slow. joe: when people weigh the merits of a set hike, people say that it is missing on the inflation side. and today, we got new data showing inflation expectations were actually slipping further and getting further away from what the fed wants it to be. thehis a good reason for fed to wait a while? they're actually getting close to that 2% mark? michael when we moved off of our : september call we moved to march. one of the reasons was that we think inflation data is softer than we expected and we advised -- we revised our inflation

forecast lower, so you have a combination of weak import prices, commodity prices, and that is starting to weigh on expectations, so i think the fed will message this week. we did not go, but we remain data dependent. they pushed this past. scarlet: but what does the fed see that consumers do not see? michael: well, i think historically, the fed would say a combination of tighter labor markets, and expectations with support their view. in practice, there is not a lot of evidence that suggests it is moving higher, so it is a forecast based decision based on historical trends. joe: from wells fargo, they were talking about -- it shows the labor markets getting tighter, and it shows where we are compared to prior target as opposed to total labor force. and this idea, this

whole phillips curve idea, that the employment markets get stronger, inflation will pick up? i know there are people looking at this because the labor market is getting tighter. michael: they suggest it is weaker than it has been in past decades, so we would say the coefficient is smaller, meaning you would have to drive labor get thea lot tighter to same boost. the other thing is productivity and thes quite low, productivity growth is weak, as well, so it is going to be tough to get a lot of wage growth. it is weaker than it has been in the past. scarlet: are the conditions there too problematic?

michael: i would say this is driven by the internal dynamics. and that rebalancing is difficult. scarlet: long and painful. michael: long and painful. i think you would have to argue that the said moving on rate pressure on the dollar, which would keep pressure on it, so i think mainly it is about their own internal dynamics. joe: what about these warnings, the fed rate hike, hurting emerging markets, but we're already seeing this selloff. is the more pain to come because of a possible rate hike? michael: it is a third domino. the u.s. is the third domino to go in 2008 and 2009, and then europe afterwards, so this, to me, is the third followthrough. china is feeling it right now, so we are arguing about the

pace. if it is a slow, gradual cycle, i would not say there is a tremendous amount of difficulty. if the fed march is faster than people expect, that is where you can get that downside. that keepsat is it you up at night? is it something entirely different? michael: it is really china. a much faster slowdown in growth, and then that becomes problematic for all of asia. economists are describing this as a trade recession, soap growth in the u.s., u.k., japan, it is not so strong that we are fully immune to what is happening in china, so trade volumes are certainly slowing. so what would keep us up at night would be that hard landing and that spill over to asia. scarlet: and you just cut your china gp forecast.

michael: we did, and we think you need to get a lot of policy. scarlet: ok, michael, from barclays, thank you. joe: when we come back, in the annals of inequality, which standard bearer for the left which just assumed a position of real power suggested that there ought to be a maximum wage ? that answer, when we return. ♪

♪ scarlet: m scarlet fu. joe: i'm joe weisenthal. "what'd you miss?" scarlet: which politician suggested there ought to be a maximum wage? joe: the answer, jeremy corbin

partyhe opposition labour , referring to the u.k. this intersection of new media and radicals being elected all over the place will stop -- all over the place. exciting times. scarlet: you have been out front on this from the get go. all right let's get to some top , headlines. we begin with bernie sanders, his schoolmate in the u.s., surging to a double-digit lead against hillary clinton in iowa and new hampshire, and iowa democrats. neighboringdge in new hampshire. vice president joe biden, by the way, third. even though he is not officially in the race. joe: facebook says it is stepping up efforts to target racist posts on its german website. they are targeting posts and

monitoring suspects' hateful posts. scarlet: and a traitor sent to jail for rigging a key interest rate is appealing his conviction and sentence. tom hayes was found guilty of relating libor while working for ubs and citigroup will stop a -- and citigroup. a london judge must decide whether to let the appeal go forward. and those our our top stories. and i want to bring in our next guest. mark dow. he is an author of a blog. volatility in the markets has been the scene this week. but you look at the volatility in currencies, swings in currencies according to the jpmorgan volatility index currencies are at a seven month , high. talk to us about how investors are positioned with less than 72 hours to go before the fomc announcement. and what that tells you. mark: a lot of investors are

nervous. they were expecting the fed to hike, but the backdrop is people expect to see a stronger dollar over time. moving in that direction, but they are afraid to hop on the train or continue with the trend to the extent they have been before because of the odds the fed does not hike this time. joe: if the fed does hike, what does that mean for global markets? do you think -- first of all, do you think they will, and if they do, what kind of ramifications would you expect to see? mark: there's a big issue people have not fleshed out and that is since the crisis, the strongest advocates of aggressive monetary policy have been disappointed with the impact on output. the largest attractors have not seen the impact on the currency and the negative impacts they

have been anticipating. everybody has been left hanging and we realize the effects of the fed on output inflation are much lower than they used to be. a lot of that is because the transmission on monetary policy has changed and complicated the world for the federal reserve enormously. today, people lend by securitizing, by liquefying the assets on their balance sheet. they do not need the liquidity provided by the fed to take risks. what matters more than the fed stance is their risk appetite. what matters to them is there risk appetite. if they don't have that risk appetite, they are not going to be stepping out. look at 2006. they become less price insensitive. the fed fund rate was at five and a quarter, and people were falling all over each other to lend and borrow but today, the

rate is pretty much at zero, and nobody is doing this, not like they were before the crisis. is having a much lower impact than what people expected, and you have the financial channel, which has become more powerful because guys in poland can sit and watch the brazilian interest curve in real-time and react or react to the chinese stock market, even if we cannot play in it, so the fed channel has become more powerful in certain respects, whereas the real channel has become less powerful, and the fed is mandated to the real channel, not the financial channel, and now they have to figure out how to calibrate this financial channel in a way that does not undermine it. so they have two targets with one tool, and they are feeling their way through this, and we

are on the other end of that. joe: one of the themes has been the everything collect, nickel or steal or oil. it is like we are up to our ears on everything. what is driving it and what will turn it around? mark: i think the supply story has been overstated. but they say nothing cures high prices like high prices. there was a speculative surge that started back in the early 2000's -- they allowed electronic access for a lot of hedge funds and traders to trade commodities in a way they could not before. you had to go through crews with brokers. after that, anyone could trade if they had the right electronic set up. that and consultants telling us we needed commodity allocations in our portfolio to diversify led to a lot of people building speculative positions. on top of that, we had emerging markets plugging into the grid

and china takes over the world story. and so, we ended up -- everyone thinks commodities got built up by a fed bubble but they forget that $150 barrel oil happened in 2008 before we even knew what qe was. we were speculating and speculating hard, so a lot of it is unwinding speculative excesses of that time. of course, the high prices did bring about a supply response, notably in shale oil and that has led to a glut. it might be a supply response but a lot of it is the unwinding of speculative positions. then you say that 10% allocation the consultant told me to have, maybe i should have a 3% allocation. joe: all right, mark, you are staying with us. we're going to talk about brazil after the break. scarlet: speaking of a glut, which of the super savers is swirling away a remarkable percentage of their earnings? the answer, when we come back. ♪

♪ scarlet: i'm scarlet fu. joe: i'm joe weisenthal. "what'd you miss?" scarlet: before the break, we asked which unlikely group is sharing a large share of their earnings and the answer is millenials. joe: an analysis by fidelity investments shows almost 20% of a millenial savers in the database save 15% of his or her salary each year in a 401(k). scarlet: and if it includes a company match, it is 11% of pre-match earnings. these so-called super savers tend to earn more than other millennial's, and when all is said and done, do do they trust the stock market? joe: supposedly they still don't. scarlet: brazil announces austerity plan that reduces government spending by almost $7 billion and is expected to boost taxes.

the country is hoping to report a surplus next year instead of the deficit that led the s&p to cut its credit rating to junk last week. joe: joining us is mark dow, a former economist at the imf. scarlet: and i am glad you bring that up, because another imf economist came up with a radical way to solve the brazilian mess. he says they cannot implement policies. the whole system needs a cleanse and a quick way to do that is to get the imf. it is a little bit wacky, but i think it makes so much sense. mark, his point is that austerity measures imposed by the imf would give enough political coverage to enact unpopular reforms.

mark: when the bad times it, you do not have to hit the interest rates, and unfortunately, brazil did not make it to that point. this may be necessary to ensure the confidence. this is already in an issue. and everyone believes that brazil has been exporting to china. that has not been the case. it has been a domestic credit boom, and they have to get out from under that. joe: one of the charts you are looking at is the chart of the real versus the dollar. and, obviously, this is the third sort of big real selloff in time, and the two-year swap, what does it tell you? mark: one of the reasons i have argued that this time it is different -- is bad but it is different because emerging markets have fixed a lot of the problems that have altered them

-- bothered them for many years. they have flexible exchange rates, and the government is no longer gaining revenue. that mismatch, what they called the original sin, is largely gone, and local market have been deepening, so now in brazil, they have insurance companies, and there is a constant bid for domestic assets, so what we see is in 2002, there was a spike. it was not emerging markets sensitive, and now this time, financial markets in brazil are much, much deeper. and interest rates have only gone to 15%. you can argue they are about to go further. we have a similar impulse on the exchange rate, but it does not go as far. tourists are no longer leave the

only game in brazilian financial markets. local players are significant, and that would lead to less , and too many people -- scarlet: in 20 seconds or less, what keeps you up at night? is in brazil, or something else? mark: disorder in china and i would watch capital outflows. 65% ofmes were good, chinese say i want to make my money and get the hell out. that was the mindset. that can only be stronger now. so the chinese their task is to keep theople in and ball happy, and we will see if we can do it. it's going to be a slow process. scarlet: a slow process and sometimes painful. thank you very much. joe: we will be right back. ♪

scarlet: i'm scarlet fu. joe: i'm joe weisenthal. "what'd you miss?" scarlet: don't miss this -- retail sales out tomorrow for august. it's the final look at consumer behavior before the fomc decision. it is backwards looking, but we already know that decent auto sales should feed into a healthy again. joe: and the consumer is everything.

i'm also looking at capacity utilization tomorrow. that feeds through to inflation as industrial capacity tightens. i will be watching that theoretically, prices rise, soi will be watching that tomorrow.

♪ announcer: from our studios in new york city, this is "charlie rose." charlie: we begin tonight with the migrant crisis, with the number rising sharply in the last month, people making a dangerous journey from syria and iraq, starting a conversation, and president obama said the u.s. would take in 10,000 refugees year, and germany announced it is expecting 800,000 asylum seekers and refugees by the end of the year. the go