is in washington. back in the ussr, mr. vladimir putin packed his bags for new york. and president obama will speak as well. and the crime of what they have done to clay christensen's disruption. we speak with adrian wooldridge on the great disruption. good morning, everyone. this is "bloomberg surveillance tom: live from our world headquarters in new york. i'm tom keene. me, vonnie quinn. from london, francine lacqua. see,a remarkable thing we with the put the speech at the united nations. francine: this is something that .s playing hard and volkswagen. the impact that it will have on climate change. story.e volkswagen we will probably have headlines

out of focus wagon on management changes. right now we're going to begin with top headlines. here's vonnie quinn. vonnie: janet yellen is confirming that the fed is on track for an interest rate lift off this year. last night the fed chair laid out the rationale for a gradual tightening. janet yellen: most of my colleagues and i anticipate it will likely be appropriate to raise the target range of the federal funds rate sometime , boosting year short-term rates at a gradual pace thereafter. as the labor market improves further and inflation was back toward 2% objective. vonnie: knew the end of her speech she felt unwell due to dehydration. a spokesperson said she was fine.

today they will get down to business. a number of disputes are likely to come up between president obama and president xi jinping today. meanwhile, she suspected to .nnounce a new trading system it is seen as a big step by the producer.rgest the white house says vladimir putin anxiously asked for his upcoming meeting with president obama. the russian president will sit down with mr. obama monday in new york. i have not seen each other in nearly one year and have not spoken one-on-one in more than two years. amazing. u.s. officials say the president tin about russia's role in ne ukraine. and the situation in syria. pope francis is in new york. if you hours from now he will

address the united nations or a later, he will celebrate mass in madison square garden. i believe tom, you made every effort to get a ticket last night. madison square garden this morning. i had a pope citing less like. a number of other family members saw him as he wound through the upper east side. this is family video. of the pope coming by. here are the gmc trucks, and that you will see the fiat here. vonnie: did you get a blessing he? tom: their hit is -- there it is, a bowtie blessing. they put up security fences. that means i am on three hours' sleep. i am not going to have a confession or anything else. tom: it would be too long for the pope to hear my confession. we look at equities, bonds --

that is funny, folks. 1.1154 with oil supporting. francine is laughing in london. i hear francine laughing. bee nice. newsncies churn as the big in the -- you see the risk on feel. don't you think it is one day on, one day off? francine: it is. i have not seen this in a long time. a lot of these european stocks are climbing after janet yellen says she will raise rates. it points to the fact that these markets, certainly in europe, where very confused. more clarityhave on what janet yellen's thinking. another interesting chart that i

wanted to bring to your attention is that for the first time in 11 years, some so-called periphery countries are now outperforming germany year to date because germany links to china, and of course because of the vw scandal. tom: i'm glad you bring that up. i see the two-year german yield still shows that yield is down. let me show you something overnight that did move. the idea of abenomics failing. here is japan inflation back a million years with the red line being the thrust of deflation. and here is the hail mary of abenomics with new inflation. we are giving it all back here in a heartbeat. abe had been lauding the fact that they have been coming out of inflation, and then we have these numbers.

it is pushing on the reality of an entrenched disinflation. mark kearney had to face that a few weeks ago, didn't h? he actually did. he was not too worried about what was going on in japan. this is stuff that central banks do not have control, so he was suggesting maybe they leave that mandate for a little while and focus on growth and employment. tom: that is the theory. we heard the same thing last night from janet yellen at the university of massachusetts at amherst. as francine said, we are not going to consider a commodity implosion. that is great until you don't. vonnie: denier in says it is folly to think that -- daniel yergin says it is folly to think that it has been abolished. we will see a rate hike this

year. the news from "the financial times" and from "the economist" as well. jenny yellen made news. she fell ill and nicely recovered. his doctor yellen -- as dr. --len asked for a doctor this is, at the moment, quite serious. tell us what happened late in the speech. right, it was, for a few moments, a very alarming episode, i have to say. then her lot more pausing to clear your throat a few times. speech.bout an hour i believe we have a problem with chris.

as these things happen, we have plenty of hydration at the desk here. tom: this was serious. vonnie: i am not kidding. basically, you need to be hydrated. you have to have some water there. the fed came out with a statement saying she is absolutely fine. tom: we need to make that clear. she is fine. speaking of the pope and the exhaustion he faces. is scheduled today is unbelievable. he begins with the u.n. and his address to the u.n. general assembly, and then he will be at ground zero at 11:30. tom: that will be emotional, to say the least. ecumenicalery ceremony at ground zero. at ahe will be in harlem school, giving them some words of wisdom. then it is off again for the pope. not only that, but we have xi in washington, d.c., as well.

tom: it is a most interesting time for international relations. we are thrilled to bring you this morning, to begin our wooldridge,rian author. theessay barely describes week in "the economist." you read the book reviews, then you turn to adrian wooldridge. he is up to speed on our central-bank debate. .arney, yellen they are pushing on a rope, aren't they echo adrian: absolutely. they do not really know how to do with it. we have an economy that is stagnant. buiter outow willem of the london school of economics. main scenario, a global recession, then yesterday he moves his fed call well into 2016.

researchl of the sources that you have at "the economist," is it safe to say that we are migrating to a 2016 call? adrian: the interesting thing that you show this morning with abenomics, then falling back, we see exactly the same thing all around the world. the united states. we get the sense that we are recovering, the economy begins to grow, and then we get disappointing numbers. vonnie: is there a case to be made that central banks will become less independent? fiscalto put pressure on policy makers, we now have thatmics and the idea that is in need of great fiscal policy. and then brazil is also putting pressure on the central bank. adrian: i am against that. easings quantitative

means taking the banks back in the government direction for when you get that, you get a new set of problems. you get governments printing money and trying to preserve their own prospects. you get politicalization. we have a different set of problems now. made the banks independent, the problem was inflation. now the problem is stagnation. tom: francine? if you look at our central banks, they are a little bit like a company. they are being disrupted because of globalization, because there is so much money on the markets. do you think they are doing the right thing, guiding forward, being more transparent? adrian: i am not sure you're getting the right results. one of the problems with the substitutions that are created to manage domestic economies, they were created before globalization. so you have the fed trying to

act as wisely as possible when a whole new set of realities is being created in china. these domestic institutions are increasing in a global market. bookwe was bigger adrian's , "on disruption." twists and turns, and the idea that god is back. we are seeing that in washington, new york, philadelphia, in the united states this week. what a week it has been for volkswagen. we will bring you the latest from the company's own talent. hans nichols, next. this is "bloomberg surveillance ." ♪

tom: good morning, everyone. "bloomberg surveillance,"

worldwide. a gorgeous day as francine the quad reach your weekend. we say good morning to all of you. we say good morning to francine lacqua with world headlines. francine: once again japan has slipped into deflation. the bank of japan's main inflation gauge dropped into negative territory last month. the boj's unprecedented stimulus was wiped out by weak demand and oil prices. it had been hovering near zero from us. voters in the northeast of spain will answer the question whether the area of the country could be its own country. separatist parties are expected to dominate. that could start anything month process leading to independence. barcelona,ncludes spain's most prosperous region. and the first step toward rebounding after the fake emissions tests could bloomberg

news reports vw could name a new chief. the crisis has wiped $22 billion off vw's market value this week. let's bring in hans nichols live from the w headquarters. ceoe think that the portion that that the porsche ceo is the right person? cons: there has been a lot of emphasis on the personnel aspect of the story. we do believe it could be matthaeus mueller. if you think volkswagen needs to follow bob dylan's example and go electric, matthaeus mueller may be the guy to do it. but on the policy side -- and i think that's more important -- i think we are looking both forward and backward. forward in what volkswagen wants to do. how are they going to compete in

america, globally, and how will they clean up this regulatory mess? looking backwards, hopefully we will get some numbers on where they are, what sort of exposure they have, what they may be setting aside, how big of a challenge and how deep of a hole they think they will have to dig out. i am moreys interested in the policies. francine? that, theon provision, 6.5 billion, it is unlikely that will be enough. more research says they will have to put aside more. this is a huge scandal. : we have 27 states attorneys general, potential criminal liability in the states as well. epa fines. that is just one jurisdiction. i know tom can name all 193 countries in the u.n. that have regulatory standards when it comes to automobiles, but i cannot. i suspect it is more than a half a dozen. it is in the mid-50, 60, maybe

100 range. that is a lot of jurisdiction for that many cars. you cannot tell your guest host that you rate him third. -- that you read him third. you have to say you read him first. tom: when the vw is tangled up in blue, will they be tangled up in red? have you seen the good analysis yet of what the scandal does to their income statement, and to presume persistency of cash flow? to say,really want "don't think twice, it's all right," but i think we would bore the viewers if we did this whole segment in bob dylan quotes. the rating agency seemed a little bit concerned about their debt. saying that they may downgraded. that may -- that has not happened yet. no one knows what the total price tag will be.

hopefully we will get some clarity on how vw will make the copulation. that is what i hope for -- will make the calculation. that is what i hope for today. any word from french automakers? anyone scrambling? hans: nothing in the last 24 hours from the french automakers. spotchecks will be done in germany across brands. they are not fundamentally changing the way they test automobiles in germany. there is some commentary that that is because the german government and the german auto industry are a littl too cozy. i would not go that far yet. but the german response with spotchecks, others are talking about more copperheads of changes. tom: coming up later today, pope francis -- about more comprehensive changes. today,ming up later

pope francis speaking at the u.n. from new york city this morning, this is "bloomberg surveillance." ♪

tom: i got three hours' sleep last night. the amount of security and construction of security gates as they move the pope and you and officials around manhattan is extraordinary. it is a beautiful new york city, perfect weather for pope francis as he begins his 30 hour visit to the island of manhattan. he will be in harlem at a school later this morning. vonnie: yes, after he speaks at the u.n. general assembly. tom: it is time for a "morning

must-read" right now. quote, theonderful great disruption. tom: adrian wooldridge hits the ball out of the park here on the abuse of mr. christiansen's classic work. what is the true definition of disruption for clay christiansen? using digital equipment, new ways of doing things, and new management techniques, and the classic idea of this would ok, a higher class of education, much different.

completely disrupt. tom: you are the shumpert are. what would the prophet of innovation has said abt the abuse of disruption? thatn: he would have said the nature of capitalism is creative destruction. but that was used like clay of -- if you use talk to people in silicon valley as saying disruption is marvelous, we must disrupt this and that. for many of us, disruption has cost as well as benefit. it is the world we live in. it is not necessarily an easy world to be dealing with. and we had a guest on earlier in the week who talked about disruption as well. he said we know it is happening, but what the value of the creation later is, we do not know yet.

adrian: if you look at the life expectancy of a fortune 500 company in the 1930's, it was 70 or 80 years. now it is between 10 and 20 years. an incredible change. the life expectancy of the ceo in the job has gone from 10 years in 2002 to five years. ,om: adrian wooldridge with us with much more to talk about, including american politics. coming up in the next hour, must watch, must listen. liz ann sonders of charles schwab. stay with us. ♪

tom: good morning, everyone. ."loomberg surveillance tom keene and vonnie quinn in new york, francine look why in london. francine: we were watching pope

francis. tom: i need to head to the theentional -- to confessional, and vonnie quinn has been telling me that for weeks. it is an exceptionally busy friday. vonnie: the fed is still on track to raise interest rates this year. for the first time since 2006. janet yellen confirms that last night in a speech in massachusetts. janet yellen: the other indicators suggest unemployment currently understates how much slack remains in the labor market. on balance, the economy is no longer far away from full employment. inflation has continued to run below the committee's objective over the past several years. vonnie: near the end of her speech, she started feeling unwell because of dehydration. she briefly sought medical

attention. a spokeswoman said that she is now fine. there will be plenty of disputes on the table when president obama meets with president of china xi jinping. today the leaders are likely to discuss cyber security, human rights, and restrictions on u.s. businesses operating in china. he's ousted do one thing that will make -- he has vowed to do one thing that will make president obama happy, unveiling a pollution plan. u.s. antitrust officials are looking at google again. bloomberg news reports the ftc wants to know if google stifled competitor access to its android mobile operating system. tech companies say that google gives priority to its own services on the android platform and restricts others. google is not commenting. two years ago, he ftc closed a

separate investigation into google's search business. house speaker john boehner wants to keep fellow republicans imposing government over a budget battle. he will spell out a plan at a meeting with lawmakers today. about 30 republicans say they are willing to shut down the government if defunding planned parenthood is not attached to a spending bill. around the world, they are lining up today to get a shot at apple's newest iphone. s and 6s plus are on sale. tom: all the phones were broken last week. they are lined up. you are kidding me. vonnie: the very first flagship store. buywoman sent a robot to her iphone because she did not want to stand there. apple with some

announcement. we look to bloomberg west for further discussion later on bloomberg television. call it the fifth revolution. there is a new political polarity and anger. it is example five by mr. sanders and mr. trump in america. and perhaps by mr. putin in ukraine and now syria. adrian wooldridge is our guest host. he is a co-author with john micklethwait. john micklethwait tells me what to do as editor in chief of bloomberg. adrian: no one tells you what to do. tom: but i ducked when you throw things at me. is it simple, john, to say that corbin is the same as what we observed in the united states? corbyn isink a lot of about anger. even if some young people

thought that he was slightly mad, they thought he was genuine. even when donald trump is being rude, he is speaking his mind and telling it like it is. vonnie: the authenticity question. adrian, what should these leaders do? they have a golden opportunity, the anti-austerity leaders. none of them seem to be coming up with a platform that is resonating policy wise. wants toeremy corbyn reinvent the 1970's. i do not think he will become a significant leader of britain. he will not become prime minister. and more interesting thing that is going on is what happening -- is what is happening in spain. they really are hardline, very disciplined leftists. that will be a real challenge. tom: and they have the distraction over the weekend of the catalonia referenda.

i was taken this week, late last week, on your house of commons as we saw well-dressed, what we s,uld call wall streeter in dark suits and ties. it was a start visual contrast. francine: and it is a visual contrast we are seeing in france , one of thele pen people to the extreme right and not the extreme left, like we see in the u.k. john, when you look at politics, when you look at donald trump and wonder if he is stoppable are not -- stoppable or not, are we losing moderate politicians, and it is a short phase? or will we see more extreme politicians around the world? john: there was a good piece by tony blair a couple of weeks ago in "the guardian congo where he made the point that it is really ,", where heuardian

made the point that they have no traction. what has been happening so far is that when it comes to the real polls, no one has gone to them. you have syriza in greece o. the way you describe it is very true. lady who used to sell me my newspaper in france, she looked, dressed, and sounded like marine le pen. and ihe two of you -- would be remiss if i did not bring this up -- wrote a terrific book, of "god is back." you talked about the acids of modernity. then we have the pope defeating the modernity here, it is trip here and in history to cuba. what do you mean about "the acids in modernity cresco adrian: the classic view is that

modernity destroys faith and destroys religion. what we argue in that book is that it does not. quite often, modernity and technological innovation creates a desire for faith, some reinsurance -- some reassurance in a destructive world. tom: all of the turmoil of 1928 in america, 1968, and then the 1979 redo. what is the next redo within this pope for christianity? , whether muslim, jewish, or christian, what is the next shift? >> you see exactly the same thing happening in the muslim world or something similar to what happened in the great wars of religion in europe when nationstates began to involve -- began to evolve. religion was tearing things apart. vonnie: we saw yesterday in a bloomberg poll that people are

generally unhappy with the political system in the united states. but you say they do not need to be and there is a better way. what is that? john: for all the despair about politics, you have to imagine in end willpeople in the start to change government. it seems impossible for me to google inat you have the headlines, with the same revolutions that happened in the private sector, that they will not happen in the public sector. france computed with britain, competed with germany. we kept on pushing each other forward -- france competed with britain, competed with germany. we kept pushing each other forward. the west has always really been good at government. now we face it with china. tom: the pageantry we see this morning as president obama and president xi hold a joint press conference in the rose garden. viaake you there live

bloomberg television and radio at 12:00 p.m. today. the most busy day for international relations. "bloomberg surveillance." ♪

vonnie: time for our "morning brief."

8:30 this money, we get annualized gdp. eastern, university of michigan sentiment. some say the baker hughes county is not particularly what we should be watching most of all. tom: is that it? vonnie: because that is just one rig count. tom: here is my morning brief. the entire upper east side and the fdr are shut down for four hours as pope francis migrates to the united nations. then the rest of midtown and down to soho is shut down as he goes down to ground zero. on we go. it is an amazing time. vonnie: that is the time to go to the apple store. tom: nobody can get to it this morning. it is time for our single best chart. we did this for john micklethwait and adrian wooldridge as well. what has our great distortion become?

with us, adrian wooldridge and john micklethwait, authors and arch coupon clippers extraordinaire. john micklethwait could be clipping coupons at 102 years old. this is an actual british bond. bring up the chart again. up to 2068. this shows the distortion of yellen and carney. the thing has gone up 230% because of the arch disinflation that is out there. do you kate -- do you take again or clipping coupons? i would take again. tom: this to me is one of the great charts. comment on the distortions you see. john: there are distortions all over the place because you had the crunch to begin with, and then this enormous injection of money. i was one of the people who

supported the injection of money. we are in uncharted territory, and it is still going on. janet yellen was still saying we will keep putting money in the system. tom: are we clearing markets, adrian? adrian: we are not clearing markets. something is happening to the nature of capitalism. some of the permanent things we believed in, like companies being solid things that employed lots of people and have solid assets, they are becoming virtual and nebulous. they are changing the world with a tiny staff of people. employees, 250,000 people. now the company changes the world, like google, with 50,000 people. tom: francine? francine: i love your single best chart of the day. tom: francine, you love the

single best chart because yours truly is going to be the only one around to clip the coupons. francine: i will take the compliment. thedo you price and model u.k. referendum, right? john, i am sitting in london and i have very smart people saying the u.k. will never leave the eu. then i have smart people on the show loving the eu. to factor in the fact that people are very angry and concerned about the direction of the economy, very confused about the direction of the economy. up until recently, we had the partytee of the labour powerfully campaigning to stay in the eu now with jeremy corbyn, you will have a divided party. john: we live in a very interesting age that goes back

to vonnie quinn's first question. probably britain stays in the european union. possibly, donald trump could become president. jeremy corbyn could become prime minister. it is like being told you walk across the road and there is a 20% chance you're going to get hit by a car. you might think, that is great. will not beime you hit, but the 20% is worrying. continuere going to our discussion, and we will speak to them about any number of topics. we really want to look toward china as well, with president cesium hang -- with president xi jinping. this is "bloomberg surveillance ." good morning. ♪

vonnie: welcome back. this is your foreign exchange report. the dollar is strengthening with the currency heading toward its biggest weekly gain in almost those come us. this is after janet yellen said the central bank is on track --

in almost those co-months. --s is after jalan yellen after janet yellen said the central bank is on track. the one i am really interested in is brazil. after the volatility on the brazilian real, alexander tom seems to beledge for short of expectations. vonnie: francine, thank you so much. u.s. antitrust officials are looking at google again. bloomberg news reports the ftc wants to know if google stifle competitors' access to the android operating system. tech companies say google gives priority to those on its platform above others. co-years ago, the ftc closed an investigation into google's search business. android, has about

9% of the u.s. share. lg, motorola, all these countries would be affected if that was the case. : it is interesting that the ftc is looking back at google, those co-years after it closed the previous investigation. they had also touched on the android platform at that time. we hear is that this is very preliminary stages of the investigation. they have met with tech companies. they are starting to gather information. it is not clear how big this is going to become, whether it is going to have legs, and whether the ftc has what it takes to bring a case. for now, the action has all been in europe, where the european commission has been very aggressive. they have brought a case against google for its search business earlier this year, and they also opened their own investigation into the android platform.

vonnie: sara forden, thank you so much. we will continue to bring you the latest on this investigation. tom: i read the article very carefully. with us this morning, john micklethwait, editor in chief of bloomberg. also, it adrian will read -- also, adrian wooldridge from "the economist." with a are once again different idea of regulation and capitalism. there is a different chemistry in europe than there is in the united kingdom than there is in the united states. it is obviously anti-capitalism, but is it anti-innovation and disruption as well? adrian: the idea that business is doing something bad and we need to regulate it -- i am worried about that. the very people putting pressure on for regulation are also the people who begin to complain that we are not creating enough because we have not gotten enough innovation.

i remember a paper 14 years ago on how there will be fewer winners with the internet and within the digital space. of any normal reaction government or regulatory body to react against a strong company like google or the rest? if you look at what has happened in europe, some of the main people who have been targeting google are people like the german media companies who have been using their clout. tom: they are old technology people. john: technology helps some business but gets in the way of many. in this particular case, the internet has always had this problem. ofpushes toward some degree progress. new appleis day of a launch, apple is almost never

mentioned within this government regulation. they have skirted the microsoft and google dramas. vonnie: to a certain extent, but we shall follow that. asn: they should be just worried. it is very easy for a government to look at technology. you have enormous market shares. apple has an enormous market share within the phone industry. that is something people will look at as well. hand, a lot other of this is passing. i remember when nuclear had three quarters of the -- when nokia had three quarters of the market of phones. then it was knocked off. francine: you talk a lot about disruption in your book, that it comes from technology and information manufacturing. how much is china disrupting the world? how much should we look at china to push back against this disruption?

take a country that is about 3% of gdp in the 1980's, coming up to a quarter of global gdp. that is a change of the sort we have not seen in the past. but secondly, we have a whole bunch of companies in china that have gone from nothing to being global players in themselves, going to disrupt those markets at home but markets abroad. alibaba being a classic example. disrupt the world. but even if the overall chinese economy slows down and china goes into some sort of retreat, it has nevertheless created a legion of global companies that will continue to be major disruptions. vonnie: are we in danger of another iceland? toocompanies depending on much of a particular industry?

too dependent is on tech. do well, the rest are sluggish. iceland is a huge problem. norway is a country hugely dependent on oil, a massively skewed economy. but nevertheless, it decided to ensure itself against that dependence. goingat oil prices are down, they are happy because this fund will keep them going for generations. vonnie: and a good central bank. tom: adrian wooldridge, thank you so much. john, thank you so much as well. editor in chief of bloomberg. francine lacqua, thank you so much. have a wonderful weekend. francine lacqua law, from our london news worm -- from our london newsroom this morning. three more hours of "bloomberg surveillance." janet yellen speaking last evening, and a major dose of international relations as we have the pope in new york city, president xi in washington.

and as president prudent travels to the united -- president travels. ♪

announcer: this is "bloomberg surveillance." tom: janet yellen reframes the

debate. the pope is in new york city. president xi jinping is in washington. putinn the ussr, mr. taxes bank for a u.n. speech. president obama will speak as well. emerging markets -- the mini canaries within the global coal mine. this is "bloomberg surveillance ," live from our world headquarters in new york. it is friday, september 25 there it i'm tom keene. joining me, michael mckee and david gora. michael: it seems like we are set to end the week on a little bit better know because janet yellen has said those canaries in the coal mines do not worry her as much as people thought. tom: we will get to that in a moment, including a moment, including our reporter in amherst, massachusetts. let's get to top headlines with david gura.

the fed chair spelled out her reasoning last night in amherst, massachusetts. myet yellen: most of colleagues and i anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labor market improves further and inflation was back to the 2% objective. david: she looked woozy during the end of her speech. the fed spokeswoman says she is now feeling fine. the u.s. and china are agreeing on a new plan to reduce global warming in missions, but the air will still be thick when the .resident meets xi jinping they died last night, and they will talk about disputes over cyber security, currency policy, and restrictions on u.s.

businesses in china. he is expected to announce a new trading system to cut global warming in missions. they will hold a news conference at noon eastern, and bloombergtv and bloomberg radio will carry it live. the white house -- vladimir putin will sit down with mr. obama on monday in new york. they have not seen each other in nearly a year and have not spoken one-on-one in two years. u.s. officials say they will militaryt russia's presence in ukraine and the buildup in syria. bloomberg news has learned that google is focusing on -- google is said by competitors to give priority to its own services while restricting others. closed an investigation 's searchle business two years ago. the pope will celebrate mass in

madison square garden today per those are top headlines. tom: let's do a data check. let's rip up the script. it is a good data check. blackberry out with the headlines -- this is even more trenchant on a day when apple hits a homerun out of the park with their new phone. at least those are the reports. blackberry with some losses to report. they will announce a new handheld device. their stock has gone from 70 to seven over the last number of years. michael mckee, this is about a turnaround. michael: they do say in the earnings report that they have positive free cash flow, which is a bit of a change and some good news for them to try to reposition. go back to their roots as a business oriented service. tom: let me do a serious data check here. equities, bonds, currencies, commodities. as michael mckee mentioned, risk

on after the janet yellen speech. expected, chair yellen made news last night at amherst massachusetts -- at amherst, massachusetts, as she fell ill but nicely recovered. christopher condon was in the room. she asked for a doctor of her own. chris, this was quite serious for a brief moment. tell us about the event. was, i have to say, for a few brief moments, quite alarming. i was sitting no more than 30 feet from janet yellen. she was near the end of quite a long speech, almost an hour, when she simply hit a wall and stopped. and she paused three or four , quite long, awkward pauses. the crowd absolutely crushed. i was personally convinced she was not going to be able to finish. she appeared disoriented. but to her credit, she kind of

out.gutted it she found a spot in the text and struggled through the last couple of sentences. she gotr a long ovation off the stage under her own power. tom: christopher condon, from amherst, massachusetts. i turn to michael mckee, who has seen politicians and public servants of an aged type. this was a big the with reagan, wasn't it? michael: i can remember many rumors thatg something had happened to alan , andspan or ben bernanke you would call the fed because people really cared. when i heard about janet yellen last night, i checked the stock markets to see if they were taking it seriously. fortunately, they were higher. in a way, you can check their health. greenspan, when i spoke to him a few weeks ago,

was shockingly vital, incredibly on his game and in good health. once again, it is the markets. michael mckee talking of chair yellen and the rates higher in 2005. back and forth we go. and amazing international relations this week with pope francis, china, president putin visiting the united states and the united nations. nicholas consonery is the director at -- with all that is changed the basic market call at schwab? being morein cautious, seeing a pickup in volatility and probably the first true correction we have had in four years. we had not changed that view. what to watch for as we extensively go through this bottoming process is a bit of the opposite of what we saw leading into the highs in may.

even if the overall averages youinue to act poorly, if start to see better underlying market -- n the tom: besides everything that is going on, where is earnings growth? is it flat? flat, and on a six month annualized basis, it gets into negative territory. there is precedent to talk about it dipsfive times, without the economy going into a recession. so you get an earnings recession, not an economic session here it -- not an economic recession. michael: everybody is saying, yes, earnings are bad, but take

out energy and they are ok. is that the case? out theyou took energy sector, you had double-digit positive earnings growth. it has been a big factor. when you have these environments with a big spike in the dollar, the negatives at first, and the positives come later. negative has to be this trip of president putin to the united nations. brief us on the immediacy and importance of the new russian effort in syria. nicholas: first of all, i think his back is against the wall. that is what we see here. meetingasked for this with president obama, correct? nicholas: absolutely. china has been twisting his arm. hhas been pushing to get these energy deals done, and it has not happened. i think he wants russia's position in syria to be

influential. i do not think they expect to stabilize the regime, but there is all this uncertainty. michael: tom and i read a marvelous article about what is happening in syria, and it was very pessimistic, suggesting we will not see a solution, that syria may almost be too far gone to be a functioning state. nicholas: we do not have very optimistic views about that. the potential for spillover in the middle east is very big, and the post assad environment is not a good one. does schwab have an oil call? ann: we have had a post commodity super cycle call that at best you will get rallies for an extended period of time. tom: give us your opinion on equities.

you have been right with a neutral call. when can you shifts to green on the screen. i do not think the bull market is over. i think what began in 2009 is a secular bull market. i think most of the damage has been done in price. joy just touch a talk about the dammed market. liz ann sonders with us, and lynn nicholas -- and nicholas consonery. address the will united nations general assembly on bloomberg radio and bloomberg television. that will be live at 10:00 a.m. ♪

tom: good morning, everyone. "bloomberg surveillance." i'm tom keene with michael mckee. he has a "morning must-read." michael: it is something that was passed around wall street this week. you can find it on the web. a speech by alan greenspan in 2004, notable for outlining then many of the same issues janet yellen is facing now in pledging to raise rates if the economy develops as they forecast. read span said that -- -- greenspan said that --

michael: that is exactly the message janet yellen gave us last night, saying if the economy develops as forecast, we will go ahead. but if not, we might not, so you as an investment professional have to decide whether or not there forecast is going to come through -- to come true. liz ann: keep in mind, the fed has not been great at forecasting. that is fine. frankly, there are not many people who have been great at forecasting. one of the important facets of that, and janet yellen has said this. it particularly rates to inflation because they will move when they are supposed to move and they expressed that they will move, not just at the point inflation gets to their target. but when they see the leading indicators. so when the conditions exist for

an eventual move, that is when they will move. they have held back on that on the job's side because we are at the point where in the past they suggested they would move. a lot of people have focused on other measures of employment. one of the common phrases i hear, is yes, but the on implement rate is lower -- is still where it was. it is lower now than it was in 2004 when it started to go up. michael: she said something about inflation that the fed does not trust the market based inflation measures like tips. liz ann: i think there is a general distrust of inflation metrics. there is a lot of questions now about whether the fed is using the right metric in core pce. some suggest it is cpi. all pullout are metrics that have been flawed for an extended until of time. tom: you are better at this than i am, mike. why the disparity between the

flavors of inflation? michael: it is the movement that the fed is looking at. are we going up? that is basically what they want to know. tom: cleveland fed is a higher inflation. michael: you and lebron james. tom: speaking of lebron james with monetary theory, richard clarida will join us from pimco. stay with us. "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance" from new york city. we have coverage of the pope francis visited new york city today, and the pageantry from the white house as president xi visits president obama. what a busy morning. here are top headlines with david gura. --id: blackberry loss blackberry's loss was wider than expected in the second quarter, but they are going ahead with a new handheld device.

they lost $.13 a share, four forecast.e than brooks -- volkswagen is expected to choose a new chief. bloomberg reports that the porsche chief will be named ceo today. could part of spain become a separate nation? the northeast region will start to answer that question sunday. catalonia will choose local officials come up separatist parties are expected to dominate that section. which includes barcelona, is spain's most rosters region -- most prosperous region. tom: the focus is typically on northern spain, the mining region. michael: catalonia is prosperous, the biggest financial region. a lot of talk this morning about , even if the independence

win, they will not declare independent spirit janet yellen's suggested that u.s. interest rates will rise this year is no help to emerging-market investors. the emerging market index is down 5% this week so far, 17% this year. to borrow a phrase from the late john conolly, it is our interest rate but their problem. chief emerging market strategist from commerce bank joins us. the difference between now and a couple of years ago when the fed would be raising interest rates is that janet yellen at least recognizes it is an issue, it even if it is not going to keep her from doing anything. >> absolutely. we are at a crossroads where in emerging markets crossover. china is becoming an important economy globally. based on that, looking back to

2013, when mr. bernanke was expected to do the same thing in september, everything -- everybody was waging on emerging markets, and he did not do it. it was at the time, as if he was hoping somebody outside would highlight these issues to him and give him the excuse to do it. right at the end, it was mentioned that the emerging markets was an issue, and he did a whole transcript of talking on that issue. michael: we know why emerging markets worry about the fed, because our interest rate will drive dollar loans in their countries. what about the pboc? the people's bank of china has an impact. where does that come in? >> it is probably the most -- the third most traded currency. the chinese authorities want to get the you into the sbr.

that has been there major policy intonts to get the yuan the sbr. he opened a big pandora's box at the time, and all hell broke loose basically. now we're at the situation where the emerging markets are not only worried about the fed but also the pboc. tom: i am going to ask you if we have a policy mandate in brazil right now. the chart of the brazilian real is an elegant, beautiful reversal to the support looking for further weakness ahead. real, andur call on what do you see the brazilian government doing about it? >> the call on real and dollar-real is on the upside as well. if you look at the central bank of brazil, they have the highest real interest rates on a forward-looking basis in emerging markets. despite this, they have not been able to protect the real. there is very little that they

can do. i would say it -- they would be very well advised not to talk about effects with the central bank. tom: they said they had intervention in brazil. in mexico, have we seen it? the mexican peso early in the morning had whispers of 1994. it was like this. interesting point because in 1994, everybody was looking to the fed, and it was the fed hiking which hit mexico at the time. the big difference at the time, especially in emerging markets and with mexico specifically, is that the mexicans had expected oil prices to increase forever and were going abroad correspondingly. that is not the case this time. emerging markets are more protected. there will come a time in the next few months where we will see a strong turnaround with fx. michael: how much of it is the clap sing -- the collapsing

commodity prices? so many of these emerging-market nations make their living off selling commodities. >> true, but you must distinguish, it cannot all be put in one pot. you have the net commodity exports with the likes of gdc -- of gt see -- venezuela, venezuela -- venezuela, russia, brazil. is: the other big dichotomy my 401(k) has become a 201k. i would say within the neutral context, our bias is actually a little bit toward developed international, where we think you might see a bit of that performance relative to the u.s. still a little bit too early.

scope oflook at the the week, it has been amazing what we see that what we have seen. michael: it will be good to get to happy hour. tom: coming up later, pope francis at the un's general assembly. ♪

-- and him and tom: good morning. we are in our second hour of bloomberg's "surveillance." a beautiful day for new york city. pope francis awaits and at 10:00 a.m., we had to the general assembly of the united nations.

we go to our top headlines with david. david: the federal reserve chair janet yellen confirmed in a speech last night in massachusetts that one of the reasons for the recent strength in job markets. the unemployment rate currently understates how much slack remains in the labor market. on balance, the economy is no longer far away from full employment. in contrast, inflation is continued to relook -- to run below the committee's objective over the past several years. david: to the fed's regional presidents will speak today. it will not be a typical all smiles show in obama meets with his counterpart from china. xinping died at the white house last night and today he faces questions on restriction on u.s. businesses in china. u.s. officials are pleased on the fight to fight global

warming and they will introduce a plan to reduce greenhouse gas. willberg tv and radio carry the broadcast live. john boehner wants to stop a budget battle from shutting down the government. john boehner will spell out a plan today at a meeting with lawmakers. about 30 republicans say they're willing to shut down the government is plans -- the funds for planned parenthood are included. bloomberg news is learning that regulators are focusing on google's android mobile operating system. competitors say google gives priority to their own services all restricting others. google is not commenting. around the world, people are lining up to get a shot at apple's newest phone. plus are and iphone 6s on sale and they look like last year's versions but have improved cameras and faster processors. allied's shot on fifth avenue of people. tom: faster processor says it

all. are they lined up for the iphone to see the pope? or maybe they want a new camera to take a picture like you last night. tom: they are in the same line and not moving. , we willoes to the un see him. let's go to the terminal. the collapse with inflation in tokyo and japan. here is the success of reinstituting a reef lady their economy. it is amazing how this flavor of kiwi has given it up in a matter of months. >> this is not just japan but qe in general that had not brought on inflation that many hoped for. we are still in this super cycle environment. i think that is the better definition than secular stagnation as larry summers used, but it is a dish inflationary at best environment. tom: what breaks the drug saying

to kiwi four, qe five, hardly break that? >> you get off the zero bound. in perpetuity, even if you don't have actual deflation, establishes a deflationary mindset because if you assume that interest rates are going to stay at or around the zero bound in perpetuity, it halts activity and works its way negatively into the economy. i think it also halts activity. corporations have been more apt to take it vantage of that low rate to borrow and buyback. tom: michael, looking at the fancy pants quantitative analysis of probabilities, people are up to zero bound. michael: they still have a price move in december, even after janet yellen's speech last night. it is easy to see why the united states is influencing everybody and we are talking about china. are you paying attention to what happens in japan? the nikkei range bound for long period of time and you might

want it in your portfolio but is it at the top of the list like it would have been decades ago? >> i think china has replaced japan as japan was a couple of of how ito in terms is on the economy or perceived otherwise. we actually like japan. that is an area we favor on portfolios. that is where we look at things. we like it. tom: i look at this, next, and we will continue the discussion with your expertise on asia, did the diplomacy of xi and obama, is there a refresh of tokyo and beijing as well? nick: i think that relationship has stabilized this year but that doesn't address the underlying economic realities for japan which is they have a huge economic exposure to china. tom: that is the big difference. ok, we will talk more with nick and liz.

michael mckee saying that janet yellen has once again done it -- turn it around. upures up, dow jones futures 229 and oil with a nice bit this morning. 45.21 the barrel. mike: i am michael mckee along with tom keene. janet yellen says the u.s. rate increase is on track for this year unless something happens to the global growth environment, saying china. is withs is -- nicholas us today and he spends days lori on the hot miss yellen -- worrying on behalf of ms. janet yellen and liz is on top of what the markets are doing. odds of weare the will see something economically negative out of china? bad enough that it will derail plan?ds net: i think that is less than likely. we certainly see a slowdown in

growth and i don't think the government is panicking. they have tools to offset that. it will be an increase in cyclical support through the economy into next year and the pboc has been on talk of monetary easing and i think i continues. china's economy is slowing down but we don't see that sharp this juncture. there are also a lot of regions where the growth rates are dramatically different, not to mention the difference between manufacturing part of the economy and more consumer parts. are those dispersions getting wider? i think that is mostly right and a negative story for commodity producers into the china story into the old model of growth that the government is trying to move away from. that is a reflection of economically obvious they face. mike: 10 :00 p.m. eastern time on october 18, china reports its next gdp numbers. 6.8% is what they say they will hit, will they hit that whether the numbers are to be believed or not?

nick: i think in actual terms, they are probably closer to 5.5 and that is manageable for the government. it will probably reflect something close to the target the best reality that it is slowing down right now. markets have heart attacks every time china announces there is something. as well as nick said, that china's growth is slowing than the official figures, but the psychology seems to be as important. ; i think psychology shifted in the last several months. if you look at the correlation between the s&p 500 futures on the shanghai a shares, the mainland shares, or you have the bubble in the bigger crash, those used to not be correlated at all. if anything, it was a slight negative correlation. in the last couple of months, we went straight up to positive territory. that does not tell me all of a

sudden that the u.s. and economic connections are greater in the last couple of months than they were before. it speaks more to the mechanics of the market and the increase in correlations we are seeing across the board and back to the risk environment. tom: china is the road from hong where inort to hotel shanghai, beijing is worse. there is a whole mother china we don't see. how separate is my china, the amateur jokester china, from the real china? next: -- next it is not just east coast but within the central and western provinces. you have the ones most exposed to resource intensive and heavy any fracturing south of economic growth in central and northwest. we see in the southeast, consumption growing, the service sector growing, it is not all gloom. tom: i will put this photo out on social in a bit for those of you on radio, i think the panda

is hugging him or maybe he is hugging the panda. this is way out to the west. how are they doing? nick: that is in every way have the most intensive -- you have a lot of high technology investment in the area and this area has been out front of encouraging a lot of multinationals in the tech-based to invest there. a.b. there is reason to be more optimistic. tom: that is the heart of the matter. when you look at simplistic gloomy looks, you hear nick say there are cool things going on. mike: a lot of people are saying that if you look at the lower levels of the economy, bottom-up, it is growing faster and recovery more quickly is the way to put it then official statistics suggest. liz: so recent announcement a consumer product companies are pretty much blooming. that is the purpose of their reform. tom: some of the fact that that

will see in washington today. president obama and president xi will hold a press conference at the rose garden and we will take that life on bloomberg television at 12:00 p.m. this is bloomberg's "surveillance." ♪

tom: good morning.

you need a friday brief and we will deliver it. a second look at gdp. it is like a blurring moment except michael mckee knows it is never boring. we will go into details at a: 30. at 10:00, we get indicators and much more than a headline number. michael mckee will try to make the smarter -- make me smarter and at 1:00 p.m., we will be paying attention to the baker recount and that could move the oil markets. mike: it has been interesting because the rig count went down and went back up again. oil am i right that most prices are we done by the media? mike: yeah. tom: anyway, information you need to know. what is moving this morning, david has an interesting mover. david: let's set with blackberry. we have the company reporting a wider second-quarter loss than

expected. the company has been trying to reinvent itself more times than i can count. you have the ceo now talking about developing a new smartphones based on the android operating system, so we are seeing blackberry down .35, about 5% in the premarket. tom, did you ever use a blackberry? i used one for a while and the reason everybody is switched. what is the blackberry ecosystem? david: i think they're trying to develop that. tom: you mentioned earlier that this chip in the new phone. engineering, no different than a car in that sense. like the popembiobile. ared: the next two i picked paid to the speech janet yellen gave. let's start with the euro stoxx 600 jumping from an eight-month low and that speech giving insurance we could see a rate increase. most people favorite that by the end of 2015.

mike: interesting. this, buthas about on the trade has been for years that the fed suggests that trade increase and equities fall and now they're going up. what has changed? liz: i think investors and the economy are ready for it. i think the message about confidence is an important one and the fed eventually not treating the patient like it is in the, roof. i think it is not positive. we are past the days where you want negative news to keep interest rates low. tom: what would have happened if they raise the rates the other day? liz: i think the market would have been fine. tom: you and i would have been employed, etc. and guess what? you move on. -- : david: speaking of moving on, the last one is the dollar. the dollar caused the biggest weekly gain in two months. you bring a guy who talks

about the dollar, you got to love that. tom: 98 is the key level for me and we are not there. this is an old blend of trading partners. euro affected and mexico, brazil, etc. it has been a good week for the dollar and a breakout of 98 would be huge. david was outstanding on that. david: thank you. tom: coming up, richard clarence, stay with us. ♪

tom: around number, the dow jones up 200 50 points as you look at futures. s&p 500 index up 20 points. post janet yellen kind of feel. time, living color, david gerwig the top headlines. david: reacting to volkswagens epa, they say they want get pulled again. how theyges coming in test emissions from diesel powered cars and road tests will be added. for seven years, vw software tricked testing machines and let spread fumes. rate anda lower tax

global futures orders frozen 17% before accounting for foreign exchange fluctuations. the last on kansas city won a division title, you could still smoke on an airplane. the royals beat seattle last night. it is the royals first division crown since 1985, the year they won their only world series championship. congratulations pastor george. -- two ester george. he is -- she is a huge kansas city royals fan. i have a baseball story. last night, san diego play the san francisco giants. 31,137 people went through the turnstiles to the game and 31,138 left the game. in the standsirth at petco park last night during the game. return to liz.

liz: really? on this? tom: i brother was born in the backseat of a car on the way to the hospital and my mother never forgive my father. liz: my children were born in a hospital. midwife whowas a helped deliver the baby in the stands and they named it eli. tom: let's move on to other blessings [laughter] . pope francis traveled through helicopter from fiat to the pope mobile to st. patrick's cathedral. janet yellen was not to be outdone by speaking in massachusetts. she shifted dovish toward hawkish markets and all markets reacted this morning. ders with charles schwab and nicolas with us from eurasia. we talk a lot about this this

morning. ask central figure to the world, was ben bernanke alan greenspan central bankers to the world? liz: i think probably they were to a similar degree but janet yellen speaks it more openly. tom: i was stunned. because of thely last year when she has been asked questions on whether she would consider making questions and think about u.s. monetary policy based on the perceived impact it would have on a perceived market, and she basically said no, we need to operate with their own internal domestic mandates. clearly, she cited that as a reason for not moving. tom: mike, with your perspective, this is a new global speed, isn't it? part of it is in use. mike: it is but i want to ask nick because he follows the world, when the fed talks about raising or lowering interest

rates, everybody pays attention. the brazilian finance minister talks about how terrible the united states is, but when mario draghi once to maybe do more qe -- maybe wants to do more qe, no one wants to. nick: this is a problem for but saide pboc has all that they don't want the fed to hike and they're concerned about implications with the strength of the dollar. as a result, we have all tension in the markets on what is the pboc going to do with the currency from here? they're showing some willingness to have some depreciation if they continue to do that and -- tom: is the norwegian central-bank independent? is the time to -- is the china's interbank central-bank? but yousolutely not, have both arguments at the table. mike: there seems to be about that the federal rates rates in december but the ecb will turn around and do more qe, so why

are we so concerned about em flows out of those countries? why did they go back and borrow in euros instead and replace the dollar? nick: i think they are reacting to what happened in the global monetary environment. at the end of the day, the pboc has outside influence on currency caretakers of monetary policy. unless they really moved away from that, they're basically accepting with the fed does. tom: i have ask liz an important question, schwab maybe more than anyone in the world knows" what people do with their money, the flows of brazil, the flows of china, what are the flows you observe with customers and clients? liz: it depends on what type of account you have at schwab. we have seen a tremendous amount amongbility and calm investors that have some sort of advice relationship. they have an outside advisor, internal advisor, so it is a discipline process of people helping them versus the more

trading-oriented folks. that is what activity has been a little bit greater. what we are seeing in terms of a fund float in biases, u.s. versus non-us is not that different than what you see in the aggregate. which is continued very weak close one really not into the market, mostly outflows of the u.s. market and more recently in the last month, pickup and flows out of some em areas. tom: are americans stocks nicely priced? caterpillar was repriced earlier this week, but is their folly within the traditional dividend going cash flow quality? not for they traditional devalue buyers but i think overall that the market is fairly reasonably valued. in particular, if you start to see some of these multinationals get down to even more reasonably guided levels, i think you would see buyers step in, especially for the call that the dollar and depreciation could pause. tom: for the eurasia group, is

there an appetite for american assets? what was the poll this week? 70% agree with donald trump in america? nick: we have optimistic views. i think the u.s. benefits relatively from what we see as a volatile global environment. tom: did ian bremmer have a tantrum over this? nick: i think he also has been optimistic view for the u.s. tom: you are i know you do as well, liz. like: when does productivity come back? is an think there argument that productivity is understated. when you think about the nature of our economy right now and how revenues are generated and alley pickup the traditional measures of productivity, i think you could argue it is understated. standing those people in line at the apple store and added something. liz: the nature of how apple and uber makes money and how exactly

productivity which is antiquated versus the economy that we have. tom: we are halfway to four hours a bloomberg's of surveillance" this morning. what i want to have all the pros of the table, what will you be thinking of reading about this weekend? tom: i will read more about the catholic church. i'm fascinated by the business of pope francis and to the syrian article you mention, i have got to get smarter, nick, about syria. what will you read about? nick: all weekend trying to understand what came out of xi and obama. tom: what body links we look for? nick: i think it will be a pretty negative visit in the sense that the obama administration is trying to find ways to be more aggressive with china on trade policies and strategic policies. it will be hard to turn it. tom: liz is trying to get home. what will you be reading? think the relationship between the u.s. and china is important because the meeting with vladimir putin. i don't think there is much more to read on janet yellen but i

think it is time to put your technician hat on and start to dive into some of the internals of the market to see whether we are seeing the conditions that suggest the bottom. david: volkswagen. i'm interested to see how this happened. tom: this would be the number one story, isn't it? anton stickles has been there with terrific coverage. mike: it is not just volkswagen. tom: we have to stop. besides the broncos and the mets -- mike: we will watch that. decides volkswagen -- besides volkswagen, the impact on germany and people are worried it could lead over and i want to see what happens at the catalonian election and how that plays out. make, this is decidedly different breakaway that some of the other things in the last 18 months. mick: i think it is a much more volatile and emerging-market space. the problematic environment for our clients. tom: thank you so much. try to get home.

we will continue on bloomberg's "surveillance," and a busy day of international relations in new york city. the pope on bloomberg television and bloomberg radio at 10:00 a.m. ♪

mike: good morning. it is the clock on wall street. if you are not at work already, the pope is in manhattan, good luck today. his holiness will be all over the city, a city basically on automobile knocked down. if you are stuck in your car and listening to us, we will keep you informed on everything you need to know. we will set you up for the day talking about the markets. we look at china first. the pope left washington to be replaced by the chinese president xi xinping to talk to the president. the chinese composite finishes lower on the day by 1.6%. across the china sea, prime minister all day getting a market endorsement as he begins his second term. folks is higher this morning. in the night -- even volkswagen is higher this morning. futures up after janet yellen suggests that fed will raise

interest rates. opposite from what we have seen in the past when the fed talked about rate moves. the bond market, bond buyers at a rate move. yields up ready much across the curve. google at the top of their stories search, the ftc adjust this department investigating allegations that the company engaged in anticompetitive act this is with its android operating system. blackberry, a wider second-quarter loss than analysts estimated as smart phones sales faster than the company's ability to cut costs. profit excluding some items, $.13 a share. and volkswagen, the supervisory board said to appoint porsche brand chief as the new ceo today and announce the departure of some other top executives. --shares are up by two point .201%, second day in a row that the shares have been higher. mentioned, xi jinping goes

to washington to the white house. a lot of people wondering how that will go given the tensions thesen the u.s. and china days. chuck todd, among those who is watching, the host of nbc's "meet the press" which you can hear a bloomberg at 11:00 and 3:00very sunday -- and every sunday after you watch it on nbc. chuck, you are probably glad you can get to your office that the pope left. when you get there, what will out of the body liquids of the president of china and the president of the united states? chuck: good news is i am in my office and kind of nice. you are right. no more traffic restrictions and mainly in new york today. think there is a lot of pressure on the president to publicly look like he is going to be just what the china president and that is the body language front. how is he going to confront the

cyber issue? i think there is essentially everybody in the community has agreed it was china that was behind the attack on opm, the personnel and the background information on workers, and the administration needs to figure out the way to punish the chinese on this. they're talking about rules for the road, but i think is the president going to publicly look just with him? i think -- that is what i am curious about. i think a strong case could have been made that, don't give him a state dinner. posted, show them a visit but downgraded a little bit. the careful of rewarding them and i think that -- what is he going to do or say today and tomorrow that indicates that this is tough love? that there is not just going to

they areough talk when not here but once the chinese leader is here, -- for: we are gluttons punishment. next week, we get the world leaders, including the president , for the united nations general assembly. coming to that is fiber putin, and he will meet with mr. obama as well. that is another meeting. check: this one has to happen. i'm sorry, but what russia is doing in syria right now, this has been a crisis for six months and it will never get resolved unless you have the russians and the iranians at some point involved and agreed to deal with assad. you cannot do it isis until you do with assad and what russia is doing it to pop assad up, there has to be -- there has to be communication between the united states and russia, so this is fraught with peril, all of that is true, but it is a pretty

important meeting. way if theo be some president can make progress on convincing the russians to at conversations about dumping assad. mike: i would think the most interesting guest have on "meet be the whiteould house social secretary. how do have all these people over for dinner? chuck: a brand-new one, by the way. i don't have that but i think have a pretty good lineup. hillary clinton and carly fiorina, the two most talked about candidates this week on the presidential trail. anytime you have time to spend with hillary clinton, it can be newsworthy. a pretty packed show. mike: chuck todd, host of nbc's "meet the press." you can watch it on nbc and listen to it on bloomberg radio at 11:00 a.m. and 3:00 p.m. tom: good morning.

michael mckee and tom keene. bloomberg's "surveillance" brought to you by the county tax advisor. connick will provide your business with the industry insight in need to succeed in a dynamic economy. sign up for insights and find out how at online. we are thrilled to bring you with thelarida university. what a wonderful day to speak with you about the bizarreness in a massive divide between weight and don't raise rates and let's get going, raise rates. you are arguably our number one authority on monetary theory rock in the market reality. what would richard clarida to? richard: what would i do if i were at the fed? what is the harm off of

getting off the zero bound? richard: none. i mentioned a while back that if it were my choice, i would have gone in september. i think it is time to get out zero. they laid out to lift apple be gradual and knowing can argue -- the lift off will be gradual and no one can argue about the basis points for the economy. janet yellen finally revealed one week ago, she had a chance to identify her dots and she said she would, and yesterday she said she expects type this year. what happened? stocks are up. go figure. i think that was the right move. mike: to the medication problem? they don't seem -- do they have a communication problem? richard: there are two issues, they have a tough message to communicate what they do have a problem. last week was not a success in terms of conveying where they were. church on the island had a chance and i think a response to

your question, she had a chance to clarify her personal views and she chose not to do that. she had a speech yesterday where she did lay that out. if she had given yesterdays speech at a press conference, we could have avoided the week of volatility. mike: so they raise rates in december maybe and then what happens? richard: they have laid out to the dot to lift off pat consistent with going four times a year. they have eight meetings and there is a press conference four times a year, so i think the baseline view would be a hike in december and probably every of the meeting until they get the fund rate up. they will god slowly. does it justify that many moves next year or doing may be see only one or two? richard: absolutely. this is a fed that the values option now it is clear and it will not be autopilot. my baseline be would be for hikes, but it could be fewer

than that. i don't think it will be a lot more than that but it could be fewer. tom: mike, i know you read cover 1998, european economics review monetary policy goals in practice. that was a bone burner. you are the real deal. if you are a member of the old economics. are we in search of a new economic model for formulas you arguably invented along with janet yellen and others? do they still work? richard: i would raise two observations. first, a lot of balls of them that i learned as a graduate student -- a lot of rules of some that i learned as a graduate student, we are rethinking that the interplay between monetary and fiscal policy we have to rethink. when it gets to monetary goals, i am in the camp that thinks our rules and good policy and it makes a lot of sense. i think the fed will eventually need to be more forthcoming about the framework and reaction function.

back to my point, i think part of the problem with the communication is that when janet -- it says that the fed is a component of a monetary policy, but the fed needs to spell out more what his reaction function will be. tom: richard clarida with us and we will continue our discussion. as michael mckee mentioned, a lot of green on the screen across all assets. teachers up 27, dow jones futures up to 47, oil higher, gold surging yesterday, and yields are up higher as well. we have the clarity and 10 year yield at 2.81% and a two-year yield that gets it back to a higher yield at .73%. ♪

good morning, everyone. i am tom keene. 10:00 a.m. this morning we will carry the full coverage of the pope's speech to the united nations general assembly. for more, here is david girl. david: pope francis has arrived in the city and his agenda includes an address to the united nations general assembly. i am joined from washington by j richard, an assistant professor in the school of business and economics at catholic university . professor richards, i wanted to start this speech the pope gave

yesterday to congress. this is unprecedented have upon to go before congress. what is your reaction to what he covered in that speech? professor richard: i figure was nonconfrontational and he talked about a lot of things. he focused on imported american heroes, couple catholic, but what stood out to me was what he said about wealth and wealth creation. he has been quite critical of the invisible hand of adam smith, but he talked about the importance of wealth creation and the breakthroughs that have happened and the alleviation of poverty in the first two years in the 20th century. this is a little more than he said in the past and quoted from his most business friendly sentences from the summer and talked about businesses in notable locations. i think that stood out. david: i think we have a bit of the tape of the pope talking about that from yesterday. pope francis: i know that to me

americans today, i have seen their past, they're working to build [indiscernible] that theithout saying path of this great effort to creation and is to be should of wealth. speakingled the pope before congress yesterday. i wanted to ask about climate change. something that came up in the white house and yesterday. the pope has talked about this a lot. you say this speech was nonconfrontational. did he make a forceful case yesterday? professor richard: he did and he called for that but he did not get into some of the detailed scientific questions he got into in his larger ones. i think he knows americans on both sides of the aisle and numbers of congress believes in being good stewards of the

environment but he is aware there are legitimate debates as you recognized. while we talk about the importance of climate change and stewardship, i think he did it in a way to bring more people together rather than dividing them. david: richard is the professor of economics at catholic university. thank you. bloomberg will bring you it live at 10:00 a.m. on your is streaming tablet, your phone, and bloomberg.com. ♪

morning, everyone. bloomberg television and radio worldwide. an incredibly busy business and finance news week. breaking news desk, here is bill maloney. morning, janet yellen clearly helping stocks in the common yesterday. said they were aiming to raise interest rates this year. france and italy are trading higher by the percent. in the u.s., s&p 500 futures of

25 points, the u.s. can yield at 2.18 continues to hold the moving average. at and0, q2 gdp estimate 9:25 u.s. composite and services pmi and at 10:00, michigan sentiment estimate at 86.5. nike eps shares higher by 8% premarket and key metric was the strength in china. reynolds set in talked to sell 5 billion dollars in assets. regarding earnings, blackberry posted an expected loss of lower by the percent premarket and finish line aps in line with q2 comps the scene estimates. upgrades and dan this morning -- united rentals raised the vigil at bank of america, price target of 155, ciber are great to buy ath the price target 62 and raymond james, and finally nike raised to buy.

i am bill maloney. tom: thank you so much. greatly appreciated. futures up 25 and dow futures up 226. thank you to build. for more life and breaking news, you can check that out at the bloomberg terminal. with richard clarida, apologies to all the folks on newport beach, he is also the chairman of the economics department and that is a hat on which we wish to address him right now. he has a doctorate in economics from harvard university where the football team is undefeated so he went to columbia to improve football fortunes. andation is everywhere always a monetary phenomenon, close to the holy grail that you get. the question was raised this past weekend and it went to put

it's you, richard, if the central banks of the world are flooding the world with dollars or their equivalent and information does not rise, does friedman still hold? long and variable lag, so i guess they are saved just hang in there and it will show up. certainly the last several years have indicated the friedman velocity relationship has broken down and become unreliable. that began decades ago, but qe has generated an enormous liquidity and outside" of emerging market economies, inflation in those countries in the world is below the desired target. that is like bernanke, janet and kuroda have to go into the uncharted in a conventional policy. they had tried the textbook, rates to zero, and that is where we are today.

mike: are central banks powerless to generate inflation? richard: i'm not in that camp. there are those who are. i think that what you want to view in the last seven years is that an enormous once in the sentry financial shock and -- once in a century financial shock and that would've been the case without it. what we need to remember is that when inflation does return and as it does return, central banks have the tools to actually get the money supply back to more historic levels and the fed has been a lot with that with the reverse repo program and deposit rate. i think the fed has the tools if the friedman relationships return but until they do, i think a prudent to pursue more or less what they are doing. tom: so much of our audience understand the anger that is out there, whether it is the united states, united kingdom, there is a political firestorm out there. to america's, to united

kingdom's, and is the challenge that the chair janet yellen has is that they are working in a blended statistical model or do you need to begin to think about two views on any given monetary problem? one for the abs and one for the hands? richard: i think your point is more robust. i think that microeconomics, not just monetary economics, needs to realize they cannot do macroeconomics without focusing on income distribution and changes. the savings are in the u.s. 5%, butout 5% -- is now the majority of households save nothing. the median savings rate is essentially zero. saving is done by the board of solutions. a basic macro economic relationship is a function of income. when you take that to the rate of change of a bimodal economy, the stuff you and janet yellen london graduate school, it is not that it is outmoded

but it has to move on to a new third time. where is richard clarida has new paradigm? richard: i would not pretend to have unique wisdom other than to know that macroeconomics needs to move above and beyond simple aggregations, representative agents and beyond complete markets. i think that is clearly not a useful paradigm for doing macro today. tom: richard clarida, thank you. mike: any football advice to the columbia coach? clarida doesg matt play-by-play for harvard football. tom: shameless. richard: shameless plug. harvard football game this weekend. we like this. i might point out that james everything onet the topic of your outgoing. richard: we are having them over to the office in a couple of

weeks. mike: liz is trying to get back to her office. of you listening, patience is needed today. this is bloomberg's "surveillance." ♪

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it's gotten squarer. brighter. bigger. it's gotten thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. >> this is "bloomberg surveillance." here are the top headlines. president obama formally welcomes china's president. of disputes are likely to come up, among them cybersecurity, currency policy, and restriction on u.s.

businesses in china. the leaders will hold a press conference at noon and bloomberg will carry that live. antitrust regulators are looking into google and its android operating system. investigators want to know if google stifled competitors' access to android. google is not commenting. the rush is on to buy one of apple's newest iphones around the world. s and plus have an improved camera. can iphone sales keep growing at the same pace? outside in new york, people are getting ready for the pope to come to the united nations where he will address the general assembly later today. those are your top headlines. it is time for a data check.

s&p futures are up this morning 1.38%. the 10-year up to 6.8%. the u.s. dollar down .69%. you are listening to and watching "bloomberg surveillance." mike: welcome back. i am michael mckee along with tom keene. financial indicators are brought to you by commonwealth. broker ready to listen. the latest reading on u.s. gdp is out. benny has the numbers. >> revised data showing gdp expanded at 3.9% in the second quarter, higher than the government's prior estimate of 3.7%.

it is higher than the first quarter when growth was under 1%. where do we go from here? the third quarter is a most over. economists looking for third-quarter growth of 2.4%. yesterday, the federal reserve of atlantic issuing an estimate for the third quarter. it could be as low as 1.4%. thanks so much. there are the numbers. yields are higher. do you think janet yellen would like to go back one week to press conference? and change her tune? mike: i think she would. steve has a good note this morning suggesting she did not say anything differently but said it in a more academic way, maybe the markets speak academic because they seem to have gotten the message. tom: what has changed?

speaking of deflation, -- pushing against the negativity. we see 3.9% gdp. i don't care how you massage it, that is a george bush ii economy. that is a new morning in america . >> u.s. consumption has been running above 3% for the last four or five quarters. it looks like that will continue. on the domestic economy, nothing has changed. i think the international risks have changed or perceptions of the international risks have changed since the summer-fall into market prices and concerns around china. tom: i don't want to interrupt. but i know mike wants to jump in with questions. can monetary people tell me commodities are a one-off? james: yes, and they will, they should. i was listening to your last

segment, inflation as a monetary phenomenon. it is important to note inflation in that sentence refers to persistent and lasting changes in overall prices. to the inflation people in markets think about, tomorrow's inflation, what is going to happen in the next six months. the fed may be has gotten too trapped in the dialogue with the market about short-term models rather than the bigger picture. economyn is strong -- strong, inflation is low. the country is closing in on full employment. it is no longer a parent we need in the streets where they are. put all that in a world where asset performance and global performance is looking troubled tricky times. back janet yellen did push

. your leaving out the premiums that get built in the safety and all that. james: market participants know that. longer data/terrible predictors of future inflation. markets are thrown around in the short run. oil prices have nothing to do with inflation longer-term. there is a complex of market moves that have been when there is a short-term shock. people get scared. people buy bonds, maybe they sell equities. the fed gets scared, too. tom: these numbers are so important. look oft, second, third nominal gdp has gone from not crisis to handwringing to outright normality. remove from 4.4 to 6.1%.

animal spirit, that is emerging market-like for the united states of america. mike: it is also an interesting and difficult thing for the federal reserve to make monetary policy under those conditions, and for the markets to trade on, especially if you're talking about the longer-term, because the number you're trading on today is not right. the number the fed has to make policy on -- if they moved in september -- if they moved in march or talked about moving in march when gdp printed at a negative number, it would have been based on the completely fallacious idea. how do you incorporate economic data that will be heavily revised into what you do? james: i think they know that. you do you can measure what is happening in the economy real-time with precision is false. i think that is why they look at

a broad range of indicators and think about policy relating to where growth is likely to be a year from now or two years from now. the reality is not only has recent earth look strong, but for domestic conditions, they look set to continue. the question is, are we going to get clobbered by events overseas? tom: numbers today suggest october action? james: it suggests the conversation about that. markets get thrown around quickly. the reaction i heard after last week was the fed's reaction function has changed, and they now care more about global events. i've heard a number of people say, what will happen between september and december that will allow them to hike in december? in my view, if we don't observe a crisis overseas, after a prudent delay, it is time to go. october is on the table. tom: james sweeney with us of

credit suisse. the headline numbers get your attention. 3.7 toquarter gdp from 3.9%. i believe that is close to 4%. >> i'm david gray here with scarlet fu. it is time for a morning must listen. what caught your ear? >> we work on air during janet yellen's speech. we have the text and knew where she was in her speech. she started stumbling of it. take a listen. mc for most fo participants, including myself, we currently anticipate achieving these conditions will likely entail an increase in the federal funds rate later this gradual pace by a of tightening thereafter. >> she picked up her pace a

little bit, but it was clear something was not right. she was speaking at a consistent pace and then there were these's pauses. mouthse sitting here, our falling open. at one point, she repeated herself to we thought maybe this was not the approved version of the speech she was going to give and she wanted to be careful because investors were waiting to hear what she has to say. the fact that when she started talking again, her voice cracked, that got us wondering. david: she was escorted off the stage. what do we know about her condition? >> apparently she is fine. she says it was dehydration. she did go out to dinner as planned and seemed to be in good spirits. it was alarming at the time it happened, especially at the end of a 50-minute long speech. thank you.avid:

the pope will be addressing the u.n. bloomberg will bring it to you live. ♪

tom: good morning, everyone.

"bloomberg surveillance" from new york city. here is david gura. google is under scrutiny over antitrust concerns. the tech giant is said to have stifled competitors' access to the android operating system. let me ask you about what the f.c.c. may be looking at. >> they are looking at whether when google bundles products on whetheroid platform, that restricts access to other products and services people might want. on your android phone, you get search, calendar, youtube. the question is, are other products available that people might want to have on that device? david: there will be people who think we have been down this road before. the f.c.c. was looking at google in 2011. >> exactly. it is interesting they are coming back to take another look after they closed the

investigation into the search function. at that time, they looked at android, but it never got to be a developed world. this is preliminary stages. we know they are meeting with some tech companies. we don't know who is going into complain. the key thing is to watch and see whether it will have legs and whether they are trying to catch up to the european competition officials already looking at this issue over there. we know google has been under scrutiny by european regulators. is it over the same sort of issues, over the android operating system, or is it broader? >> 13 of things going on in your. dear european -- there are two things going on in europe. the european commission has charged google over the search issue and open an investigation into android. they have sent out questionnaires to companies to get more information. they are studying those answers. the next logical step would be to bring a formal charge in the case, for they are not at that

point yet. david: we have been talking shown people around -- at apple stores around the world waiting to get the new iphones. android still has the largest share of the mobile phone market. >> it is interesting because a few years ago, android was nowhere. the fast growth they have shown in the past couple of years is probably something competition officials are looking at. they overtook apple. now they need to press into these issues and make sure it isn't even playing field for other suppliers and services. david: you said these are early days. let us know what is happening next. i understand this was brokered between the f.t.c. and the department of justice to start looking into this. what happens next? >> it is a confidential investigation. they will not make announcements. they needed clearance from the justice department because both can look at antitrust issues. this shows it is a formal

investigation. they have comments to look. they can take as long as they want. they have clearance to look. they can take as long as they want. there is no allegation of wrongdoing. they are just asking questions and building their understanding. david: sararden -- forden, thank you. the folk addressing the u.n. general assembly at 10:00 today -- the pope addressing the u.n. general assembly at 10:00 today. bloomberg will bring it to you live. ♪

tom: good morning, "bloomberg surveillance" brought to you by invesco. have you considered all your investment alternatives? traditional asset classes and strategies may help you achieve your goals. find out more investor.com/alternatives. it is from june 7, 1929. we have become familiar with it the last seven days. the national flag of the vatican city state. we are observing it at the united nations or the pope is lined up with a set of people, including the leadership of the united nations, assembled cardinals, as they go through

photo opportunities. mike: it is interesting. he's coming ahead of the convening of the u.n. general assembly where we will have leadership all over the world here as we do every year. the pope does not come very often. tom: one hour and 11 minutes away from that speech. will have that for you on bloomberg television, bloomberg radio worldwide. i might say the city is abuzz. i happened to be in the ritz carlton lobby last night i have never seen it more crowded, including hurricane sandy. it was jammed because of you and meetings. -- it was jammed because of you .n. meetings.-- u we had a lovely video. it was exciting. we will have family members at madison square garden today, which is cool. mike: the mets, giants, and yankees won last night.

the pope came to town. coincidence? tom: james sweeney on the animal spirit of the economy. what does nominal gdp mean? talking about getting tossed the ugly average. we have got to get back to a better spirit. one quarter does not make a moment. nominal gdp has been running at a study 3.8%. tom: not good. is falling unemployment and a dollar that is cheap, the bearish argument is the unemployment rate stops falling and interstates going up. now we have a stronger. . dollar that will slow. i think it might slow. tom: where is the ambiguity? james: households did not have great cash flow for a long time.

there is a qualitative change in the recovery. all those market concerns about inflation are about households not paying as much for imports and gasoline. credit growth is starting to grow. i think that resiliency of domestic demand and household spending is a major lift in this economy. we get cyclical acceleration. i'm not sure in the long-term, nominal gdp will be about 4%. i think we may have a cyclical acceleration ahead. if that is out, watch out in the markets. 6.1% final look second quarter? mike: watch out in the markets is a relative term given where we are. see do you think we could over the next few years in the 10 year -- 10-year? tricky.he 10-year is if you think better global

growth will trigger a fed cycle at least as aggressive as the suggesting,es are around for hikes the year -- four hikes a year, you will get capital inflows and interest in dollar assets. longer term interest rates in the u.s. may be reasonably well supported by demand from the rest of the world. mike: you get yellen's conundrum. james: yeah. i'm not sure we will get out of control move in longer rates. if they continue to be this skittish, and maybe they are december, maybe the market would start worrying about inflation in longer-term interest rates. i think they will start to hike. when they do, the curve will be flattening further. mike: the rules of the window

friday -- rolls out the window friday. -- the rules out the window friday. what about the yield curve and recession? if the conundrum pushes the long end down but the short end prices on fed moves, it is no longer a good indicator? james: perhaps. but if we get a flat yield curve in two years, who is to say we will not get it in three? there is always a cycle. there will be rough patches for growth ahead. right now, i think the runway looks good so long as we don't get a nasty shock. tom: we are supposed to have cyclical ups and downs. is all the chitchat of bloomberg surveillance more structural or are we talking about the cyclical back and forth? we are due for recession. james: think structural talk is

triggered a cyclical moves. look at china. badget a few months of data, you get a stock market fall. everyone decides the economy is over. you get a few good months and structural concerns are on the back burner. it is no different in the u.s. mike: what happens when the fed raises interest rates? mechanically, it is a complicated process. they will do the reverse repos. does this rude goldberg system work for the markets? james: i think it will work, but it will be messy. thehink they will raise reverse repo rates 25 basis points to they will raise interest on reserves to 50 basis points. a think they will allow

facility that will suck a lot of reserves outer banks and move them onto government money funds. that movement is a big flow of cash which could be messy. we think the ingredients are there to get the whole structure of short-term interest rates up 25 basis points, including possibly bank departments -- deposits. mike: banks have to attract money back. james: not necessarily. non-transactional deposits are costly for banks to have. some of these, they want to get rid of. those are the ones most likely to turn into reverse repo shares. tom: james sweeney, thank you so much. mike: i wonder about unintended consequences. tom: right now, the pope is speaking at an informal gathering at the united nations

-- toan staff the best you.n. staff. people are in the same positions as they were yesterday at the white house. they just changed the color of the flag. mike: it is déjà vu all over again, you bear would say if you were still with us. these things follow a strict script. the marine trumpeters will blow. they blow. the leader gets out, they should cans. the difference is because he is the leader of a country with the military, the president and chinese president will review the troops. they did not do that with the

pope. he does not have an army. tom: it is remarkable to see the sequence of pageantry. this continues through the weekend into monday where we have mr. putin and mr. obama. mike: they will be in new york meeting on the sidelines. tom: i would suggest the traffic shutdown is worse when the president comes to town because they don't have the planning set up like we have for the pope. except that more people are here trying to see the pope. people have thousands of lining the streets, which is an added constraint. tom: we will have comments from

washington at 10:00. bloomberg television and radio worldwide, the pope speaks to the u.n. general assembly. this is "bloomberg surveillance." ♪

>> this is "bloomberg

surveillance." tom: good morning. tom keene and michael mckee. we welcome all of you to new york city where there is a lot going on, to say the least. the pope speaking to the staff of the united nations big this is a set of informal comments. at 10:00, we will bring you his speech to the general assembly. at this moment at the white house, president obama will greet the president of china. secretary kerry, and vice president biden lined up today as they were yesterday for pope francis for the leadership of china. remarkable to see the international relations of this in the coming three days. let me do a forex brief, get this out of the way quickly. wereare an online service traders, investors, and institutions canned meat and collaborate. enhance your trading experience

or expand your business. you see foreign-exchange doing better. risk on after the good gdp helping yields, hire dollar stronger. europes a chart between and began -- there is a churn between europe and the yen. continues itsreal strengthening with the abrupt reversal yesterday suggesting we may have seen an important moment. michael? as youarkets reacting would expect after janet yellen's comments with the yields higher and the dollar stronger. equities have gotten stronger. normally they drop when the fed gets ready to raise rates. i get the interesting task of

inroducing clive crook washington joining us on the t-mobile phone line. he is joining us to talk about his views on the fed. a column that someone you know appeared in. i will leave that aside and ask about the point of your column, which was janet yellen has a communications problem, and once you might be able to solve by raising the fed's inflation target. a move she sort of seemed to do last night. clive: i don't want to leave you out of it. the point of the column was you asked a killer question at janet yellen's press conference last the numbersas yellen reported do not support the interest rate prediction the

statement included. in other words, they intend to proceed very slowly on raising interest rates but there is no inflation in the system. so why are we having that conversation? i did feel there was a disconnect in the statement. you put your finger on it at the press conference. i thought it was interesting it was the only question in the press conference that made her stop and think. you put her on the spot. i think the fed is struggling to answer this question. rationalize based on the numbers they are looking at? there is a gap. mike: you did suggest maybe they could close that gap by changing their inflation target. clive: yeah. i think one of the problems is if you look at the fed's forecast for interest rates, if you look at their plot of when

they expect to streets to rise, -- expect interest rates to rise and then you look at the profile they are expecting for inflation, they are taking great care to never let inflation rise above 2%. the dilemma they face is they cannot stand the embarrassment of say inflation may rise above 2%. that is a ceiling and not a target. as yellen do the press conference, if 2% as yellenng -- explained at the press conference, if 2% is a ceiling, you will get less than that. my argument is it should be a target. it should be symmetrical. allowed to letbe it rise above 2%. i think if the markets understand that, it would make the fed's job easier.

thick book out of the dallas fed honoring john taylor of stanford, the taylor of smartg where a lot people including clive crook talk about this asymmetric versus symmetric battle. clive crook, what can we learn from the bank of new zealand or norway? they have taken a more rigid tack on being symmetrical. what can a big economy like the u.s. learn from new zealand? i think it is a question of being clear about it. the e.c.b. inflation target's sixth lucidly -- efficient target is explicitly the ceiling. they seem to keep inflation close to below 2%. that is the ceiling. i think that is a mistake because average inflation will

be less than 2% and that is too low. i think the fed officially has a target and not a ceiling. askeder a fed official is , they say it is a target, not a ceiling. but there is a disconnect between that position and the way they seem to be running monetary policy. i think they should say it is a ceiling but raise it. let's have a ceiling of 3%. tom: i want to interrupt. ve: i think presenting monetary policy would be more straightforward if they went to that presentation. tom: i want to interrupt again as we have pageantry in new york. we have another mode of transportation for the pope. .n., he is u moving on the papal golf cart. this is something nationwide of

great concern. it is the papal golf cart. he is shaking hands. he does not have a set of clubs. mike: we will keep our eyes open. clive: what does that mean for monetary policy? tom: [laughter] mike: there is the question. last night, janet yellen suggested maybe she lets inflation run hot for a while, let's the economy grow more was quickly to the idea of the faster economy. is that good enough? do they need to formally change the inflation target? clive: i think it would be better to formally change it. i'm not sure she said she would let inflation run hot for a while. she said she would let to aloyment fall, maybe, little less than current estimates of the natural rate which is now 4.9%. that is a different thing.

i don't think she signaled a willingness to let inflation overshoot. i am saying that is what they should thinking. it was not in the main text of the speech but a footnote in the printed version. it looked at the inflation target issue in more detail. she argued in that segment -- she argues against raising the inflation target. i do think that is a mistake. tom: one more quick question. to him movingpond out his fed caldwell and to 2016? into 2016? well clive: i can't see the fed waiting much longer for this list of -- lift off. , ins partly for bad reasons

my view. the fed is under considerable moral pressure from the markets. why are they waiting? what is going on? that narrative is building. the fed is not immune from that sort of push. i think they will feel they have to respond. i wish they didn't, but i think they will. tom: thank you, clive crook. michael? mike: for those of you watching us on bloomberg television, the president of china has arrived at the white house. he and president obama shaking hands and striding forward for introductions to u.s. officials, shaking hands with vice president biden, his wife, and secretary kerry. they will then go up to the platform. national anthems will be played. they will review the troops and speak. we will try to bring you some comments as the state visit gets

underway in washington. we might mention, with inflation running at a 2% rate in president xi's china. tom: the moment of it within economics. clearly, everything we have read is that the politics of the moment trumps economics. i would note right now i see michael froman in the photo. you wonder about trans-pacific debates, leaving china out is part of the interesting tensions ambulances of these -- interesting tensions and nuances of these talks. they stepped to the podium. mike: president obama and president xi on the south lawn of the white house reviewing the troops in front of the white house. t junior from both shortly. the president beginning his

visit in seattle with visits with tech leaders. china was saying it would buy 3000 boeing jets and open a new facility in china. some of this pageantry may look familiar. the pope was in washington a few days ago. with ceremonies like this, they are often similar. a military component not on display with the pope a couple of days ago. i am joined by brendan greeley. this may look familiar to you as well. at least thesay president did not have to negotiate with the pope over cybersecurity, which is proving to be an intractable issue. one thing we heard from president xi in seattle was china does not engage in cyber spying. that is a bit of a

linguistic dodge because we do know there are elements in china that made or may not be working with the chinese government. that are so many things are so important, the trans-pacific trade act is an issue now. it is designed to work around china. one hopes eventually it will be designed to include china. but that is far off now. there are security concerns with japan the conservative government there. i would argue the bottom line issue where they could do something is coming to some agreement on what both countries are doing to each other in the cyber wrong. -- cyber realm. >> they had dinner last night at the warehouse across from the white house. secretary of state john kerry was there as well. the big headline this morning about climate change, china saying is willing to embrace some cap and trade policies as

well. >> that has been implemented in europe but has eluded the u.s.. to think we are the third major economy to come up with cap and trade, economists argue cap and trade is inefficient and nobody is close to thinking about tax. cap and trade is preferable. xim reminded of the speech gave two or three days ago in seattle on his arrival. it seemed he was reaching out to the u.s. to say i am just like you. i like to read ernest hemingway and i like to watch "house of cards." don't be scared. i am not some sort of autocrat. phil mattingly, what do you see? what is going through the heads of these leaders? phil: i think they are trying to download what happened last

night with the dinner at the blair house. this is keeping with the white house strategy that started last year and in 2013. the president believes the best to get messages and negotiations across is to do it one-on-one and private settings. in group negotiations, it becomes a talking point festival. what we saw last night was a repeat of beijing, a private dinner where cybersecurity came up. the big issue everyone is talking is the climate agreement in that started in november in beijing where they reached a big ed theent that jumpstart climate talks. this another step in that direction. there are a lot of major differences. the relationship is not on solid ground according to u.s. officials. there is a lot weighing on

bilateral negotiations that will start after the pomp and circumstance this morning. >> we had susan rice making a speech previewing this visit. you talking about the ,elationship between these men forged in the private moments together. i understand there will be two parts of the series of bilateral meetings. one today and a larger one with the cabinet. that sounds like from a personal perspective, they may be making progress, getting along better. >> i was with the president of the trip to beijing last year. he talked to white house officials about the relationship between the men. the president is genuinely curious about him and the leadership he is trying to take the country he is running. the also enjoys the give-and-take. he feels they have a candid relationship. in private meetings, they have been able to speak in a way leaders of these countries have not been able to in the past. the president's focus is to

engage on issues of agreement. in this case, climate, afghanistan, iran talks. and try to work out a way around areas of disagreement. the concern of critics is that has opened the door to president xi being more aggressive on several fronts. a keys a key meeting, visit to see whether the strategy of engagement is effective or has fallen flat. >> i'm thinking back to copenhagen where obama laid so much of his own personal political capital on the table and made the trip to copenhagen to get some sort of agreement. chou play the spoiler and refused to meet with leaders. he had people running around making sure the agreement did not happen. what groundwork are they laying to make sure paris is more

successful than copenhagen? countries are two of the largest polluting countries in the world. they are cognizant if there will be any major agreement in paris, they need to be the leaders. what the president -- what president obama sees is critics about climate has said in the last three or four years, even back in 2009, that if you don't get china to come with you, nothing the united states does matters. all it does is set as an economic disadvantage. the big deal last no denver when they got china to agree to topline reductions is we have china with us. hopefully, this will help: india -- pull india and other countries along. i think on climate, laying the groundwork for paris, these are the key players now. if these key players can set realistic targets but also go as

a united front into paris in december, that sets a tone that may be a year ago nobody thought was in play. >> to recap what we are watching, this is "bloomberg surveillance." we are looking at pictures of the south lawn of the white house. president obama and president xi greeting people who have come to hear from the men. they are at the white house before a series of meetings on president xi's state visit to the u.s. there will be a state dinner tonight. >> we have been talking about climate change in the lead up to paris. in the background is china's security posture. the leaders just walked asked -- passed a platoon's worth of marines and airmen.

some combat troops have been sent to australia, a signal to china. as they go into the talks, what is the state of play? >> it is not good. it seems like a simplistic way to put it. if you watch what has happened over the last year, it has hit a downward slope. alliess concerned u.s. and u.s. military leaders, what is going on in the south china sea with the building of what u.s. officials believe our military installations. the biggest issue from white house officials' standpoint is they are not sure what pushed back -- pushback has an impact. flew through the expanded defense zone trying to make a statement. none of that has had an effect. i think the question is, is there anything the u.s. can do in these meetings or with the public military posture that can have impact on what the military

is doing? as of now, they have come up empty. it is one of those issues you can get in candid moments white house officials to acknowledge allies are uncomfortable about that. >> "bloomberg surveillance" on bloomberg tv. "bloomberg surveillance" with tom keene and mike mckee continues on bloomberg radio as we watch president obama and president xi reviewing the troops. all the pop and pageantry continuing as we await speeches from both men. manageden said to have faked test results. they controlled key aspects of tests they now admit they have faked. >> when you look at the structure of the company, so

many people have said it is hard to believe he could not have known what was going on. metallurgist who had run products development for volkswagen, so it is hard to imagine if his engineers said we have this amazing motor that has but is environmentally friendly, he did not think to ask, how did you do that? the board structure of that company in germany is unique even to germany. that fascinates me. normally you have the supervisory board with capital and labor. they run the management board. you have an extra element for volkswagen. the prime minister of lower saxony sits on that board because he is regulator and capital. you have local authorities opening a criminal investigation. the man who announced that happens to be in control of a

controlling share of that company. there is a lot of untangling to do at the executive level in germany. >> the stark contrast between , what doattias moeller you know about him and what he might do for the company? >> the most important things to understand those companies, porsche and volkswagen, the family stories of capital and management are intertwined over the course of seven years -- 70 years. ferdinand porsche was the portion --gineer a sche. he got money to start the company from volkswagen. you have to have a good relationship with both families. he knows both families. he sits on the supervisory board of the company. obama is beginning to speak. we will it you hear what he has to say.

on behalf ofma: michelle and myself, welcome to the white house. on behalf of the american people, welcome to the united states. [translator speaking another language] president obama: across more than two centuries, americans and chinese have traded together, chinese immigrants helped build our railroads and great cities. the united states has enriched -- is enriched by millions of proud chinese-americans, including those who join us this morning. this visit reflects the history of friendship and cooperation between our two great peoples. history ofreflects a friendship and cooperation between our two great peoples. [translator speaking another

language] president obama: this is also an opportunity for michelle and me to reciprocate the hospitality shown to us during our visit to china. michelle, our daughters, and my mother-in-law were warmly welcomed last year as they traveled across the country, as was i when i made a state visit to beijing. i'm told news about michelle's trip got one billion views online. [laughter] xi, ient obama: president

believe where boast accustomed -- we are both accustomed to being outshone by our dynamic spouses. [translator speaking another language] as i have said: many times, the united states welcomes the rise of a china that is stable, prosperous, and peaceful, because that benefits us all. our work together to increase trade, boost the global economy,

fight climate change, and prevent iran from obtaining a nuclear weapon, chose when the united states and china work together, it makes our nations and the world more prosperous and secure. [translator speaking another language] president obama: even as our nations cooperate, we must address our differences candidly. the united states will always

speak out on behalf of fundamental truths. we believe nations are more successful in the world makes more progress when our companies compete on a level playing field, when disputes are resolved peacefully, and when the universal human rights of all people are upheld. [translator speaking another language] president obama: during our

multiple visits together, i believe we have made significant enhancingn understanding between our nations and laying the foundation for continued cooperation. [translator speaking another language] president obama: president xi, you have spoken of your vision of china's peaceful development. during my visit to beijing last year, you said there were wide areas where our nations need to and can cooperate with each other. and i fully agree. >> [translator speaking another language]

president obama: in fact, i believe our two great nations, if we work together, have an unmatched ability to shape the course of the century ahead. fung,ent xi, madame members of the chinese delegation, in that spirit, with the eyes and hopes of the world upon us, welcome to the united states of america. >> [translator speaking another language] [applause]

>> [translator speaking mandarin] >> president obama, mrs. obama, ladies and gentlemen, dear

friends. my wife and i are pleased to come in autumn to the beautiful city of washington, d.c. at the outset, i would like to thank you, mr. -- ident, with your kind and i will like to convey the warm regards and warm wishes of over 1.3 billion chinese people. china and the united states are both great nations. the chinese and the american people are both great people. since we established diplomat at

relations 36 years ago, china-u.s. relations are forged ahead, despite twists and turns. at our meeting in the summer of 2013, president obama and i made the strategic decision of of majora new model country relations. more than two years have passed and get made important progress in various areas of exchange and cooperation. this has been welcomed by people of our two countries and the world at large.

to grow our relationship under the new conditions, we must andt to the changing times build on the positive momentum. i come to the united states at this time to promote peace and advanced corporation. we would like to work with the u.s. side to make great advances in our relationship and deliver

more benefits to people of our two countries and the whole world. [speaking mandarin] we must uphold the right direction of building a new model of country relations. make sure our relationship is defined by piece, respect, and cooperation. and see to it that it keeps moving forward on a track of steady growth. [speaking mandarin] we must enhance strategic trust and mutual understanding.

-- about oured by differences and disagreements. and strengthen our people's companies in china-u.s. friendship and cooperation. pres. xi: [speaking mandarin] >> we must pursue win-win cooperation. broaden the scope of our collaboration. and improve the well-being of people in our two countries and the world through concrete actions and outcomes of cooperation. pres. xi: [speaking mandarin]

we must enhance friendship and promote interaction between our people. encourage our two societies to meet each other halfway, and cement the social foundation of china-u.s. relations. pres. xi: [speaking mandarin] translator: we must promote development,nd improve coordination on major international and we -- and regional issues, may considered challenges,lobal and work with other nations to build a better world. pres. xi: [speaking mandarin]

translator: 30 years ago, during my first visit to the united states, i was hosted in iowa. my hosts were so warm, sincere, and friendly.

we had corneal conversations. we we hugged tightly when have to say goodbye. to this day, those moments are still fresh in my memory. three years ago, i went back and had a reunion with my old friends there. they said to me friendship is a big business. from these old friends and from any other american friends, i can feel firsthand the friendship between the chinese and american people. we do share each other's feelings. this gives me every confidence about the future of our relations. pres. xi: [speaking mandarin]

>> for a state visit to the white house with president obama on the south lawn. as they spoke, major breaking news. house speaker john boehner is resigning from congress. he will give up his house seats at the end of october. he has been under extreme pressure from his party's right wing, including efforts to depose him, drop him from his speakership over the funding of planned parenthood in a bill to keep the government running. a government shutdown is possibly on the horizon. our phil mattingly confirmed speaker banner is going to give up his seat. he joins us now from washington.

pressure on the speaker. efforts by the right-wing may be to force him from office, but no one saw this coming. the idea that he would quit congress altogether. there were whispers from the last two years. that at some point, john boehner, somebody like him through all of the leadership fights and battles, had really reached the peak and decided he had enough. he has been on their constant pressure since he became speaker in january of 2011. this was a surprise. the timing was a surprise. at fact that he will do this the end of october was obviously a surprise. i have been talking to congressional aides. the speaker and formed his conference this morning that this would be his decision. he said he does not want to be the issue anymore. i think one of the concerns amongst congressional leaders is

aboute from conservatives the direction of policy or legislation has been directed solely at boehner, a well, judicial eyes conservative, someone who would not been considered a republican in name only but has been pegged as that while trying to keep the government running. something conservatives found against their principles or where they want their party to go. john boehner will step down, putting an end to a congressional role that has been a roller coaster. someone who was -- back intoself leadership when republicans were a minority in the house and becoming speaker in 2011. he is an ohio republican from cincinnati. there are no real words right now. his team inside and outside

congress on k street and agencies has run this town on the republican side of things for the better part of the last decade. so his departure is not just an earthmoving moment on capitol hill but also monks lobbying firms. top dismisses that work in the town. thener's team is all over place. >> joining us now from potomac baez.ches greg what comes to mind is the words of louis the 15th of france. apres-moi la deluge. who after boehner can hold the republican party together? >> that is quite a question. the focus would be kevin mccarthy, i think. i am not sure he is ready for the job. there is one person who could unify the party and that is paul ryan. but i think he would rather work on tax reform. >> you have such a tapestry and

culture of republican and democratic politics. i want to ask a question that i am surprised i am asking but i think is fair to ask. would you suggest that speaker boehner made this decision as he sat behind the pope yesterday in congress? >> you know, that is the exact worst thing that i thought. maybe he thought of bigger things in life and said to himself, do i really need this of these squabbling children. i think there is a connection. tom: let's review this. this is a kid out of cincinnati, out of new or high school, which was an almost mythical name out of athletics. a linebacker. their years sitting with joe biden, who has just lost his son, behind his holiness. i do not want to speculate, but you are a pro. this is the first thing i

thought of. so did i. does he really want to mess with a continuing resolution next week? it sounds kind of petty after here met with the pope. tom: we just learned that speaker boehner will speak at 10:00 a.m. this morning. >> we will have that for you of course. do we still have the mattingly with us? mattingly with us? yes. efforts tound the keep the government funded. does this significantly raise the odds that we will see a government shutdown next thursday? think it does the opposite. what you have seen is republican leaders, including kevin mccarthy and paul ryan, coalesce around john boehner's decision that he will put up a bill to defund planned parenthood that will pass the house, have no future in the senate, and will have to resort to putting out a

clean funding bill that does not defund planned parenthood to push that fight to another date. his top of the these are behind us. a good group of republicans say there are probably going to be behind this. i think the retirement of boehner makes it more likely people send him out on a high note as opposed to a situation where you have john boehner trying to pass something with 50 republicans and 200 democrats. us fromian emanuel with ubs. ubs is seriously taking a look at the probability of shutdown. does it change in your eyes within the financial markets given this resignation? ulian: we look at the possibility of a shutdown in october as 30%. and going out to december, around 40%. key, those probabilities rise. perhaps phil is right in

thinking that october is not as likely. versus dan colander, who has been way out front with higher numbers. representative john mica saying boehner does not want to become the issue. yet, greg valliere, he did. years. many because he was the man in the middle. does a republican party go much further to the basically and lawmaking because they will never get along with the democrats in the senate for this session in congress? do we have greg valliere? greg: sorry. let me make this point. i think boehner could have easily gotten 80 democrats to go along with a bill keeping the

government open. with boehner gone, will this be kevin mccarthy's first assignment? to get all of these democrats to vote with republicans? i disagree with my friend phil, but i think this increases the chances we have a shutdown. tom: where it is -- identify where the moderate ofublican is in september 2015. >> he or she is out of office. it sounds like i am being sarcastic, but that is the realistic way things have gone. tuesday group. the moderates that would get together on capitol hill and it would often involve both parties and they would talk solutions. that group, not unlike the blue democratic side, have been phased out.

that has added to bain's difficulty. 30 five members of his conference that are not going to agree to anything that would look like a compromise. up.nt to bring one thing i have been e-mailing back and forth with people who are inside the boehner circle. their point is john boehner had tried for two decades to get a pope to capitol hill. a very devout catholic. their thinking is -- and they have been speaking about this back and forth and 18 set the kind of pt yesterday. that was the last thing he wanted. this is being confirmed by people in boehner circle. yesterday was it to you that was the last thing he wanted to accomplish. his agendaen high in for decades. he pulled it off. you could see it on his face yesterday. and after yesterday, he could exhale and say i have done it. michael: i want to reset the scene. the news breaking a short time

ago that house speaker john boehner will be resigning from congress, give up his house seat, at the end of october. this as the house is in a major fundingver extending for the government into the next fiscal year. speaker boehner is addressing the republican kosice -- caucus in the capitol. expecting him to speak in the next few minutes. we will have that for you as soon as he does. this news breaking while the president was welcoming president xi jinping of china to the white house. one presumes that speaker president ofheir the united states know that this was coming. that greg valliere of potomac research, how does this complicate things for president obama, who is now losing one of the few moderate voices in leadership, to the extent there is a moderate, on the house side of the capitol?

greg: better the enemy you know than the enemy you do not. i think president obama is sticking that. to a certain extent, i think this helps hillary, who needed a distraction from the e-mail stuff. if she can have a dysfunctional congress, that is a great foil for her to run against. ubs, youan emanuel of perked up. julian: in my view, this squarely puts more pressure on the republicans to craft a solution before the debt ceiling in the middle of december. given the fractious nests -- fractiousness of their party. note --g valliere, your usually i read it like the gospel of the new testament as the pope sets up this begot the u.n. -- we see mr. trump upset

because of fox, we see mr. trump upset i believe because of politico -- maybe he will be upset because of bloomberg one day -- what is the dynamic now between the republican candidates and can mr. boehner help any of them? i would say that the trump act is starting to get stale. for him to criticize marco rubio because rubio drink a lot of water -- for child to say he has better hair then rubio, we are getting to the bottom of the barrel of quality insults. i think republicans will eventually solidify around one candidate. i think it might be marco rubio. tom: phil mattingly, in the caucus, that speaker boehner is speaking to, how united are the conservatives? we talked about the lack of moderates, but is it one conservative mass? the 30 to 35 have not

broken at all on any major issue. that has been boehner's problem. what will be the problem is now you have to have a leadership election. this is when things get real. it is easy to sit on the sidelines or in the back two rose of this conference meeting and law insults are boehner on background or anyone trying to pursue legislation. not only do you need to coalesce behind one person to run for if you win that leadership position, at the conservatives win one of the top to leadership positions, then you have to govern. what you hear from current leadership aides, when they look at the conservative lock that have caused so many problems is that it is easy to be those guys. try to put yourself and my shoes. we are at that moment where one of those people may have to put the shoes on. is whenwhen you -- that

the realities of legislating, governing, leading with the white house, with the senate, where publicans do not have a filibuster-proof majority, becomes real. there is a lot that will play out in the days ahead, as mentioned by greg. kevin mccarthy, paul ryan, these are establishment guys in line for the beta shipped position but would probably not work for that conservative bloc. so all of this horse trading behind the scenes of action will take place. we are not even talking keeping the government open anymore. we are talking the next leader of house republicans. you really cannot overstate how big of a deal this actually is. michael: let me ask greg valliere. all ryan is a member of the representatives. ran for vice president. served as chairman of the house budget committee. kevin mccarthy is a california congressman who is the majority leader. those are the names you hear

most often. presumes that representative mccarthy would be interested in the job. the question some has raised is would paul ryan even want to step into this? greg: he may not. he has teenagers. he is working on tax reform. he has a phenomenal knowledge of the issues. of memberswith a lot of congress and he is in the top 5% in terms of knowledge. mccarthy, a nice guy, i think does not have the depth and gravitas that ryan has. michael: can mccarthy run this fractured party and the house of representatives? greg: unclear. can you keep the right in line? that is a top assignment for any leader. -- that is why i think hillary is one of the winners. she can point to an incompetent and the social congress that only squabbles. tom: if it is only 35 members --

--if itd 5 for yucks is 40 members, explain how that is a party? every time, a new republican leader could come out and ask democrats to support them? phil: the issue is that boehner has had to rely on democrats, which has drawn the ire of these 35 or 40. the next leader would presumably also have to rely on democrats todo anything at acceptable the white house or does not have 60 republican votes. here is the question. interesting part about kevin mccarthy, the majority leader from california, he actually recruited these members of congress. he was the key elections guy for the republicans when they took power in the 2010 elections. he has good relationships with these people. but to greg's points, is he too

nice of a guy. when he was the third ranking member responsible for getting the votes for any boehner initiative, he always had difficulty getting people in line. now, what would change? when you talk to republicans now, the concern is there is no clear-cut next speaker and they are not sure that kevin mccarthy is necessarily the guy for the job? let's put it in wall street terms. if either of these two gentlemen -- we have no other names put forward now -- but paul ryan word to take the job, that might the possibility of tax reform getting on the agenda, because that has been one of his big issues. what about representative mccarthy? is there anything he is particularly interested in that wall street would want to look for? greg: i think while she would be

pleased to see ryan, because he is knowledgeable on tax issues. in terms of wall street the next few weeks, this is a big story in the beltway. i am not sure if it is as big as the janet yellen's speech last forward, agoing potential crisis in december or something markets would have to worry about. that deadline is december 11. if they go to two december 11 and decide they will shut it down, that is a week before the next fomc meeting. that could lead to one certainty. i think the markets can get through the next week now. is joining userin now. what was the calculus that led to this decision? on a john boehner has been high wire with no net for a long time. caught between the business of doing government on things like spending bills and debt

ceilings. and the republican conference in the house that had not only tried to unseat him, but threatened to recap it with the ability of the government to function. to the threattion to unseat him and some of the -- that fights that the in the past he had sometimes finessed. john heilemann, please help me with came into my mind. speaker who sat behind his holiness yesterday and had to make a big decision. would you suggest there is some thought to that? that he decided to go out after bringing the pope to his house? n: clearly, boehner has been reflecting on his it a gimmick suggested,as mark

but acutely over the last couple of weeks as he has been staring into the tricky, maybe impossible task he has a head which is keep the government open, protect the republican party from political damage. the planned parenthood funding issue. for a guy like boehner, who obviously has enormous respect for the pope, it would clearly come to mind that if he made this decision, we do not know what boehner's mental timeline he would clearly not to have wanted to do that to get ahead of the pope on that and then in some way disrupt the holy father's visit to washington. the timing, clearly he was willing to wait until after rather than doing it before. no doubt he understood how historic it was yesterday and did not want to salt the story until after the pope had left washington? >> i have to wonder if members of congress like bill flores of

who have been pushing against boehner because of the planned parenthood thing, if this is like the french revolution. they may get more than they bargained for. >> boehner's departure leaves a ton of questions. the continuing resolution, the debt ceiling. the question of who replaces him. but no one is going to have an easy time. i expect whoever replaces boehner will have a harder time being a governing partner in passing bills out of the house. in the short term, i think boehner saw this as a way to let nancy pelosi and the democrats provide the votes to pass a continuing resolution. and in the longer term next year, republicans will have a challenge passing anything.